Market outlook
Flirting with highs!
Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less. - Marie Curie
Only three trading sessions are left in FY10, and looks like the bulls are all set to bid a happy farewell to it. We could see some typical year-end tricks being played by various players to shore up their balance sheets. Taken together with positive FII inflows and stable global markets, the Indian indices may well touch new 52-week highs.
It's a holiday-shortened week yet again. Watch out for the EXIM data, auto numbers and cement dispatch figures on the first day of FY11. Speaking of data, the latest report on infrastructure industries' growth is a bit of a disappointment. However, it is unlikely to make a major dent in the sentiment.
We expect a steady to flat start and gradual build up towards new highs. Banking sector will be in focus, particularly the PSU pack as the RBI announces the calendar for government's borrowing programme. Shares of DQ Entertainment will list today.
Trading ideas (Time period: 1-3 days)
Alstom Projects (BUY, CMP Rs627, Target Rs655): The stock has given a breakout on the weekly chart. It has consolidated in a range between the levels of Rs610-504 for last five months. On Friday, the stock made a breakout from the higher-end of this trading range. In addition, the gain in the stock price from a low of Rs580 in the last week has been on back of increasing volumes, indicating strong buying at the support levels. The daily RSI is already in strong buy mode. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs622-630 with a stop loss of Rs614 for a target of Rs655.
Glenmark Pharma (BUY, CMP Rs253, Target Rs270): The stock has seen impressive volume expansion in last few trading sessions and appears to have taken support between Rs244-247 range. It could bounce till somewhere between Rs267-270 levels in the near term. Our argument is further validated after the stock recovered from the low of Rs244 in yesterday's session with strong volumes. Traders are advised to maintain a stop loss of Rs246 and go long. Book partial profit around Rs267 and exit around the levels of Rs270.
Derivative strategies (Time period: Till expiry)
± Long Patel Engineering April Future @ Rs464 for the target price of Rs485 and stop loss placed at Rs458
Lot size: 1,000
Remarks: Net maximum profit of Rs21,000 and net maximum loss Rs6,000.
± Long State Bank of India April Future @ Rs2,081 for the target price of Rs2,120 and stop loss placed at Rs2,065
Lot size: 132.
Remarks: Net maximum profit of Rs5,148 and net maximum loss Rs2,112.
Mutual funds
| Fund focus | |||||||
| Reliance Growth Fund | Invest | ||||||
| Fund manager | Sunil Singhania |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs438.7 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs442/201 |
| Exit load | 1% <1 yr | |||
| Latest AUM | Rs6,733cr |
| Latest dividend (under dividend option) | 25% (Mar 30, 2010) | |||
| Type | Open-ended |
| Benchmark | BSE 100 | |||
| Class | Equity – diversified |
| Asset allocation | Equity (90%), Debt (0%), Cash (10%) | |||
| Options | Growth & dividend |
| Expense ratio | 1.8% | |||
Sector Update: Utilities – Firming Up Merchant Rates
After witnessing low spot prices over the past four months, rates have bounced back in March '10. Spot rates touched a high of Rs7.9/unit in March, indicating strong demand. Average rates for March '10, Rs5.8/unit, were 67% higher over Q3 FY10. Low capacity addition over the past three years and slippages expected to continue, we believe the country will continue to witness high peak deficit. In addition an improving economic environment and the oncoming summer season will keep demand high. All this will translate into high peak deficit of ~12% and firm spot rates. We believe merchant rates for the next one year should average at ~Rs5.5-6/unit. Since we have already factored this into our JSPL and Tata Power estimates, there will be no change to our numbers. Re-iterate Market Performer on JSPL and BUY on Tata Power.
Debt Market - week ended March 26, 2010
± The benchmark 10-year G-Sec bond yield remained steady during the week on account of the awaited borrowing calendar by the RBI. The yield stood at 7.86%, down by 1bps on a weekly basis.
± All Scheduled Banks' investments (at book value) in the central and state government securities stood at 18% at Rs14,279bn as on Mar 12, 2010 vis-à-vis Rs12,076bn in the corresponding period of the previous year.
± Food inflation eased to 16.22% for the week ended Mar 13, 2010, the lowest in four months, vis-à-vis 16.30% in the previous week. It was due to decline in the prices of vegetables and onions.
± As per the committee headed by RBI Deputy Governor K C Chakrabarty, Indian government may invest Rs40bn in 49 regional rural banks for expansion of their capital base and opening new branches over the next two years.
± Bank of India raised US$500mn in 5 1/2-year dollar bonds, as the offering was part of a plan to raise US$2bn over the medium term. It will utilize the proceeds to fund its international operations and for general corporate purposes.
± Japan's consumer prices fell 1.2% in Feb 2010, the 12th fall in a row, adding pressure on the central bank to take necessary steps against deflation.
Corporate Snippets
± Tata Steel plans to raise US$500mn via GDR in the next six months. (BS)
± HDFC plans to focus on loans for college education in the next few years. (BL)
± GAIL, MIDC form JV to lay gas infrastructure in Maharashtra. (BS)
± Ambuja Cements opened new cement plant in Nalagarh in Himachal Pradesh. (BS)
± Axis Bank is reportedly in talks with Max New York Life to acquire up to 5% stake in the latter. (BS)
± The Karnataka government is allotting 500 acres to Hero Honda near Dharwad to set up a Rs20bn manufacturing plant with annual capacity of 1 lakh units. (BS)
± Gujarat State Petroleum has filed DRHP with the regulatory body SEBI to bring out its IPO. (BS)
± Several carmakers including Tata Motors, Fiat, Hyundai, Mahindra and General Motors plans to increase the prices of their vehicles from April as the government is set to implement the Euro IV emission norms from 1 April. (BS)
± Punj Lloyd plans to sell its 19.4% stake in Pipavav Shipyard to co-promoter Skil Infrastructure through an inter se promoter transfer. (BS)
± Procter & Gamble plans to more than double the production of Tide. (BS)
± NTPC plans to set up solar and wind projects in Orissa with aggregate generation capacity of 500MW. (BS)
± NHPC plans to set up three hydro power projects in Orissa with an aggregate generation capacity of 300 MW. (BS)
± HDFC plans to move its investments in non-core unlisted companies to a special purpose vehicle and sell stakes to private equity investors at a substantial mark-up. (BS)
± Axis Bank raises US$350mn from the global financial market by issuing five-and-a-half-year bonds under its medium-term note programme. (BS)
± Cairn India has planned to initiate development of its Bhagyam field in Rajasthan. (ET)
± M&M is likely to freeze investments in its troubled JV with Renault. (ET)
± Bharti to ink definitive pact with Zain in 10 days. (ET)
± Glenmark Generics, a subsidiary of Glenmark Pharma received final USFDA approval to market psoriasis ointment. (ET)
± Indian Hotels plans to open 15 new properties under its two brands, Vivanta by Taj and Gateway, over the next 12-14 months. (BS)
± JSL plans to raise nearly US$50mn by selling shares to QIB this week to fund a steel plant in Orissa. (ET)
± The Supreme Court pulls up Alstom, Voith for 'delaying' Tehri power plant. (ET)
± Bhushan Power and Steel plans to invest Rs20bn to set up an automotive grade steel plant with installed capacity of five lakh ton. (ET)
± Ruchi Soya signs a deal on biofuels with IOC. (ET)
± Ramco Systems gets order from Medsol in providing pathology testing services in the Middle East & North Africa region. (FE)
± Alembic generic drug ropinirole hydrochloride has received US FDA approval in tablets format. (FE)
± City Union Bank is planning to raise around Rs10bn over the next three years to support its business target of Rs500bn by 2013-14. (BS)
± The Japanese government has selected four consortiums such as Toshiba Corp, Mitsubishi Heavy Industries and Hitachi, for construction related works along the Delhi-Mumbai Industrial Corridor (DMIC) project in India. (BS)
± The government is likely to raise about Rs100bn from the proposed divestment of its 11% stake in Coal India. (BS)
± BSNL finalises a war chest of Rs140bn to defend its market share. (BS)
± George Soros and George Kaiser are in the race to acquire close to 4% in the Bombay Stock Exchange. (BS)
Economic snippets
± The Confederation of Real Estate Developers' Associations of India (Credai) it would consider taking the government to court if its demand for excluding land cost from the proposed service tax on housing complexes under construction was not met. (BS)
± Six core infrastructure industries grew at 4.5% in February against 1.9% during the corresponding month last year. (BS)
± The TDSAT stays the order of the DoT on increase in spectrum charges for both GSM and CDMA mobile operators. (BS)
± The government has told the RBI that the norms for approval of new banking licences could be based mainly on the existing policy framework for ownership of private banks. (ET)
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