Market Mantra: Technicals - Renuka Sugars (Sell), Videocon Inds (Buy); F&O - Bharti Airtel (Long), IDFC (Long); Reports - Budget Preview 2010-11, Greenply Industries (Mgmt Mantra),

 

 

Market Mantra

 

Market outlook

Surprise on the Street!

 

The nice part about being a pessimist is that you are constantly being either proven right or pleasantly surprised.

 

The bears will be pleasantly surprised as investors find themselves in a season of surprises. After China’s unexpected second hike in the reserve ratio last week, the Fed has increased the discount rate by 25 basis points. The US central bank said the move reflects improvements in the US economy and does not reflect a change in policy.

 

Late last week, Fed chief Ben Bernanke had indicated a move was coming, but no many anticipated any action between meetings. The dollar is up while gold prices have slipped further. Crude oil too is also up. The Fed move came after Wall Street trading, where US stocks gained in a volatile session. Asian markets are mixed. China market remains shut.

 

We expect a weak start in India amid concerns on monetary tightening worldwide. One needs to be careful amid constant flow of news and heightened market volatility across asset classes. Inflation is threatening to touch double digits though the RBI maintains it won’t hike rates before April. But then the RBI too could surprise.

 

Trading ideas (Time period: 1-3 days)

Renuka Sugars (SELL, CMP Rs184, Target Rs170): On the daily chart, the stock seems to have appeared on an interesting juncture. The stock is trading just above the 200-DMA, after staging a bounce from this moving average on Tuesday. Any fall below Rs183 could seriously dampen any hopes of a legitimate recovery following a sharp correction yesterday. The daily MACD has generated a crossover sell signal, suggesting build-up of momentum on the downside. Further the daily RSI is showing a downtrend. We recommend traders to sell the stock in the range of Rs186-182 with a stop loss of Rs191 for a target of Rs170.

 

Videocon Inds (BUY, CMP Rs240, Target Rs255): The stock continues to be in an uptrend after breaking out a downward-sloping trend line since January 2010. The momentum indicator RSI is exhibiting positive movement suggesting further upside in the near term.  We believe a move past Rs244 will see the stock testing January 2010 peak. Keeping in mind the above mentioned technical parameters, we recommend traders to buy the stock in the range of Rs238-244 with SL of Rs232 for target of Rs255 and Rs260.

 

Derivative strategies (Time period: Till expiry)

±       Long Bharti Airtel Ltd Feb Future @ Rs282 for the target price of Rs290 and stop loss placed at Rs277.

Lot size: 500

Remarks: Net maximum profit of Rs6,500 and net maximum loss Rs2,500.

 

±       Long IDFC Feb Future @ Rs155 for the target price of Rs165 and stop loss placed at Rs150.

Lot size: 2,950.

Remarks: Net maximum profit of Rs29,500 and net maximum loss Rs14,750.

 

Mutual funds

Fund focus
ICICI Prudential Dynamic Plan					Invest
Fund manager	Sankaran Naren		Min investment				Rs5,000
Latest NAV	Rs90.3		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%

 

 

Management Mantra: V. Venkatramani, CFO, Greenply Industries

V. Venkatramani,  Chief Financial Officer (CFO), Greenply Industries Ltd. He is responsible for finance, accounting and direct taxation functions of the company. Venkatramani is a qualified chartered accountant from the Institute of Chartered Accountants of India. He has an overall experience of 22 years and has been associated with the Company since July 1, 1995. Prior to joining Greenply, he was Financial Controller of MKJ Enterprises Ltd.

 

Strategy Note: Budget Preview 2010-11 – ‘Tightening Purse Strings’

Fiscal prudence is expected to be the primary agenda of Budget 2010-11. This is certainly not the year for industry-specific freebies or any galloping gross budgetary support. Instead, the Finance Minister will aim at bringing down fiscal deficit, largely through stimulus withdrawals, disinvestments and 3G auctions, among others. Inflation control measures (mainly food inflation) will also be a focus area.

 

We expect significant positive measures for the rural economy, in line with the government’s agenda of inclusive growth, infrastructure development and educational reform. Announcement on disinvestment and GST roadmap will be tracked closely. The budget is unlikely to cause any negative impact for equities. However, it may fall short of the triggers to boost the markets. The expected excise hike could act as a near-term depressant for certain sectors.

 

Corporate Snippets

±      Bharti Airtel may sell stake to SingTel to part-fund its purchase of Zain’s Africa assets for US$10.7bn. (ET)

±      L&T to venture into wind and hydro power generation. (ET)

±      Coal India to offer coal from its Krishnashila coal mines to Hindalco at 10% premium over the notified price. (ET)

±      SAIL in talks with some companies for acquiring coking coal blocks in Australia, New Zealand, Mozambique and Indonesia to achieve its production targets. (BL)

±      RIL may ask for more time to sweeten LyondellBasell bid. (FE)

±      Tata Motors appoints Ralf Speth as CEO of Jaguar Land Rover with the overall responsibility for its operations. (ET)

±      Swiss loan puts Wockhardt in a spot of bother. (ET)

±      Three international investors have decided to sell their holdings in Vedanta on concerns over its human rights record. (ET)

±      Navratna companies such as IOC, NTPC, ONGC and SAIL are likely to get ‘Maharatna’ status within the next 60-90 days. (ET)

±      Government allows ONGC and GAIL India to take 8.4% and 4.2% stake respectively, in a pipeline that China is building in Myanmar to transport gas from offshore blocks A-1 and A-3. (BL)

±      BPCL arm strikes gas in Mozambique. (FE)

±      Dr Reddys’ Laboratories to move 25% more Betapharm production to India. (BS)

±      M&M’s farm equipment sector is looking for local partners to outsource the assembly of its newly-launched low-cost 15HP tractor, Yuvraj. (FE)

±      Adani Group has evinced interest in setting up a 100mtpa port in Orissa at an investment of Rs100bn. (BS)

±      PFC to pick-up direct equity in power projects. (FE)

±      Suzlon bags L&T arm project to set up 8.7MW wind energy project in Tamil Nadu. (FE)

±      Godrej Consumer in talks with some domestic and international firms for buyouts. (FE) 

±      Radhika Piramal, the younger daughter of Dilip and Gita Piramal, to become VIP Industries’ managing director from April 10, 2010. (ET)

±      BEML has tied-up with a polish company, Obrum, to jointly design and develop futuristic main battle tanks for the Indian Army. (FE)

±      GTL is planning to take its total cell sites to 50,000 in the next three years. (FE)  

±      Spencer's Retail is set to invest up to Rs1bn in the coming financial year to open, close to 15 large-format stores. (BL)

±      Dishman Pharma has entered into a strategic alliance with a California-based biotech company Codexis. (ET)

±      EXL Services plans to establish a delivery footprint in the US through an acquisition. (ET)

 

Economic snippets

±      Food inflation rose for the fourth straight week to 17.97% for the week ended February 6. (ET)

±      For the first time since 2002, urea prices for the farmer will go up by 10% as part of the nutrient-based subsidy scheme to be implemented from April 1. (ET)