Market outlook
Monday morning exhaustion!
People choose the paths that grant them the greatest rewards for the least amount of effort.
Exhaustion seems to have got the better of the bulls and neither effort nor reward seems to be on the anvil. Stock indices continue to languish after a brief spurt post the Budget. The scenario is no different in global markets, though the US and Europe have held up well in the face of a few significant headwinds.
Emerging markets like India and China have actually under-performed in the past few sessions. It remains to be seen when this trend changes. For now though, it looks like the market will remain in a state of flux for a while before there is any meaningful movement.
At the cost of being repetitive, we expect yet another dull opening and perhaps another trigger-hunting day. Advance tax numbers might lead to some shift in the undertone, though it will not make a big difference. Monthly inflation numbers will be another factor to watch out for. Fed policymakers will meet on Tuesday for a monthly review. All eyes and ears will be glued for the latest cues from the US central bankers.
Trading ideas (Time period: 1-3 days)
Hindustan Zinc (BUY, CMP Rs1,250, Target Rs1,315): The daily chart of Hindustan Zinc suggests it is on the verge of breaking out from a 2-month Cup and Handle formation. The cup was formed during the period starting from third week of January 2010 to first week of March 2010. Since then the stock has been trading in a range to form a handle. A breakout from the Cup and Handle formation could signal a continuation of the prior uptrend. On Friday, the stock crossed above the Trendline joining the previous two peaks with higher volumes. The momentum indicator like RSI and MACD are exhibiting positive divergence. We believe as long as the stock sustains above its critical resistance zone of Rs1,240 on a closing basis, it could rally up to the levels of Rs1,300 and Rs1,315. We would advise traders to maintain a stop loss of Rs1,230 on all long positions.
LIC Housing Finance (BUY, CMP Rs810, Target Rs845): The stock has rallied smartly from a low of Rs720 in February-end 2010 to the present levels. On the weekly charts, it has formed a pattern of a higher bottom. It is considered as the initial sign of a bottoming out process in the short term. The daily RSI is already in strong buy mode, indicating that the prices are set to rally from the current levels. Last we, the stock witnessed volume expansion and closed above its 100-day DMA. Any move past the levels of Rs815, could see the stock attempting the levels of Rs840-245 in the short-term. We recommend a buy at current levels with a stop loss of Rs796.
Derivative strategies (Time period: Till expiry)
± Long Mundra Port & SEZ March Future @ Rs705 for the target price of Rs730 and stop loss placed at Rs690
Lot size: 300
Remarks: Net maximum profit of Rs7,500 and net maximum loss Rs4,500.
± Long IDFC March Future @ Rs168 for the target price of Rs178 and stop loss placed at Rs163
Lot size: 2,950.
Remarks: Net maximum profit of Rs29,500 and net maximum loss Rs14,750.
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% | |||
Economy Update: IIP – January 2010
± IIP growth for Jan 2010 at 16.7% v/s 17.6% in Dec 2009
± Growth continued across all use based categories
± IIP growth for December revised upwards by 80bps
Sector Update: Sugar - 'Turning Bitter'
Domestic prices have dropped ~22% from their January 2010 peak on account of 1) higher than estimated production of ~16.8mn tonnes, up from ~15mn tonnes seen in early February 2) Government imposed stock limits and zero import duty on white sugar. International raw sugar prices too fell to their lowest level since Aug' 09 on reports of higher Brazilian cane output in the crushing season beginning from April.
With expectations of a ~37% jump in SS2011 output and supportive raw sugar prices, domestic realizations could remain under pressure in the near term. We lower our SS2011 realizations by 15-26% for all the coverage companies. Downgrade BJH and SHRS to MP but retain BUY on BRCM with reduced TP of Rs131. Any further fall in raw prices is a key risk to our call as it could further boost the relative attractiveness of imports, thereby capping the upside on domestic realizations.
Technical View: Nifty - Bullish Consolidation
Last week, the NSE Nifty traded in a narrow band of 5,090-5,160. Since the market is trading near calendar year high, this pattern should be called as a bullish consolidation. This trend may most likely break on the upside sooner or later. Two stocks - Reliance and ONGC - are trading at critical juncture which supports our view of buy on declines. Their combined weightage in the Nifty is ~14%.
Weekly Update: Debt Market - week ended March 12, 2010
± The benchmark 10-year G-Sec bond yield hardened further by 4ps on a weekly basis to 8.01%. Concerns over high WPI inflation and next fiscal year's borrowing plan continue to influence G-Sec bond yields.
± All Scheduled Banks' investments (at book value) in the central and state government securities stood at Rs14,131bn as on Feb 26, 2010 vis-à-vis Rs12,136bn in the corresponding period of the previous year.
± Food inflation slipped to 17.81% for the week ended Feb 27, 2010 vis-à-vis 17.87% in the previous week. Although the decrease was minimal, prices of essential food items remain still expensive.
± GOI would provide Rs95bn for recapitalisation of public sector banks in Q1FY11, while about Rs70bn would be infused during the remaining part of FY11.
± China's exports gained 46% yoy while its inflation reached a 16-month high of 2.7% in Feb '10, indicating a case for the government to pare back stimulus measures and hike rates relatively soon.
± Britain's trade deficit widened unexpectedly in Jan '10 to US$12bn (£7.99bn) on account of a fall in exports of oil and chemicals and a rise in imports of semi-manufactured goods.
Corporate Snippets
± Government may shift subsidy burden to ONGC, OIL, GAIL. (BS)
± M & M opens Rs50bn Chakan facility; facility to be used to make new portfolio of pick-ups, a still-to-be-launched SUV and a range of medium and heavy trucks made under association with Navistar. (BL)
± ONGC is likely to invest up to US$20bn on its core upstream business over the next 10 years, to acquire oil and gas assets abroad. (BL)
± JFE may pick up 14% stake in JSW Steel. (TOI)
± Infosys could potentially face a tax liability of Rs1bn for alleged violations of SEZ rules at its Chandigarh SEZ. (FE)
± The government is considering up to 10% equity dilution in Nalco. (TOI)
± NMDC FPO issue subscribed 1.25x. (TOI)
± JFE Holdings is unlikely to buy stake in JSW Steel as has been stated earlier by both the companies, but rather in a SPV under which their Bengal project is coming up. (DNA)
± Tata Power plans to increase its wind and solar energy generation capacity to 2,000mw and 250mw. (ET)
± Godrej Consumer has entered into an agreement to acquire Nigerian beauty brand Turafor ~Rs4-5bn. (BS)
± TCS plans to finalise its wage and recruitment plans by April. (BS)
± Reliance Industries, IMG Worldwide enteres into an equal joint venture to build a professional sports business in India. (BS)
± DQ Entertainment fixes IPO price at Rs 80. (BS)
± Ranbaxy eyes 80% rise in income by end of 2012. (BS)
± Vishal Retail receives approval from lenders for inducting a strategic investor into the company to help it emerge from a Rs7.35bn debt pit. (BS)
± Texas Pacific set to take over Vishal Retail assets. (BL)
± Fortis Healthcare plans to use a short-term loan and money raised through a recent rights issue to fund its 23.9% stake buy in Singapore's Parkway Holdings from PE firm TPG Capital for US$685mn. (BS)
± Bharati Shipyard acquires an additional 3% in Great Offshore from its rival, ABG Shipyard, for Rs 537mn.
± KSK Energy arm lowest bidder to supply 1010 MW power to GUVNL. (BS)
± Eveready hikes prices of dry cell batteries. (BS)
± Micro Technologies signs a strategic alliance with Brussels-based Advisers Global. (BS)
± Triveni Engineering & Industries announces the demerger scheme of its steam turbine business. (BL)
± Elder Pharmaceuticals is increasing its stake in its Bulgarian subsidiary Elder Biomeda to 61% from the current 51% for around US$12mn. (ET)
± Zensar Technologies lines up US$100mn for another overseas buy. (ET)
± Mercator Lines acquires a medium range tanker of 42,235 DWT, or dead weight tonnage. (ET)
Economic snippets
± Govt may pick up RBI's stake in Nabard next fiscal. (BS)
± Foreign exchange reserves rose by US$74mn to US$278bn for the week ended March 5. (BL)
± Tyre companies may hike prices again on rising input costs. (ET)
± Capital goods, consumer durables lift January industrial growth to 16.7% yoy. (BL)
± SC declines to interfere with the adverse findings of the Delhi HC against DoT and Union minister A Raja in allocation of 2G spectrum in 2007 by arbitrarily advancing the cut-off date for application from October 1 to September 25, 2007. (TOI)
± Port traffic up 5.5% in April-Feb 2010. (TOI)
± Mobile number portability, which will enable subscribers to retain their numbers while changing operators, is likely to be delayed at least by another three months till July. (TOI)
± Hydro electricity capacity addition during the 11th Plan (2007-12) may be 34% lower than the target, according to a mid-term review. (DNA)
Confidentiality & Disclaimer: This message contains confidential information and is intended only for the individual named. If you are not the named addressee you should not disseminate, distribute or copy this e-mail. Please notify the sender immediately by e-mail if you have received this e-mail by mistake and delete this e-mail from your system. E-mails are not encrypted and cannot be guaranteed to be secured or error-free as information could be intercepted, corrupted, lost, destroyed arrive late or incomplete, or contain viruses. The sender, which includes India Infoline Limited and its group companies, will not be liable for any errors or ommissions in the contents of this message which arise as a result of e-mail transmission. If verification is required please request a hard-copy version. This message is provided for informational purpose and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments.
No comments:
Post a Comment