Market Mantra
Market outlook
Bulls losing power!
The highest proof of virtue is to possess boundless power without abusing it- Lord Macaulay
Not too long ago, levels of 5400 and 5500 were almost a given for the Nifty. In a matter of few days the situation seems to have turned a little worse for the bulls. In fact, the Nifty is all set to lose its grip over 5200, at least at the start. Whether it is able to reclaim 5200 by the close will hinge on the newsflow and results.
Overall, the mood will be one of caution ahead of the RBI annual policy meet tomorrow. Consensus forecast is for a 25 bps hike in key policy rates and a 50 bps increase in the CRR. The RBI's commentary will be keenly followed for gauging the mood on Mint Street. The Goldman Sachs issues and its broader fallout will also vie for attention; usually, stocks where there is a holdings could see knee-jerk reactions.
Though inflation didn't cross 10% in March, food inflation is near 18% and non-food prices are threatening to spike as well. Monsoon will critical this year after last year's near disaster. How the world economy does over the next few months will have a bearing on sentiment.
Trading ideas (Time period: 1-3 days)
Canara Bank (SELL, CMP Rs398, Target Rs380): The stock had seen a steady rise in prices from the levels of Rs379 during last week of February 2010. However, the stock hit an intermediate top around the levels of Rs433-440. Twice in last one month, the above levels have proved to be major resistance zone. On Friday, the stock has closed in the lower half of the intra-day band and on negative internals. Towards the end of session, the selling pressure became so intense that prices moved below the previous day's open. However, it has closed at the support of its 100-day DMA. Any move below 396 would confirm the downside. Based on above technical evidence, we recommend traders to sell the stock up to Rs400. It is advisable to maintain a SL of Rs408 for an initial target of Rs380.
Mcdowell (SELL, CMP Rs1,233, Target Rs1,180): The stock continued to show weakness and fell below the crucial support of Rs1,325-1,330 levels. It also broke below its 100-day DMA in Friday's trading session. The above pattern is bearish in nature and suggests more downside in the coming trading sessions. The daily oscillators are also indicating building up of the momentum on the downside. We recommend traders to sell the stock at current levels and on rallies to the levels of Rs1,250 for an initial target of Rs1,180. It is advisable to maintain a stop loss of Rs1,260 on all the short positions.
Derivative strategies (Time period: Till expiry)
± Long SCI April Future @ Rs159 for the target price of Rs165 and stop loss placed at Rs157
Lot size: 2,400
Remarks: Net maximum profit of Rs14,400 and net maximum loss Rs4,800.
± Long Power Grid Corporation April Future @ Rs108 for the target price of Rs112 and stop loss placed at Rs106
Lot size: 1,925.
Remarks: Net maximum profit of Rs7,700 and net maximum loss Rs3,850.
Mutual funds
| Fund focus | |||||||
| Reliance Growth Fund | Invest | ||||||
| Fund manager | Sunil Singhania |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs448.7 |
| 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% | |||
Event Update: Telecom - 3G Auctions
Ongoing 3G auctions gathered momentum on Day 7 as Delhi overtook Gujarat to garner the highest bid of Rs6.3bn at the end of Round#40. We presume activity levels have reached 90% as 7 circles commanded a price rise of 5% or more in R41, compared to just three instances of such a price delta in the preceding six days. Pan-India bid price of Rs57bn posted its highest jump of 12%, double of that seen at the end of R#22. The provisional winning bid at the end of day 7 represents ~76% of our estimated bid price of US$1.7bn for 3G spectrum.
At the end of R#40, the govt is assured of half of its budgeted amount of Rs350bn even as BWA auctions are yet to commence. With increased bidding activity and excess demand in six of the top 7 circles, we believe the govt can comfortably meet its revenue target.
Mutual Funds Thermometer as on April 16, 2010
Key observations
± The Indian equity market was highly volatile during the fortnight. A positive rally continued in the mid-cap category and small-cap stocks compared to the large-caps. BSE Midcap and BSE Smallcap outperformed by posting 2.6% and 3.8% respectively, whereas the S&P Nifty was down by 0.3%. Equity diversified NAVs ended higher with advance:decline ratio of 155:32. The biggest gainer during the fortnight was HSBC Smallcap, managing a corpus of Rs61cr; it's NAV appreciated by 8%. Other than HSBC Smallcap, DSPBR Micro-Cap (+7.1%) and Escorts Growth (+6.8%) were the top gainers in the equity-diversified category. Major large cap funds were placed at the bottom of the fortnightly chart.
± On the sectoral front, media and informational technology outperformed the fortnightly sectoral chart. Positive expectation build up at the beginning of the result season resulted in Information Technology-oriented funds gaining momentum during this fortnight. Within the category, Reliance Media & Entertainment (+8%), SBI Magnum IT (+4.2%), ICICI Pru Technology (+3.8%), and DSPBR Technology.com (+3.5%) were the toppers on a fortnightly basis. Unlike last fortnight, bank-oriented fund NAVs ended in the red; on an average it was down by 0.8%.
± Tax- saving funds exhibited better performance as their NAVs ended higher. The category average was up by 1% this fortnight. Among the large corpus, SBI Tax Advantage Fund - Series 1 (+2.2%), Reliance Tax Saver (+1.4%) and ICICI Pru Tax Plan (+1.3%) outperformed the S&P Nifty. Average return of these funds was 190 bps above that of the S&P Nifty.
± Short term and long term debt funds ended on a flat note. On an average, the income fund category delivered a nominal return of 0.23% and gilt funds delivered 0.04% this fortnight. However, outperforming the gilt fund category, Canara Robeco Gilt PGS and ICICI Pru Gilt-Treasury-PF delivered a return of 0.7% and 0.2% respectively.
± Internationally, Gold prices ended higher on a fortnightly basis. Worries on Greece's debt crisis resulted into safe-haven buying. In line with gold performance, Gold ETFs regained their luster posting positive returns of ~1.7% on a fortnightly basis. Banking ETF underperformed the ETF category following fears of an adverse outcome from the upcoming RBI annual policy meet.
Weekly Update: Debt Market - week ended April 16, 2010
± The Indian 10-year benchmark bond yield hardened by 18bps on a weekly basis. After touching a 17-month high of 8.09%, yield settled at 8.07% on Friday.
± Lackluster demand for the existing government securities coupled with rising inflation resulted in the hardening of yields. Fear of tightening regime from the upcoming RBI annual policy meet on Tuesday weighed on sentiment.
± The Index of Industrial Production (IIP) witnessed a growth of 15.1% in Feb '10 vis-à-vis 0.2% in Feb '09. The growth for Jan '10 remained unchanged at 16.7%. The IIP registered a growth of 10.1% during Apr '09 - Feb '10 vis-à-vis 3% in the corresponding period of the previous year.
± India's WPI inflation marginally rose to 9.9% in Mar '10 from 9.89% in Feb '10. However, food inflation eased to 17.22% for the week ended April 3 vis-à-vis 17.7% in the previous week.
± As per The People's Bank of China, China's foreign exchange reserves grew 25.3% from US$1.95trn a year ago to US$2.4trn at the end of Mar '10.
± Euro zone finance ministers unanimously approved a US$40.5bn emergency aid mechanism, structured in bi-lateral loans, at ~5% for debt-crisis in Greece
Corporate Snippets
± GVK Energy to raise US$250mn for power, coal mining assets. (BL)
± Vedanta sets sights on Anglo's zinc business worth US$1bn. (ET)
± L&T plans to set up power plant in Jharkhand. (BS)
± Reliance Industries picks stake in logistics firm Deccan 360. (BL)
± Mahindra & Mahindra will buy out Renault's 49% stake in the five-year-old JV which produces the Logan at Nashik, Maharashtra. (BL)
± Dr Reddy's Lab recalls antipsychotic drug in US. (ET)
± Chennai Petroleum Corp has put on hold its plans for setting up a 15mn tonnes per annum refinery at Ennore. (BL)
± JSW Energy will acquire a majority stake in South African Coal Mining Holding for about US$85mn besides making an open offer to the minority shareholders. (BL)
± Bajaj Auto has increased its stake in Austrian company KTM Power Sports AG from 31.9% to 35.7% with an investment of €20mn in a cash rights issue totaling €30mn. (BL)
± Coal India took workers on board for its Rs120bn divestment plan after agreeing to their wage revisions and other demands. (TOI)
± Mahindra Lifespaces will launch its two World City projects - SEZs - in Pune and Chennai in the next 1-2 years. (DNA)
± PTC India says its subsidiary, PTC Financial Services, is likely to go public with an IPO in this financial year. (FE)
± Chennai Petroleum Corp is planning a three-fold capacity expansion at its 3mtpa refinery in Manali with an investment of Rs100bn. (FE)
± Thermax has won an Rs5.8bn order for a gas based combined cycle power plant from an Indian petrochemical major. (BL)
± GMR Energy set to divest non-power portfolio. (DNA)
± IL&FS is set to raise around US$300mn by selling a combination of existing and fresh equity share. (Mint)
± Unitech floats Rs3bn Mumbai redevelopment fund. (BS)
± Videocon aims to double Pipavav plant capacity to 2400MW. (BS)
± Videocon plans to generate 5,000MW power through projects in Gujarat, Chhatisgarh, Maharashtra and West Bengal. (ET)
± Development Credit Bank plans to raise Rs1.5bn through QIP in the next 6-12 months. (ET)
± Gitanjali Gems records US sales growth of 8.5% to US$30mn during the first three months of the current calendar year. (BS)
± GMR Infrastructure raised US$315mn through (QIP). (BS)
Economic snippets
± Foreign exchange reserves rose by US$932mn to US$280bn for the week ended April 9. (BL)
± The fight for 3G spectrum intensified on Saturday with the price for pan-India air waves going up by Rs6.1bn to touch Rs57bn. (BL)
± GSM mobile operators added 13.9mn new users in March taking their total subscriber base to 422mn. (BL)
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