Market outlook
Establishing our world!
To establish oneself in the world, one has to do all one can to appear established.
The Indian equity market appears set to establish its hold. For all those who wake up trying to track how the Nifty is performing on the Singapore Exchange, there will probably be another breed of investors who will now stay awake to watch the Dow and S&P500 being traded on our exchange.
Meanwhile, stocks appear to have settled into yet another consolidation phase with no substantial newsflow to trigger direction. Traded volumes have been a bit disappointing even as flows from FIIs have improved. The post Budget feel-good factor which actually co-incided with global optimism seems to have ebbed slightly. For lack of other things, fourth quarter results, RBI's annual policy meeting and monsoon could provide fresh direction going ahead.
Today we expect flat to a slightly higher start. US indices have gained overnight. European stocks too advanced while Asian markets are mostly in the green zone. On the technical front, 5150 is proving to be a tough resistance for the NSE Nifty. On the down side, strong support is expected at 5,000.
Trading ideas (Time period: 1-3 days)
Mcleod Russel (BUY, CMP Rs245, Target Rs265): A detailed study of daily chart suggests that Mcleod Russel has made several attempts to break above the resistance zone of Rs240-242. The stock had been facing resistance around its 100-DMA since January 2010. On Wednesday, the stock gave an upside breakout. This was accompanied by smart surge in volumes. We expect the rangebound trading to come to an end and is likely to resume its uptrend. The stock rallied by 3% yesterday confirming the bullish set up. We continue to remain positive on the stock from technical perspective as the stock has managed to hold its short-term support trendline in ongoing market volatility. We recommend traders to buy the stock in the range of Rs242-247 with a stop loss of Rs236 for target of Rs265.
Orbit Corp (BUY, CMP Rs297, Target Rs315): Orbit Corp had been consolidating in range between the levels of Rs271-236 for one month. On Wednesday, the stock broke out from the higher-end of this trading range. In addition, the gain in the stock price from a low of Rs264 in the current week has been on back of increasing volumes, indicating strong buying at the support levels. The daily RSI is already in strong buy mode. The stock has closed above all its key daily moving averages. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs295-299 with a stop loss of Rs288 for target of Rs315.
Derivative strategies (Time period: Till expiry)
± Long Tata Power March Future @ Rs1,343 for the target price of Rs1,400 and stop loss placed at Rs1,320.
Lot size: 200
Remarks: Net maximum profit of Rs11,400 and net maximum loss Rs4,600.
± Long Bombay Rayon Fashions (BRFL) March Future @ Rs218 for the target price of Rs228 and stop loss placed at Rs214.
Lot size: 1,150.
Remarks: Net maximum profit of Rs11,500 and net maximum loss Rs4,600.
Mutual funds
| Fund focus | |||||||
| Birla Sun Life Tax Relief `96 Fund | Invest | ||||||
| Fund manager | Ajay Garg |
| Min investment | Rs500 | |||
| Latest NAV | Rs87.0 |
| 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% | |||
Sector Update: Banking – 'Loan growth inch further'
The recently released RBI data reveals that system credit growth for the fortnight ended February 26, 2010 has inched to 15.8%yoy. Pick-up in corporate capex plans and increase in investment activities across industries have contributed to higher loan growth. With banks having lent ~Rs3.2tn YTD, over 38% of the same came in last 2-months. We expect loan growth to accelerate further driven by improving credit demand and proactive lending by banks to meet their priority sector lending targets for the year. We estimate system loan growth at 16-17%yoy for FY10 and higher 17-18%yoy for FY11.
The system deposit growth has remained in 16-19%yoy growth trajectory over the past several fortnights. With banks having re-priced a large amount of their deposit books, they have now started mobilizing deposits via various routes. A host of banks like ICICI Bank and HDFC Bank have already raised deposit rates across various maturities in anticipation of higher credit growth in coming periods.
While loan-to-deposit (LDR) ratio has remained at 71% levels for past several fortnights, significant pick-up in loan growth coupled with moderation in deposit growth have improved incremental LDR, which has stretched to 67% levels.
While the increase in reserve requirement was higher than anticipated at 75bps to 5.75%, this increase was implemented in a phased manner, thereby draining over Rs360bn of liquidity from the system. With pick-up in credit growth, banks are expected to divert surplus funds currently parked under reverse repo window towards high-yield earning assets. Rising bond-yields, improving credit environment, soaring inflation and front-loading of government borrowing programme are the factors, which are likely to compel RBI to increase its key rates in order to anchor inflationary expectations while ensuring adequate growth.
Corporate Snippets
± SBI to tap retail bond market next year with a 10-year issue. (ET)
± RIL has leased an ultra deep water drill ship to boost offshore exploration. (BS)
± Tata Steel hit by Orissa Government blanket mining ban order. (BL)
± ITC arm to invest Rs11bn in Bhadrachalam paper plant. (BL)
± NMDC FPO received bids for 17% of the share on day one. (ET)
± NMDC and Nagarjuna Fertilizer are scouting for phosphate mines abroad. (BL)
± Government says no FPO offers in IOC and ONGC as of now. (BL)
± SBI prefers rights issue over FPO says Chairman OP Bhatt. (BS)
± Adani Power out of race to supply power to Gujarat Urja Vikas Nigam. (BS)
± Thermax has formed a JV with Babcock and Wilcox for making super critical boilers. (ET)
± Jayshree Tea is close to acquiring a company in agro commodity space. (ET)
± Supreme Infra wins an order for Rs4.5bn.
± Maharashtra Government forms a JV with TCS for a 10-year e-governance project. (ET)
± Special auditors submit report on Bharti Airtel to DoT. (ET)
± SpiceJet to launch its international operation in June. (ET)
± Nagarjuna Fertilizer to form subsidiary in Mauritius. (ET)
± GVK Power and Infra arm bags Hydro Power Project worth Rs50bn in J&K. (ET)
± SAIL plans to increase annual capacity to 26mn tons by 2014. (ET)
± Videocon Industries has fixed right issue price at Rs225 per share. (ET)
± Essar Oil interested in building new oil refineries in Indonesia. (ET)
± Mphasis will announce salary increment in May. (ET)
± P&G increases grammage of Tide Naturals by 25% without any hike in price. (ET)
± BSNL board approves Pitroda panel report on 30% stake sale. (ET)
± Disinvestment department has return to DoT seeking to know the listing plans for BSNL. (ET)
Economic snippets
± Dow and S&P 500 index would be soon available on NSE in Indian rupee term. (ET)
± Government is considering allowing FI's to guarantee bond issued by infrastructure companies. (ET)
± RBI data indicates that second half bank loan grew by Rs376bn. (ET)
± Domestic steel prices may rise next month on higher input cost. (ET)
± Tyres production rises by 16% yoy to 79.2mn units during first 10-months of FY10. (BL)
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