Market Mantra
Market outlook
Back to square one
To profit from good advice requires more wisdom than to give it. Wilson Mizner.
Yes, there is some profit to be made from the global rebound this morning, but one should not get carried away as the advance may run out of steam after a while. We expect a positive start following further improvement in risk tolerance worldwide. Early gains may not hold though and the market may once again turn choppy and rangebound. Near-term sentiment may remain at the mercy of global events even as earnings continue to trickle in, both here and overseas. Monsoon will be the next big event on the domestic calendar.
April was a dull month for Indian equities, as the main indices were stuck in a range. A breakout from the current range may continue to elude us unless we have a major global rally. So, it would be wise to stay cautious though there is no need to panic. Be selective and careful in picking stocks, especially the small- and mid-cap ones.
In the near term, 50-day DMA at 5,161 is likely to provide strong support. On the way up, a bounce would run into resistance at 20-day DMA (5,294).
Trading ideas (Time period: 1-3 days)
Biocon (BUY, CMP Rs303, Target Rs320): The stock has seen impressive volume in yesterday's trading session and appears to have taken support between Rs290-294 range. It could bounce till somewhere between Rs318-320 levels in the near term. The bullish formation is confirmed after the stock gave a close above its short-term moving averages with positive divergences in momentum oscillators. Any move above Rs305 could take the stock towards Rs320 and higher in the short-term. Traders are advised to maintain a stop loss of Rs296 and go long. Book partial profit around Rs317 and exit around the levels of Rs320.
ICICI Bank (BUY, CMP Rs947, Target Rs997): After moving in a downward sloping channel, ICICI Bank has broken out above the upper trendline of this channel. On Thursday, we saw, the stock arresting its downward slide which began from first week of April 2010 and giving a close above crucial moving averages. From the high of Rs1,010, the stock saw a low of Rs903 last week. The decline in the above pattern was accompanied with lower volumes. However, we saw some stability returning back in the stock. A move above Rs953 with expansion of volumes could see the stock touching the levels of Rs990 and above in the medium term. The short term oscillators are showing upward movement. Keeping in mind, the above mentioned technical evidences, we recommend traders to buy the stock between the levels of Rs943-950 with a stop loss of Rs925 for a target of Rs997.
Derivative strategies (Time period: Till expiry)
± Long Syndicate Bank May Future @ Rs93.6 for the target price of Rs96 and stop loss placed at Rs92
Lot size: 4,000
Remarks: Net maximum profit of Rs9,600 and net maximum loss Rs6,400.
± Long Tata Power May Future @ Rs1,353 for the target price of Rs1,382 and stop loss placed at Rs1,337
Lot size: 250.
Remarks: Net maximum profit of Rs7,250 and net maximum loss Rs4,000.
Mutual funds
| New Fund Offer | |||||
| DSP BlackRock Focus 25 Fund | Subscribe | ||||
| Fund manager | Apoorva Shah |
| Min investment - Retail | Rs5,000 | |
| NFO dates | April 23 – May 21, 2010 |
| Entry load | Nil | |
| NAV | Rs10 |
| Exit load | 1% <1yr<Rs5cr | |
| Type | Equity – diversified |
| Registrar | CAMS | |
| Class | Open – ended |
| Asset allocation: |
| |
| Options | Growth & dividend |
| Equity & Equity related securities | 65-100% | |
| Benchmark | BSE Sensex |
| Debt and money securities | 0- 35% | |
Technical View: All eyes on 50-day DMA
The Nifty's 50-day DMA is placed at 5,161, which coincides with the low of April 19 (low made post SEC ruling on Goldman Sachs). The past few weeks have seen global events taking centerstage. With quite a bit of earnings out of the way, India will continue to look to global markets for directional cues. In such a scenario, 5,161 will act as a crucial support.
Result Update: Ashok Leyland (Q4 FY10) – BUY
CMP Rs55, Target Rs61, Upside 10.6%
± Net sales jump 141.3% yoy to Rs29.4bn on back of 138.9% yoy volume growth.
± Operating profit surged 229.5% yoy and OPM expanded by 345bps yoy to 12.9%
± Employee cost as a percentage of sales decline by 403bps yoy on back of benefits of operating leverage
± Upgrade the stock to BUY from Market Performer
Result Update: Ultratech Cement (Q4 FY10) – SELL
CMP Rs1,019, Target Rs909, Downside 10.8%
± Revenue rise of 9.9% above our estimates on higher volume growth
± Surge in raw material costs, freight and other overheads pulls down OPM by 750bps yoy
± PAT declined by 26.2% yoy to Rs2.3bn; falls short of our estimates
± Current valuation remains expensive; Maintain Sell.
Result Update: CESC (Q4 FY10) – BUY
CMP Rs393, Target Rs475, Upside 20.8%
± Commissioning of Budge Budge III during the quarter resulted into 3.5% increase in generation
± This coupled with marginally higher realizations translated into 2.1% increase in revenues
± Higher interest, depreciation and tax resulted into flat PAT growth
± Dhariwal project has achieve financial closure, placed orders for BoP and BTG, improved visibility on timely commissioning
± Spencer's witnessed improvement in sales to Rs811/sq ft in March '10 against Rs660/sq ft in March '09
± Achieved savings of Rs1bn in the last 12 months
± Re-iterate BUY with an upgraded target price of Rs475/share
Result Update: KEC International (Q4 FY10) – BUY
CMP Rs571, Target Rs681, Upside 10.0%
± Revenues grow by a healthy 19.5% yoy to Rs13.6bn against 11.3bn last year. Full year revenues are higher by 14% yoy to Rs39bn
± Higher material and erection cost lower gross margin to 21%
± Higher deferred tax, on account of merger, offset higher growth in PBT
± Robust order book of Rs55bn covers it well for the next 18 months
± Re-iterate BUY for a target price of Rs628/share
Result Update: Dabur India (Q4 FY10) – BUY
CMP Rs181, Target Rs200, Upside 10.3%
± Records ~16% yoy growth in revenues at Rs8.5bn, primarily driven by volume growth across segments
± Retail venture records strong 37.1% yoy growth at Rs24mn during the quarter.
± Operating margins witnessed 137bps expansion to 19.1% aided by lower raw material costs and overheads
± Strong revenue growth coupled with improved operating efficiency drives net profit by 27.6% yoy to ~Rs1.3bn
± Maintain BUY with a revised target price of Rs200
Corporate Snippets
± RIL plans to sell gas to retail consumers in the US, using Atlas Energy's infrastructure
± UltraTech Cement has acquired Dubai-based ETA Star Cement for an enterprise value of Rs17bn. (ET)
± Jindal Steel and Power is close to acquiring Oman based Shabed Iron and Steel for US$500mn. (ET)
± Supreme Court verdict on RIL-RNRL gas issue is likely next week. (ET)
± Air India has opposed the marketing alliance between Kingfisher Airlines and British Airways on domestic network. (ET)
± NTPC-BHEL Power Projects, 50:50 JV between the two PSU's, is expecting orders worth Rs70bn by the end of current fiscal (ET)
± Infinite Computer Solutions has bagged an order worth Rs1.25bn. (BL)
± Madhucon Projects has secured an EPC contract worth Rs12bn for setting up thermal power plant in Nellore district of Andhra Pradesh. (BL)
± CESC has decided to revive West Bengal's Balagarh thermal power project abandoned several years ago. (BL)
± Pantaloon Retail and Future Value Retail plan to issue Rs7.5bn worth of NCD's. (BS)
± Mindtree has bagged the application development services segment of the UID Project. (BS)
± Tata Power has been asked not to apply differential pricing for Reliance Infrastructure. (BS)
± Nuclear Power Corporation of India is likely to sign JV Agreements with IOC and NALCO. (FE)
Economic snippets
± Finance Bill proposes to prohibit token concessions to housing, air travel, planters and healthcare. (ET)
± Food inflation eases to 16.6% during the weekend April 17. (BL)
± Government has directed mobile operators to stick to June 30 dead line for launch of mobile number portability. (ET)
± According to the Telecom minister, 3G auction to end in a day or two. (BL)
± The Government has hiked export duty on iron ore lumps to 15%. (BS)
Results table
| Company | Revenues | % yoy | PAT | % yoy |
| Andhra Bank | 6,562 | 66.0 | 2,403 | 19.4 |
| Shoppers Stop | 3,812 | 22.5 | 126 | - |
| Patni Computer System | 7,745 | (2.8) | 1,497 | 96.8 |
| Shriram Transport Finance | 12,034 | 23.1 | 2,644 | 71.9 |
| Ashok Leyland | 29,390 | 141.3 | 2,227 | 317.8 |
| CESC | 7,700 | 2.1 | 1,000 | 6.4 |
| KEC International | 13,571 | 19.5 | 628 | 30.0 |
| Biocon | 6,582 | 37.6 | 806 | 224.0 |
| MRF | 17,737 | 26.2 | 958 | 39.5 |
| Subex Ltd | 1,147 | (14.0) | 265 | - |
| Indian Overseas Bank | 8,204 | 16.5 | 1,274 | (60.5) |
| Ultratech Cement | 19,225 | 2.5 | 2,285 | (26.2) |
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