Market Mantra: Technicals - Maruti (Buy), Electrosteel Castings (Buy); F&O - Sun Pharma (Long), Indian Hotels (Long); Reports - Inflation - January 2010, Tata Motors Ltd

 

 

 

Market Mantra

 

Market outlook

Not worth the chance!

 

Choice, not chance, determines destiny.

 

The uncertainness in recent times does not really offer much of a choice to take a chance. Brazil’s market is shut on account of the Carnival while a few Asian markets are closed for the Lunar New Year. For India and other world markets that are open for trading, there are hardly any reasons to celebrate - at least for the time being.

 

If anything, worries have got compounded of late. Concerns over China’s monetary tightening, debt troubles in the EU and the jobless economic recovery in the US are among the woes. Back home, while things appear to be getting better for the economy, inflation, at the same time, is threatening to cross double digits soon. Budget is just a few days away and could herald partial and calibrated rollback of the fiscal stimulus. Monsoon will be crucial, as India can hardly afford another bad rainy season.

 

We expect a steady start today. Japan and South Korea have gained modestly while stock benchmarks in Europe rose marginally. Avoid taking any major call on either side. Use the uncertainty and consolidation to rejig your portfolio.

 

Trading ideas (Time period: 1-3 days)

Maruti (BUY, CMP Rs1,336, Target Rs1,390): The stock has been consolidating in a range between the levels of Rs1,310-1370 for last two weeks. The stock is witnessing side-ways movement uptrend and is stalling at the upper-end of the trading range, which is a bullish sign. 200-DMA has acted as a strong support for the stock since first week of February 2010. A break above Rs1,342 could lead to a fresh directional move in the same direction. The stock has closed above all its key daily moving averages. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs1,330-1,342 with a stop loss of Rs1,315 for target of Rs1,380 and Rs1,390.

 

Electrosteel Castings (BUY, CMP Rs46.80, Target Rs51): The stock has seen a severe correction from the levels of Rs55 in January 2010 to a low of Rs44.20 last week. This was a panic bottom and the stock rallied higher without a retest of this low. Yesterday, the stock rallied after crossing the 13-DMA. The up move was accompanied with heavy volumes. We expect the stock to rally in the medium term. Traders can buy the stock in the range of Rs46-47 for a target of Rs51. It is advisable to maintain a stop loss of Rs45.

 

Derivative strategies (Time period: Till expiry)

±       Long Sun Pharma Feb Future @ Rs1,527 for the target price of Rs1,557 and stop loss placed at Rs1,518.

Lot size: 225

Remarks: Net maximum profit of Rs6,750 and net maximum loss Rs2,025.

 

±       Long Indian Hotels Feb Future @ Rs91 for the target price of Rs97 and stop loss placed at Rs88.

Lot size: 3,798.

Remarks: Net maximum profit of Rs22,788 and net maximum loss Rs11,394.

 

Mutual funds

Fund focus
ICICI Prudential Dynamic Plan					Invest
Fund manager	Sankaran Naren		Min investment				Rs5,000
Latest NAV	Rs89.6		Entry load				Nil
NAV 52 high/low	Rs94/44		Exit load				1% <1 year
Latest AUM	Rs1,890cr		Latest dividend (under dividend option)				12% (19-Feb-10)
Type	Open-ended		Benchmark				S&P Nifty
Class	Equity-diversified		Asset allocation	Equity (83%), Debt (0%), Cash (17%)
Options	Growth & dividend		Expense ratio			1.9%

 

 

Economy Update: Inflation – January 2010

 

±      WPI basket continues to rise as it increases 8.56%

±      Primary goods index continues to surge on back of higher prices of food articles

±      Food products prices cause higher manufactured goods index

±      Fuel index rises 6.9% yoy as crude oil price increase

 

Company Update: Tata Motors Ltd - MP

CMP Rs682, Target Price Rs693, Upside 1.6%

 

±      JLR volumes nearly triple in January 2010

±      Current European crisis a key headwind for JLR

±      Domestic CV recovery faster than expected

±      Valuations fair at current levels, maintain MP rating  

 

 

Corporate Snippets

±      Rural Electrification Corporation plans to raise US$700mn through External Commercial Borrowing (ECB) and Export Credit Assistance (ECA). (BS)

±      BP Plc has joined the race with RIL to acquire a majority stake in Canadian oil-sand major, Value Creation, with an offer of US$1.2bn. (BS)

±      PVR Cinemas has decided to terminate its agreement to acquire real estate developer DLF’s exhibition hall business, DT Cinemas. (BS)

±      Ballarpur Industries has put in a  bid close to US$200m for acquiring Malaysia’s largest integrated paper manufacturer GS Paper & Packaging Group (ET)

±      Indiabulls Real Estate is considering the demerger of its wholesale trading business, to unlock value from the venture. (BS)

±      Work on Jaypee Power Ventures Limited (JPVL)’s, a subsidiary of Jaypee Group, 2,700MW hydro project in Arunachal may commence by 2011. (BS)

±      SBI to provide interest-free seed capital of upto Rs1m to aspiring entrepreneurs under a new scheme – SBI SMILE. (ET)

±      Shoppers’ Stop plans to add 1mn sq ft over the next three years. (BS)

±      Bharat Electronics is likely to end the present financial year with an order book of over Rs120bn, a growth of 20% during the year. (BS)

±      Adani Power enters MP with 1,320MW power project.

±      Stone India inks JV with Japanese firm for manufacturing air springs. (BS)

±      GlaxoSmithKline Pharmaceuticals is set to increase its field-force, and introduce several products including patent-protected ones, over the next 12-18 months. (BL)

±      NTPC ‘in talks' to take over Jharkhand's Patratu power station. (BL)

±      Ruchi Soya Industries has approved a scheme of amalgamation with Palm Tech India Limited (PTIL), of Andhra Pradesh. (BL)

±      Four Soft has won a contract from the European firm Len Lothian Ltd for the deployment of its warehouse management system, 4S eLog. (BL)

±      PVR Cinemas has called off the deal to acquire DT Cinemas. (FE)

 

Economic snippets

±      The Wholesale Price Index (WPI), surged to a 14-month high of 8.56% in January, beating the Reserve Bank of India’s projection of 8.5% by the end of March. (BS)

±      The finance ministry has cleared the decks for the auction of third-generation (3G) telecom licences by the end of this financial year, by assuring the law ministry that it would ensure all successful bidders the availability of spectrum by September 1, instead of selectively releasing spectrum depending on availability. (BS)

±      The National Highways Authority of India (NHAI) has introduced new norms that will bar a developer from bidding for new projects if the company has not been able to achieve financial closure of three or more projects. (BL)

±      State-owned oil firms to cut aviation turbine fuel (ATF) price by 2.5% on falling global rates to give some relief to Indian carriers. (FE)