Market Mantra
Market outlook
More or less accepted!
Peace of mind is that mental condition in which you have accepted the worst. -Lin Yutang
Quarterly numbers, global events and of course the RBI's annual policy will keep the Indian market on tenterhooks. Can the market find some peace of mind? The spotlight will be on banks as the RBI is all set to raise rates (and perhaps even CRR) to tame inflation. The central bank's commentary will have a bearing on sentiment. But, the fact that the markets have already discounted rate hikes and the key indices have come off the 2-year highs could lead to a bounce back.
The Goldman Sachs shock appears to have eased a bit for the time being. The focus will be on the Wall Street titan's results later today. Citigroup shares rallied after posting strong earnings. But IBM shares are down despite stellar set of numbers.
The IT space will be in focus back home after TCS came out with better-than-expected Q4 results. Liquidity is a key variable and one needs to keep a close watch on fund flows. We expect a flat to slightly positive start. Overall, things will be volatile with a possibility of a higher finish.
Trading ideas (Time period: 1-3 days)
Allahabad Bank (BUY, CMP Rs159, Target Rs169): In our view, the stock has completed its downfall and has created a medium term support around its 20-day DMA (Rs151). From the current level, the stock is more likely to move upwards. The daily RSI has also given a positive divergence, indicating that price would start moving up. From the first week of March 2010, 20-day DMA has provided strong support on any decline. Any move past the above Rs160 is likely to trigger an upside in the near term. Based on the above evidences, we recommend high risk traders to buy the stock at current levels and on declines up to the levels of Rs157 with the support of Rs153 for an initial target of Rs169.
Siemens (SELL, CMP Rs710, Target Rs682): On the daily chart, the stock has broken below the small consolidation pattern. It presents great opportunity for the traders to jump in on the downtrend. An occurrence of this event indicates further selling and continuation of the downtrend. The stock had been moving in the range of Rs728-763 since last week of March 2010. Moreover, the stock has given a close below its 20-day DMA. The daily RSI has also shown a reversal from a neutral position along with the price movement. We recommend traders to sell the stock for a target of Rs682. It is advisable to maintain a stop loss of Rs622 on all short positions.
Derivative strategies (Time period: Till expiry)
± Long Larsen & Toubro Ltd April Future @ Rs1,557 for the target price of Rs1,580 and stop loss placed at Rs1,545
Lot size: 200
Remarks: Net maximum profit of Rs4,600 and net maximum loss Rs2,400.
± Long Hindalco April Future @ Rs178 for the target price of Rs184 and stop loss placed at Rs175
Lot size: 3,518.
Remarks: Net maximum profit of Rs21,108 and net maximum loss Rs10,554.
Mutual funds
| Fund focus | |||||||
| Reliance Growth Fund | Invest | ||||||
| Fund manager | Sunil Singhania |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs445.2 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs453/201 |
| Exit load | 1% <1 yr | |||
| Latest AUM | Rs7,111cr |
| 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% | |||
Result Update: Hero Honda Motors (Q4 FY10) – BUY
CMP Rs1,897, Target Rs2,112, Upside 11.4%
± Revenues rise 20.4% yoy due to 18.9% growth in volumes and 1.3% higher realizations
± Lower raw material costs owing to higher degree of ancillarisation at Uttaranchal plant led to 122bps yoy rise in OPM
± Higher production from Uttaranchal plant drives 10ppts decrease in effective tax rate
± Rising raw material prices a key concern, however, further increase in ancillarisation to cushion the impact
± Upgrade to BUY, with a revised price target of Rs2,112
Result Update: TCS Ltd (Q4 FY10) – Market Performer
CMP Rs812, Target Rs875, Upside 7.8%
± Moderation in volume growth momentum as expected; US$ revenues grew 4.2% qoq in constant currency
± Growth driven by Top 10 clients and the US region; manufacturing and telecom verticals show signs of revival
± OPM hits 5-year peak with 20bps qoq expansion; net profit grows strongly due to higher other income
± Record employee additions driven by large deal wins and enhanced confidence in growth; material wage hike and payouts may keep attrition under check
± Upgrade earnings and target price but maintain Market Performer on TCS
Result Update: Sesa Goa (Q4 FY10) – Market Performer
CMP Rs459, Target Rs474, Upside 3.2%
± Sesa Goa's topline increase of 28% qoq to Rs24.2bn, was higher than our estimate
± Iron ore sales volume of 7.35mn tons was higher than our expectation of 7.2mn tons
± Led by strong spot iron ore prices in China, net realisations increased by 20.5% qoq to Rs3,605/ton
± Company announced a net increase of 43mn tons in reserves and resources
± Net cash improved from Rs55.1bn by the end of Q3 FY10 to Rs69.5bn by the end of Q4 FY10
± Trading near fair value, maintain Market Performer
Corporate Snippets
± The Government is considering divesting 10% stake in the state-owned National Aluminium Company (NALCO). (BS)
± L&T to bid for airport projects in West Asia. (BL)
± ArcelorMittal in talks with Delhi-based Ferro Alloys Corporation (Facor) for a strategic stake. (BS)
± BHEL has bagged contract of Rs63bn from Raichur Power Corporation Ltd's for setting up a 1,600 mw supercritical power plant in Karnataka. (FE)
± GMR group is planning to raise an additional US$100mn from a group of private equity companies, led by Singapore-based Temasek Holdings, to fund its expansion plans. (BS)
± Siemens to invest Rs5bn for wind turbine manufacturing facility in Gujarat. (BS)
± Bajaj Auto has increased its stake in Austrian power bike maker KTM further to 35.7% from present 31.9%. (FE)
± Cipla has developed three low-cost generic medicines to treat blood pressure, allergic rhinitis and control excessive bleeding in women during delivery. (BS)
± United Spirits plans to expand into Southeast Asia and Africa by buying distilleries as it seeks to bolster its position as the world's second-biggest seller of alcohol. (ET)
± JSW has beaten two South African bidders to acquire a majority stake in South African Coal Mining Holdings (SACMH) at a price of 85.4mn rand (~Rs511.6mn). (BS)
± Coal India Limited (CIL) has fallen short of its targeted coal supplies to consumers in sectors like power, steel and fertilizers during April-February 2009-10. As against the 281.8mn tons which was to be supplied by CIL to the power sector, the coal major managed to supply 270.2mn tons, thus falling short of the target by 4.1%.(BS)
± Philips has outsourced its entire TV business, including manufacturing, distribution and selling, to Videocon industries. (BS)
± Shree Renuka Sugars has been insisting for at least 8% more equity in the Brazilian firm, Equipav. (ET)
± Jay Shree Tea & Industries is close to acquiring tea estates in Uganda and Rwanda. This overseas acquisition is expected to lift production from 23.5mn kg to nearly 29mn kg in 2010-11. (ET)
± Coal India is expected to seal deals worth US$1.8bn with foreign firms in the next two months for mining coal abroad (ET)
Economic snippets
± The government would rake in a minimum of over Rs240bn from the auction of third generation (3G) spectrum on the eighth day as the pan-India licence reached a bid of Rs60.7bn, up by about 73% from the base price of Rs35bn. (BS)
± Government has managed to add over Rs96.5bn in 2009-10 as non-tax revenue from the oil exploration companies. (BS)
± The sugar production in Uttar Pradesh for the 2009-10 crushing season is likely to fall short of 5.2mn tons as earlier projected. (BS)
± Credit growth surpassed the RBI's projection of 16% in FY10 mainly on account of public sector banks reporting robust growth in lending. (BL)
± A key committee of Parliament has said that the proposed Financial Stability and Development Council (FSDC) should be constituted at the earliest to address the inter-regulatory issues in the financial sector, creating pressure on the government to make the council some sort of a super regulator. (ET)
Results table
|
| Revenue | % yoy | PAT | % yoy |
| Hero Honda | 40,926 | 20.0 | 5,988 | 48.9 |
| TCS | 77,380 | 7.9 | 20,010 | 50.1 |
| Sesa Goa | 24,189 | 67.6 | 12,129 | 121.5 |
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