Market Mantra
Market outlook
Time to get realistic!
I'm a pessimist because of intelligence, but an optimist because of will
The bulls are turning optimistic after a day's breather and will most likely resume their shopping spree as healthy global cues remain the inspiring trigger. It's time to get realistic and not really pessimistic as the Budget-inspired rally in recent days do not make valuations too compelling. Take it stock by stock rather than get swayed by daily movement in the key indices. Small-cap and Mid-cap stocks may extend Thursday's rally. But, weigh your risk-reward ratio well while dealing with this space. We expect a firm start, which should well hold till the end of the day. Monthly US jobs data is the key global event to watch out for today.
US stocks advanced, with the Dow Jones returning into the positive zone for the year, in the wake of encouraging reports on retail sales and initial jobless claims. The US dollar gained versus major currencies after a surprisingly weak report on pending home sales triggered worries about the pace of the economic recovery. Across the Atlantic, the picture was mixed in Europe. Japan led Asian shares higher this morning after reports that the Bank of Japan will likely consider further monetary easing.
Trading ideas (Time period: 1-3 days)
Bhushan Steel (BUY, CMP Rs1,740, Target Rs1,815): The stock broke out from a Ascending Triangle pattern. It had been moving back and forth within the context of the Triangle from third week of January 2010. In the above formation, two or more rising troughs form an ascending trend line that converges on the horizontal line as it rises. It is considered a bullish set up. Moreover, on the daily chart, the price movements have formed a higher bottom formation. The current breakout is likely to take the stock to the levels of Rs1,815 and above. We recommend traders to buy the stock at current levels with a stop loss of Rs1,710.
Indiabulls Real Estate (BUY, CMP Rs173, Target Rs185): Indiabulls Real Estate is pointing to continued strength in the weeks to come as it has broken a downward-sloping trend line since early-January 2010. A detailed study of the daily chart shows that the stock has corrected from the high of Rs236 in January 2010 to touch a low of Rs151 last week. On Thursday, the stock staged a smart breakout past the downward sloping trendline. This bullish breakout signals the end of the intermediate downtrend. We recommend high risk traders to buy the stock in the range between Rs171-175 for a target of Rs185 with stop loss of Rs166.
Derivative strategies (Time period: Till expiry)
± Long IFCI March Future @ Rs54.30 for the target price of Rs57 and stop loss placed at Rs53.30.
Lot size: 7,880
Remarks: Net maximum profit of Rs21,276 and net maximum loss Rs7,880.
± Long Aurobindo Pharma Ltd March Future @ Rs959 for the target price of Rs980-1000 and stop loss placed at Rs949.
Lot size: 700.
Remarks: Net maximum profit of Rs28,700 and net maximum loss Rs7,000.
Mutual funds
| Fund focus | |||||||
| HDFC Taxsaver Fund | Invest | ||||||
| Fund manager | Vinay Kulkarni |
| Min investment | Rs500 | |||
| Latest NAV | Rs199.0 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs204/84 |
| Exit load | Nil | |||
| Latest AUM | Rs2,125cr |
| Latest dividend (under dividend option) | 60% (4-Mar-10) | |||
| Type | Open-ended |
| Benchmark | S&P CNX 500 | |||
| Class | Equity-tax saving |
| Asset allocation | Equity (97%), Debt (0%), Cash (3%) | |||
| Options | Growth & dividend |
| Expense ratio | 1.9% | |||
Event Update: Punj Lloyd – BUY
CMP Rs178, Target Price Rs198, Upside 11.1%
Punj Lloyd bagged Rs10bn EPC order for complete BoP for CESC's 2x300MW Chandrapur thermal power plant. This provides us improved visibility on the timely completion of the project. Punj Lloyd also announced £23.1mn liquidation damages levied by Ensus for delayed commissioning of its bioethenol plant. In addition to these damages, it may face further losses from delays in some of its key orders i.e. ONGC, Libyan orders, Adaro power project and PTT project. In light of fresh write-offs and risk of future write-offs, we reduce our FY10-12 earnings estimates to Rs4.6bn and Rs5.9bn respectively. Since Ensus was the last project being executed by Simon Carves and Punj Lloyd executing the rest, we believe there is greater visibility on timely completion - which will be a key trigger for the stock. We introduce FY12 earnings and value the company on a lower target multiple of 10x to arrive at our reduced target price of Rs198/share.
Mutual Funds Thermometer as on March 04, 2010
Given below is the summary of performance of the mutual fund industry in India. The analysis has been based on different criteria like time period, size of corpus and scheme category. A snapshot of the report is shown below.
Key observations
± After remaining range-bound in the last few sessions, equity market moved up smartly on the positive budget announcements. The benchmark index - S&P CNX Nifty gained 3.5% this fortnight and steadily held above the 5000 mark. Performance of equity diversified funds was in line with the equity market. The advance:decline ratio of equity diversified funds stood at 177:13. Distinct to the previous trend, top quartile was dominated by the large-cap funds this fortnight. Among the large corpuses, Templeton India Growth (+3.7%), Reliance Vision (+3.6%) and IDFC Enterprise Equity-A (+3.5%) were the top gainers in this category. Many mid-cap funds remained underperformer and languished at the bottom of the chart viz. SBI Magnum Midcap (-0.7%), JM Small & Mid-Cap (-0.7%), HSBC Midcap Equity (-0.2%).
± Encouraging budget announcements for banking space, such as new banking licenses, capital infusion for PSU banks, etc. enabled bank centric funds to outperform with respective to other sectoral funds. Among the top-10 fortnightly gainers, seven funds belonged to the banking and financial services. Religare Banking topped the chart by delivering a return of 6.2%. ICICI Prudential FMCG Fund underperformed the sectoral category on account of an increase in excise slab for cigarette manufacturers. Since one of the fund's major holdings includes ITC (18% of the total corpus), the announcement had a negative impact on the fund - down by 0.7% on a fortnightly basis.
± In the ELSS category, all funds ended in the positive territory. However, only nine ELSS funds were able to outperform the benchmark index i.e. BSE 200 on a fortnightly basis. Among the large corpuses, Birla SL Tax Relief '96 (+3.4%), Franklin India Taxshield (+3.2%) and ICICI Pru Tax Plan (+2.9%) were the leading gainers. Funds with relatively smaller corpus were not able to compete with their larger counterparts in terms of the fortnightly performance.
± NAV's of debt funds ended on a positive note on the announcements of lower-than-expected net borrowing programme of Rs3.45tn in FY11 vis-à-vis Rs3.97tn in FY10. Gilt funds and income funds delivered average returns of 0.15% and 0.09% respectively on a fortnightly basis.
± In the ETF category, Bank ETFs outperformed on a fortnightly basis. Bank BeES ETFs' NAV witnessed a growth of 5.59%, closely followed by Reliance Banking ETF (+5.5%) while Kotak PSU Bank ETF rose by 4.2% on a fortnightly basis. Internationally, gold prices gained during the fortnight as dollar declined against major international currencies. On a fortnightly basis, Gold ETFs, underperforming the ETF category, have witnessed a rise in NAV by 1.9%.
Corporate Snippets
± Private Banks, HDFC Bank, ICICI Bank and Kotak Mahindra Bank raise rates on home and auto Loans. (ET)
± Government likely to set NMDC floor price for the FPO at 30-35% discount to the current stock price. (ET)
± IOC's Paradip refinery in Orissa to commence operations by November 2012 which may dent the available income tax breaks. (ET)
± Infosys plans to have a third of its total revenues coming from new services, including cloud computing and platform-based offerings, over next few years. (ET)
± Nissan will continue to source the Pixo, a small car from Maruti Suzuki, until the contract expires in 2012. (BS)
± TTML is preparing a war chest of Rs85bn to bid in the forthcoming 3G auctions. (ET)
± NMDC is planning to raise long-term contract prices of iron ore by 40-50%, effective April 1, 2010. (BS)
± Wipro has rejigged its non-IT businesses along with leadership changes. (ET)
± AstraZeneca has sued Sun Pharmaceuticals for challenging the patent on its ulcer drug brand, Nexium IV, in the US market. (BS)
± Sudan, Congo, Nigeria, Libya, Ghana, Angola, Egypt and Uganda are among the African countries that ONGC Videsh Ltd (OVL) is focusing on for acquisitions of oil and gas assets. (BL)
± Wipro Infotech is betting big on cloud computing and will mainly target the US$4.5bn SME segment to drive its growth. (BL)
± NMDC issue will be priced according to the book building route. (BL)
± Ashok Leyland to invest Rs30bn over next three years on various expansion projects. (ET)
± Suzlon Energy has won an order from Gujarat State Petronet to set up, operate and maintain a 52.5 MW wind energy project in the Rajkot and Porbandar districts of the State. (BL)
± Raymond to recast its garment business; to pull out of weak brands. (ET)
± Aurobindo Pharma has created a division, Auro Source, within the company to focus on CRAMS. (ET)
± Essar Oil plans to invest about Rs40bn in the next three years for developing its three CBM blocks in Jharkhand, Gujarat and West Bengal, having recoverable gas reserve of close to 7tcf. (BS)
± Zydus Cadila has commenced the phase II and III of the clinical trials of its H1N1 vaccine. (BS)
± Strides Arcolab to buy South Africa-based Aspen's Brazilian facility for US$75mn. (ET)
± Ahluwalia Contracts plans to foray into the construction of power projects. (BS)
Economic snippets
± Food inflation rises to 17.87% for the week-ended February 20th. (ET)
± Center to pump in Rs350bn into PSU Banks over two years. (ET)
± GST rates likely to be pegged at above 12%. (ET)
± Government to allow power projects situated in SEZs to sell electricity to units outside the zone. (ET)
± Direct Tax collection till February stood at Rs2.78 lakh crore, short by Rs1 lakh crore to meet the target set for the fiscal. (ET)
± India will have a new policy to auction hydrocarbon assets for exploring oil and gas reserves — Open Acreage Licensing Policy (Oalp) — in 18 months from now. (BS)
± Centre to curb movement of 20% non-urea fertilizers. (BL)
± Airbus has forecasted that India will require 1,032 aircraft, valued at US$138bn, in the next two decades. (BL)
± The Government is inclined to allow an increase in FDI limit beyond the existing 26% in the defence sector on a case-to-case basis. (BL)
± The Union Cabinet on Thursday approved raising the ceiling for payment of gratuity for private sector employees from Rs 0.35mn to Rs 1mn. (BL)
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