Market outlook
Be your own!
Part of being a Master is learning how to sing in nobody else's voice but your own. -Hugh Macleod.
It's been a rock-n-roll year for bulls with underpinned by a smart economic recovery and healthy FII inflows. All eyes are now on FY11. The immediate trigger will be India Inc.'s report card, trend in inflation and RBI policy action. Fund flows will also a play a crucial role, and so will the monsoon. On the whole, India is poised to do a little bit better than FY10.
A late spurt helped the key indices rebound after a mostly lackluster day. The Sensex and the Nifty gained 8% each in the March F&O series following a subdued February. Today we expect another sedate start due to uncertain global cues. A rangebound trade with a positive bias is what we foresee in the near term.
A big worry is how the external environment shapes up. Of late, there have been concerns about sovereign debt in parts of Europe. Dubai seems to have settled that issue. Reports suggest a consensus on financial aid from the EU-IMF combine. Keep a close watch on the Dollar for gauging the direction of the overseas markets.
Trading ideas (Time period: 1-3 days)
Hero Honda (BUY, CMP Rs2,024, Target Rs2,085): On the daily chart, the Bullish Engulfing Line was confirmed on Thursday, after the stock broke out from the resistance levels of Rs1,980. The above formation is further verified with the buy signal in the RSI. The daily RSI exhibited the uptrend along with the increase in the price yesterday. A sustained move past the Rs2,030 levels will see the stock heading towards the levels of Rs2,080 and higher in the medium term. Despite the ongoing volatility in the market, the stock has managed to hold on to the support of its short-term trendline. We recommend traders to buy the stock between Rs2,015-2,030 for an initial target of Rs2,085 with a stop loss of Rs1,995.
Sintex Industries (BUY, CMP Rs278, Target Rs295): The stock had been consolidating in a narrow range between the levels of Rs279-262 from last two weeks. On Thursday, the stock attempted to break-out from the upper-end of this trading range. Moreover, on the daily chart, the stock has formed a Bullish Engulfing Line in which a large candlestick is followed by a smaller candlestick whose body is located within the vertical range of the larger body. The white body has totally engulfed the body of the first black candlestick. The daily RSI is already in strong buy mode. The stock has closed above all its key daily moving averages. A move past the levels of Rs282 could take the stock towards the levels of Rs295-298 in the short-term. Keeping in mind the above mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs277-280 with a stop loss of Rs270 for an initial target of Rs295.
Derivative strategies (Time period: Till expiry)
± Long JP Associates April Future @ Rs151.75 for the target price of Rs149 and stop loss placed at Rs157
Lot size: 1,688
Remarks: Net maximum profit of Rs8,862 and net maximum loss Rs4,642.
± Long Polaris April Future @ Rs172.6 for the target price of Rs179 and stop loss placed at Rs169.90
Lot size: 2,800.
Remarks: Net maximum profit of Rs17,920 and net maximum loss Rs7,560.
Mutual funds
| Fund focus | |||||||
| Reliance Growth Fund | Invest | ||||||
| Fund manager | Sunil Singhania |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs436.3 |
| 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% | |||
Company Update: India Cements – SELL
CMP Rs136, Target Rs112, Downside (%):17.4
± IPL franchise valued at Rs24 per share
± Raised US$65mn via QIP
± Downtrend in margin to continue in FY11
± Increase in IPL valuation; upgrade price target
Corporate Snippets
± Bharati Airtel has formed two SPVs in Netherlands and Singapore to execute US$10.7bn deal to acquire Zain Telecom's African assets. (ET)
± L&T has bagged six orders worth Rs11.8bn from various domestic and international agencies. (ET)
± ONGC is seeking to buy oil sands assets in Canada. (ET)
± ONGC has approved a capex investment of Rs32.4bn for the first phase of development of marginal fields. (BS)
± ONGC has took note of three discoveries reported in March 2010. (BL)
± Coal India, RCF and GAIL plan to jointly set up a coal gasification unit in Orissa. (BL)
± SBI may extend 8% home loan scheme beyond March 31. (ET)
± SBI may merge its associate State Bank of Indore with itself in Q1 FY11. (ET)
± Tata Motors is selling about 20% stake in its equipment and services unit (Telcon) for roughly US$220mn to Japan's Hitachi Construction Machinery Co. (ET)
± Tata Motors is set to increase prices of its cars and SUV's following implementation of new emission norms next month. (FE)
± Bajaj Auto plans to increase its manufacturing capacity to 5mn vehicles a year. (FE)
± Essar Group has agreed to buy an Indonesian Coal mine for US$208mn. (ET)
± Essar Oil is seeking shareholders nod to raise US$1.7bn through issue of securities in international markets. (ET)
± Jet Airways has leased out three Boeing planes to Thai Airways for three years. (BS)
± Reliance MediaWorks entered into a strategic tie-up with UFO Moviez to set up the latter's encryption technology system at RMW headquarters. (ET)
± Videocon Group is set to invest Rs140bn in its mobile service division over the next three years. (ET)
± Arcelor Mittal has acquired another 4.9% stake in Uttam Galva for an estimated Rs750-800mn. (ET)
± Government has asked HPCL to invoke corporate guarantee given by United Breweries to recover dues. (ET)
± GMR Energy will soon raise over Rs16bn from a group of private equity players. (BS)
± Patel Engineering has bagged US$1bn project to build an integrated township in Mauritius. (BS)
± IDBI Bank has filed for US$1.5bn MTN issue but would raise around US$230-300mn. (BS)
± Nitin Fire is close to acquiring a Fire protection co. in UAE. (BL)
Economic snippets
± Food inflation fell to its lowest in four months for the week ended March 13. (ET)
± Quasi-equity instruments such as perpetual bonds may be ineligible to meet RBI guidelines on capital requirement in future. (ET)
± India's crude oil production grows by 4% in February. (ET)
± FII investment cap for core bonds could be raised. (FE)
± Credit growth has hit RBI's target of 16% in the fortnight to March 12, 2010. (FE)
± Government may infuse Rs40bn into regional rural banks over the next two years. (BS)
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