Market outlook
Time to stand and stare!
Enjoyment is not a goal, it is a feeling that accompanies important ongoing activity.
There is no great feeling in the market as we stare at another soft opening. The global markets appear inconclusive. US stock benchmarks posted moderate gains while Europe was subdued. Asian markets are trading mixed. Looks like investors are on a 'wait-n-watch' mode and appear to be reluctant in taking major bets immediately. The Nifty is expected to remain stuck in the 5100-5150 range and the next hurdle is near the 5200. Fresh selling could take it as low as 5030-5050.
Inflation numbers showed a spike in fuel price. A possible trigger later in the day would be the IIP numbers.
Meanwhile, India Inc's global conquest continues unabated – yet another sign of revived confidence following the financial turbulence. The economy is in good shape, if not great. The Government is aiming for the top slot in a few years. This may sound a little ambitious but not unachievable. Much will depend on how the policy landscape unfolds besides of course the state of the world economy. Among the other major headwinds include inflation and its implication on monetary policy.
Trading ideas (Time period: 1-3 days)
Harrison Malyalam (BUY, CMP Rs120, Target Rs130): A detailed study of daily chart suggests that Harrison Malyalam has made several attempts to break above the resistance zone of Rs120-121 (100-day DMA) since February 2010. On Thursday, the stock closed just below the important moving average yet again with strong volumes. We expect the rangebound trading to come to an end and is likely to resume its uptrend. We continue to remain positive on the stock from technical perspective. We recommend traders to buy the stock in the range of Rs118-121 with a stop loss of Rs114 for target of Rs130.
Amara Raja Batteries (BUY, CMP Rs165, Target Rs177): The stock has seen impressive volume expansion in yesterday's sessions and appears to have taken support between Rs160-161 range (100-day DMA). It could bounce till somewhere between Rs176-177 levels in the near term. Our argument is further validated after the stock recovered from the low of Rs155 in yesterday's session with strong volumes. Any move above Rs166 could take the stock towards Rs177 and higher in the short-term. Traders are advised to maintain a stop loss of Rs159 and go long. Book partial profit around Rs174 and exit around the levels of Rs177.
Derivative strategies (Time period: Till expiry)
± Long ABB March Future @ Rs865 for the target price of Rs890 and stop loss placed at Rs855
Lot size: 500
Remarks: Net maximum profit of Rs12,500 and net maximum loss Rs5,000.
± Long Cairn India March Future @ Rs267 for the target price of Rs280 and stop loss placed at Rs262.
Lot size: 1,250.
Remarks: Net maximum profit of Rs16,250 and net maximum loss Rs6,250.
Mutual funds
| Fund focus | |||||||
| Birla Sun Life Tax Relief `96 Fund | Invest | ||||||
| Fund manager | Ajay Garg |
| Min investment | Rs500 | |||
| Latest NAV | Rs86.4 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs78/37 |
| Exit load | Nil | |||
| Latest AUM | Rs1,220cr |
| Latest dividend (under dividend option) | 70% (Mar 12, 2010) | |||
| Type | Open-ended |
| Benchmark | BSE200 | |||
| Class | Equity – Tax saving |
| Asset allocation | Equity (98%), Debt (0%), Cash (2%) | |||
| Options | Growth & dividend |
| Expense ratio | 2.3% | |||
IPO Note: IL&FS Transportation Networks – Not Rated
Price band Rs242-258
IL&FS Transportation Networks Ltd. (ITNL), an infrastructure development player with a focus on road projects is raising Rs7bn through a public issue. Amongst India's major private players in the BOT road segment, ITNL has an order book of Rs103bn in road and railway projects with a total of 17 projects in hand of which eight have been completed. With the central and state governments seeking to secure greater private sector participation, we believe that ITNL with its proven track record and experienced management is well placed to capitalize on this opportunity.
Sector Update: Two Wheelers – Changing Trends
Price band Rs242-258
During FY10, 2-wheeler industry witnessed a sharp recovery in volumes after witnessing a marked slowdown in H2 FY09. Companies have intermittently reported their highest ever monthly volumes in YTD FY10. During this phase, vital trends for the segment have witnessed material change impacting performance for various companies differently.
± Hero Honda gains market share within scooters segment
± Rising proportion of <125cc motorcycles
± Increasing rural penetration
± Constrained credit availability
± Increasing raw material prices
With the recent budget increasing disposable income and laying stress on rural employment, we believe 2-wheeler volumes will continue to witness steady growth. However, operating margins would be under pressure as prices of key raw material prices continue to rise. We believe, Bajaj Auto with success of its recent launches and higher margins will outperform its peers. We maintain our rating on Bajaj Auto (BUY) and Hero Honda (MP), and downgrade TVS Motors to SELL from MP.
Corporate Snippets
± Bharti Airtel made its debut into media and entertainment services with the launch of the Airtel Digital Media Business. (BL)
± Fortis Healthcare Ltd acquired 23.9% strategic stake in Singapore-based healthcare service provider, Parkway Holdings Ltd for about US$685.3mn. (BL)
± Bank of India has increased interest rates on big-ticket (wholesale and bulk) deposits by 75-150 basis points across various maturities
± Maruti Suzuki would export at least 35,000 units of the A-Star compact car to Nissan in Europe in FY11. (BL)
± Ashok Leyland plans to import radial CV tyres and has sought a licence from the Government. (BL)
± Hero Honda would finalise the location to set up its fourth manufacturing facility by September 2010. (BL)
± TVS plans engine making unit in Karnataka. (BS)
± CESC intends on adding 5,000 MW of thermal generation capacity over the next few years, with investments in the range of Rs 200bn, by establishing five new facilities. (BS)
± Bosch is expected to declare a lockout at its flagship plant in Bangalore on March 15. (BL)
± Mahindra Satyam has won a US$48mn contract from KMD, an IT major from Denmark that specialises in the public sector projects. (BL)
± ICSA India has received work orders worth Rs1.3bn from Powergrid Corporation of India, taking the total order book size to Rs21.3bn. (BL)
± Areva T&D India has bagged a contract worth Rs4bn from Uttar Pradesh Power Transmission Corporation Ltd for building a substation. (BL)
± Anglo-Swedish major AstraZeneca has tied up with Torrent Pharmaceuticals to brand and supply a basket of Torrent's non-patent medicine in emerging markets. (BL)
± IVR Prime Urban Developers raised Rs1.5bn through issue of secured redeemable Non-Convertible Debentures (NCDs) on private placement. (BL)
Economic snippets
± The rate of food inflation showed some signs of moderation, sliding to 17.81% for the week ended February 27, 2010. (BS)
± Cement industry registers 6.34% growth in dispatches during February. (BS)
± According to UN Industrial Development Organisation (UNIDO), India has entered into the league of top-10 industrial producers for 2009. (BL)
± Public and private sector banks have raised Rs330bn through issue of capital bonds so far this fiscal year. (BL)
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