Market outlook
Uninteresting...a year later!
Modern calendars mar the sweet simplicity of our lives by reminding us that each day that passes is the anniversary of some perfectly uninteresting event.
It's been a year since the market has bid farewell it its lows. Meanwhile, the Sensex has galloped by over 100% in a year; albeit with a couple of corrections. The story ahead doesn't appear as promising as yet. For the day, we don't expect any broad movement as the sentiment has softened a bit. Global markets are also insipid to say the least. Given this backdrop, we expect a flat to slightly positive start and another anemic session. Select stock specific action may of course continue to hog limelight.
Technically, the NSE Nifty faces resistance at 5200 while support is likely to kick in at 5000. A break beyond this range is not expected anytime soon. Much will hinge on global cues and fund flows; also don't forget local data points like IIP and inflation.
Meanwhile, in Parliament, it has taken 14 long years for India to pass the Women's Reservation Bill in Rajya Sabha. The Bill is yet to be cleared by the Lok Sabha.
Trading ideas (Time period: 1-3 days)
HDIL (SELL, CMP Rs308, Target Rs290): On the daily charts, REC has given a close well below its resistance levels between Rs321-323. Moreover, the stock has broken below its 200-DMA. We expect the weakness to continue in the near term with daily RSI also showing a downward trend. Movement of the momentum indicators denote that the stock could trudge lower over the near term. Any fall from these levels could drag the stock lower towards Rs290 and below. We recommend a high-risk sell on the stock between the levels of Rs311-305 with a stop loss of Rs317 for an initial target of Rs290.
HDFC (BUY, CMP Rs2,659, Target Rs2,740): The stock had been consolidating in a narrow range between Rs2,545-2,624 since last one week. On Tuesday, the stock broke past its 100-DMA with higher-than-average volumes. From the current level, the stock can only move towards one direction, i.e. upwards. The daily RSI has also given a positive divergence, indicating that price would start moving up after facing stiff resistance around the levels of Rs2,620-2,625 zone. We recommend buy on the stock from the above mentioned technical observations. Maintain a stop loss of Rs2,624 and go long for a target of Rs2,740 in the coming trading sessions.
Derivative strategies (Time period: Till expiry)
± Long Piramal Healthcare March Future @ Rs424 for the target price of Rs445 and stop loss placed at Rs414.
Lot size: 1,500
Remarks: Net maximum profit of Rs31,500 and net maximum loss Rs15,000.
± Long Oriental Bank of Commerce March Future @ Rs306 for the target price of Rs325 and stop loss placed at Rs295.
Lot size: 1,200.
Remarks: Net maximum profit of Rs19,200 and net maximum loss Rs7,200.
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% | |||
FPO Note: NMDC – Not Rated
CMP Rs376
NMDC, a government-owned (98.4%) Navratna company is the country's largest iron ore producer. NMDC has a large iron ore reserve base of 1,360mn tons and is blessed with high quality iron ore reserves (64-66% iron content). The company plans to increase its annual production from 30mtpa to ~50mtpa by 2015. Average operating costs for the company over the past four years are a mere US$6.3/ton. We believe the robust volume growth in the domestic steel market coupled with strong iron ore realizations globally, will lead to a strong earnings growth for the company. After reporting weaker numbers in FY10E, we expect the company to witness earnings CAGR of 36% over FY10-12. NMDC's strong balance sheet will offer opportunities to grow inorganically. Cash balance of Rs127bn (Rs32/share) at the end of FY09 is expected to double by FY12. At the lower end of the price band, which is Rs300, NMDC will trade at 13.3x FY12 EV/EBIDTA, which is at a significant premium (100%) to its domestic and international peers. We believe that such high valuations even at the lower end of the band are unjustified.
Corporate Snippets
± Minister of state for Petroleum and Natural Gas Jitin Prasada told Rajya Sabha that ONGC plans to invest Rs265bn in the next fiscal for exploration, production and related ventures. (FE)
± Minister of State for Petroleum and Natural Gas, Mr Jitin Prasada, said that IOC has "regretted its participation" as equity partner in the proposed Barmer refinery due to financial constraints. (BL)
± The European Investment Bank had agreed to a £340mn loan to the Jaguar and Land Rover brands of Tata Motors. (BS)
± Daimler sold its 5.34% stake in Tata Motors for nearly €300mn (Rs18.6bn). (ET)
± A group of British Members of Parliament launched a scathing attack on the mothballing of Corus's Teeside Cast Products plant in northern England. (BL)
± NMDC is expected to increase its production to 50mt by 2013-2014 from the present 30mt and also plans to introduce a new pricing mechanism from April 1. (BS)
± Wipro Technologies, the global IT services business of Wipro, announced that it has signed a Microsoft business productivity online suite "dedicated advisor" agreement with Microsoft Corp. (FE)
± Wipro Infotech, the India and West Asian IT business of Wipro, won a turnkey project from the Financial Intelligence Unit - India (FIU-IND) of the Union Ministry of Finance to implement the FINnet project. (BS)
± Hindustan Unilever has appealed against the Calcutta High Court's interim injunction, which restrained it from airing a particular commercial for its washing soap/powder, Rin. (BS)
± FMCG major Marico plans to launch its beauty and wellness chain, Kaya in the Middle East by opening 4-5 clinics in the region in FY11. (ET)
± The Steel Ministry said it will send the 20% share sale proposal of SAIL to the Cabinet this week. (ET)
± IDBI Bank hoped to raise US$250-300mn through a medium-term note program, but would wait until market conditions were more favorable. (BS)
± Indian Hotels is mulling the possibility of completely doing away with its Residency brand luxury hotels and gears up for a stronger push of its Vivanta brand. (BL)
± The QIP issue of India Cements, launched late on Monday, is said to have a received good response from institutional investors to raise US$75mn. (ET)
± Tata Teleservices has acquired 75,000 sq ft built up space for Rs280mn in the newly built IT building named 'Prince Infocity II' near Chennai. (ET)
± Binani Cement plans to venture into commercial real estate development in order to cash in on its idle land bank and to reduce dependence on the cyclical nature of the cement business. (ET)
± Patel Engineering has received coal linkage for its proposed 1,050MW thermal project at Nagapattinam, Tamil Nadu. (BL)
± Aditya Birla Minacs part of the Aditya Birla Group, has acquired the UK-based firm Compass BPO for an undisclosed sum. (ET)
± Bosch Ltd declared a lock-out at its Naganathpura production plant near Bangalore, after workers resorted to a flash strike and assaulted an officer over wage revision. (FE)
± Even as reports of Bt cotton 1 developing resistance to pink bollworm create concern in the farming community, Monsanto has begun work on two new technologies Bollgard III, the third generation Bt cotton technology, and Roundup Ready Flex, a technology that gives herbicide tolerance to the plant. (BL)
± Garware Offshore Services bagged a contract worth Rs225mn from ONGC. (FE)
± CCCL Infrastructure Ltd, part of the Chennai-based Consolidated Construction Consortium Ltd, plans to raise Rs15-20bn through private equity. (BS)
± Singareni Collieries Company Ltd, India's second-largest coal producer, and also a state sector undertaking, plans to foray into power generation by setting up 1,200MW thermal power plant in Adilabad for an investment of Rs56bn. (BS)
Economic snippets
± The Railways carried over 800mt of freight, an increase of 6.95%, in the ongoing financial year to February. (ET)
± The government plans to carry out bulk of its targeted borrowing for fiscal 2010-11 in the first six months, the country's top policy adviser has said. (ET)
± The RBI plans to amend its rules to pre-empt NBFCs from misusing the liberal rules governing limited liability partnership firms. (BS)
± India and Russia are expected to sign four agreements in the fields of business and economy and one of the pacts includes fertilizers. (FE)
± After de-controlling the prices of fertilizers containing phosphorous and potash from April 1 this year, the government is planning to encourage their free imports. (FE).
± According to leading developers in the housing segment, home buyers are set to face higher prices due to the imposition of service tax as well as an increase in cost of various inputs like cement. (BS)
± The Central Board of Excise and Customs has recommended to the Director General of Foreign Trade that the norms for issuing export/import licenses be more stringent. (BS)
± The Jawaharlal Nehru Solar Mission's plan for the deployment of 20,000MW of solar power by 2022 needs an investment of Rs3trn, based on a capex of Rs150mn/MW. (BS)
± The government will provide Rs95bn for recapitalisation of public sector banks in the first quarter next year, while about Rs70bn will be infused during the rest of the financial year 2010-11. (BS)
± Sugar production in Uttar Pradesh may cross 4.5mt during the ongoing 2010-11 season as cane yields surpass expectations. (BL)
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