Market outlook
Nothing to worry!
Nothing is often a good thing to do and always a clever thing to say - Will Durant
Bulls could extend Tuesday's rally thanks to the Federal Reserve's move to do nothing on its ultra loose monetary policy. What's more, the US central bank offered a more optimistic assessment on the state of the labour market.
European stocks finished higher, extending gains late in the session after S&P said Greece was on track to meet its near-term budget goals.
Asian markets are mostly higher this morning. It's a no-brainer that given the slightly optimistic global cues, the Indian market too will advance further. Whether it closes up or not is anybody's guess. It's best to do nothing with the stocks you hold now.
The Nifty could take a shot at 5300 in the near term, provided global markets remain firm. However, it may take a while for it to touch 5500. On the way down, strong support is now seen at 5100.
One cause for concern of late has been the low traded volume and constant selling by local funds. At the same time, volatility remains pretty low. One may see the main indices consolidate in a range of 5100-5300.
Trading ideas (Time period: 1-3 days)
Jayshreee Tea (BUY, CMP Rs341, Target Rs358): The short-term ascending trendline yet again provided strong support to the stock on Tuesday. It pulled back smartly from day's low to close at days high with impressive volumes. The stock is sitting on an important trendline support just above Rs333. Recent developments are building up the case that the uptrend from February low of Rs305 is likely to continue. A rebound should be due as daily oscillators continue to remain in a positive set-up. Traders are advised to buy the stock in the range between Rs339-342 with SL of Rs332 for target of Rs358.
Mercator Lines (BUY, CMP Rs59, Target Rs65): The stock had been on a downtrend from the first week of March 2010. Infact, the stock has seen a sharp decline from the levels of Rs61 to a low of Rs56. The Daily RSI is exhibiting strong positive divergences, which indicates that the worst is over and that the trend should reverse from the current levels. We expect the stock to witness smart pullback from the current levels. Volumes have shown a smart increase in the past few sessions, which suggests accumulation at lower levels. A bullish candlestick on Tuesday further validates our argument of a short-term bounce in the stock. We recommend a buy for a short-term target of Rs65 with a stop loss of Rs56.
Derivative strategies (Time period: Till expiry)
± Long Tata Power March Future @ Rs1,379 for the target price of Rs1,410 and stop loss placed at Rs1,370
Lot size: 200
Remarks: Net maximum profit of Rs6,400 and net maximum loss Rs1,800.
± Long GMR Infrastructure March Future @ Rs57.80 for the target price of Rs64 and stop loss placed at Rs54
Lot size: 2,500.
Remarks: Net maximum profit of Rs15,500 and net maximum loss Rs9,500.
Mutual funds
| Fund focus | |||||||
| ICICI Prudential Tax Plan | Invest | ||||||
| Fund manager | Sankaran Naren |
| Min investment | Rs500 | |||
| Latest NAV | Rs125.7 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs125/50 |
| Exit load | Nil | |||
| Latest AUM | Rs1,044cr |
| Latest dividend (under dividend option) | 10% (Mar 19, 2010) | |||
| Type | Open-ended |
| Benchmark | S&P Nifty | |||
| Class | Equity – Tax saving |
| Asset allocation | Equity (91%), Debt (0%), Cash (9%) | |||
| Options | Growth & dividend |
| Expense ratio | 2.0% | |||
Sector Report: Auto Components – Gathering speed
Our detailed report on Indian Auto Components should reach you shortly. Indian Auto Component manufacturers have registered an improved financial performance in the past couple of quarters on the back of higher volumes arising from the domestic market. Cost cutting initiatives, improved productivity and better financial management during the meltdown (Q3 FY09-Q1 FY10) provided additional traction to their financial performance. We believe the momentum is expected to continue based on the following factors:
± Strong domestic demand for automobiles
± Replacement demand gaining traction
± India emerging as automobile manufacturing hub
± Rising automobile component sourcing from India
Apollo Tyres - BUY
CMP: Rs70, Target: Rs84
± Replacement demand and higher radialization of CV tyres to drive domestic performance
± Foreign subsidiaries to gain from global economic recovery
± Margin scenario is expected to improve
± Initiate with a BUY rating on back of overall growth
Bharat Forge - BUY
CMP: Rs267, Target: Rs295
± Domestic operations on strong revival as CV volumes surge
± International subsidiaries to witness improved performance
± Non-auto business to witness strong growth
± Recommend BUY on strong earnings growth
Exide Industries - BUY
CMP: Rs112, Target: Rs130
± Strong replacement demand to buoy automotive segment performance
± Industrial segment will provide additional momentum
± Lead sourcing strategy to expand margins
± Recommend BUY on strong earnings momentum
Motherson Sumi - BUY
CMP: Rs143, Target: Rs175
± Diversified product portfolio and market presence
± Wiring harness business to gain traction from domestic sales
± Visiocorp acquisition takes MSSL into tier-I league
± Tier-I status to justify premium valuations
Corporate Snippets
± RIL loses bid for Canadian firm Value Creation to British energy major BP Canada, which has taken a controlling stake for ~US$1.2bn. (BS)
± Bharti Airtel has issued a term sheet to banks to raise up to US$8.5bn in offshore loans to fund the acquisition of African mobile operator Zain. (ET)
± State Bank of India is likely to raise Rs200bn via rights issue by the year-end. (ET)
± Hindalco Industries has received a loan commitment of over Rs100bn from more than 10 banks for the Rs49bn debt the company plans to raise for its Utkal Alumina Refinery. (BS)
± Boeing will pay US$145mn compensation to Air India (AI) for delay in deliveries of the Dreamliner B787-800. (BS)
± Nissan Motor along with its joint venture French partner Renault, has invested around Rs28.8bn at Oragadam, near Chennai. (BS)
± Nissan Motor scouts for yet another Indian partner to develop one more car that will be placed between Micra and proposed ultra low cost (ULC). (BS)
± Reliance Communications has said that it was open to acquisitions in the country to grow its presence in the domestic market. (ET)
± PFC to pick up 26% stake in power projects. (BS)
± Mahanadi Coalfields Ltd (MCL) to cross 100mn tons coal production this year. (BL)
± Dhruvi Securities, a subsidiary of GMR Infrastructure has acquired shares of ING Vysya Bank from another GMR group subsidiary GMR Airports Holdings Private Ltd for a sum of Rs107.3mn. (BL)
± Strides Arcolab has informally offered to buy the remaining 43% stake in its Australian venture, Ascent Pharmahealth Ltd at Rs1.45bn. (BS)
± Patni Computer Systems has set up a new North American hub for BPO operations in El Paso, Texas. (ET)
± State-owned fuel retailers — Indian Oil, BPCL and HPCL— are likely to end the fiscal with a loss of ~Rs480bn on selling petrol, diesel, domestic LPG and kerosene below cost. (ET)
± The government has asked the five telecom operators, Bharti Airtel, Reliance communication, Tata, Vodafone and BSNL, to give their accounting details for three years (2006-07 to 2008-09) to the Comptroller and Auditor General of India. (ET)
± Religare Enterprises has decided to set up an asset management, sales and distribution business in Japan and has hired a team from KBC Financial Products for the same. (ET)
Economic snippets
± The finance ministry has circulated a proposal that aims to ask state-run banks to exit noncore businesses, notably insurance, to force greater capital efficiency and ensure that periodic capital infusion into them goes into increasing the spread of banking rather than propping up money-losing ventures. (ET)
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