Market Mantra
Market outlook
One link at a time
It is a mistake to try to look too far ahead. The chain of destiny can only be grasped one link at a time - Winston Churchill
The weak link for the market appears to be fears of an adverse outcome of the RBI's annual policy meet next week. Meanwhile, India's quest to break into the elite global space club will be delayed. In a rare failure, ISRO's indigenously made rocket (GSLV-D3) crashed soon after take off on Thursday.
Even the bulls will have to wait a bit more before they see the NSE Nifty cross 5400. A sudden bout of selling pulled the market down despite inflation being steady. What is more disturbing is that fund flows have started to taper off. Even the FIIs, who till recently were pouring money at a steady pace have turned a bit cautious.
Its still early days as far as results are concerned. So, the volatility will prevail for a while amid a mix bag of earnings. In any case, the market seems to be looking far ahead at FY12 numbers. Today we see a sluggish opening and another choppy session. A rebound cannot be ruled out after Thursday's selloff.
Trading ideas (Time period: 1-3 days)
Kotak Bank (SELL, CMP Rs745, Target Rs715): On the weekly chart, the stock has been forming the pattern of lower high and lower lows since January 2010. The downtrend is likely to continue in the near term. Weekly chart suggest that the price movement has occurred in a well defined Channel formation. Thursday's closing price is hovering close to the lower decending trendline of the channel. The weekly RSI as well as the MACD continue to depict negative trend. In view of the above mentioned technical evidences, we recommend traders to sell the stock at current levels and on rallies to levels of Rs750 for target of Rs720 and Rs715. A stop loss of Rs760 is recommended on all trading short positions.
L&T (SELL, CMP Rs1,572, Target Rs1,520): Last week, the stock surged smartly on higher volumes. However, on Thursday, it appears to have run into strong resistance area of Rs1,640-1,650, suggesting that a short term cycle top has been formed. Deeper decline is still possible to the levels of Rs1,500 and below. The candlestick patterns formed in the recent past support the bears. Moreover, the stock has closed below its 200-day DMA. Based on the above evidences, we recommend traders to sell the stock between the range of Rs1,580-1,565. It is advisable to maintain a stop loss of Rs1,600 on all short positions.
Derivative strategies (Time period: Till expiry)
± Long Bharat Forge Co Ltd April Future @ Rs271 for the target price of Rs280 and stop loss placed at Rs266
Lot size: 2,000
Remarks: Net maximum profit of Rs18,000 and net maximum loss Rs10,000.
± Long Cummins India Ltd April Future @ Rs532 for the target price of Rs550 and stop loss placed at Rs524
Lot size: 950.
Remarks: Net maximum profit of Rs17,100 and net maximum loss Rs7,600.
Mutual funds
| Fund focus | |||||||
| Reliance Growth Fund | Invest | ||||||
| Fund manager | Sunil Singhania |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs450.3 |
| 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% | |||
Economy Update: Inflation – March 2010
± WPI rise remains flat sequentially at 9.9%
± Primary goods index continues to surge
± Food products prices cause higher manufactured goods index
± Fuel index rises 12.7% yoy on fuel price revision and higher crude oil prices
Company Update: Tata Motors – BUY
CMP Rs776, Target Rs896, Upside 15.5%
± JLR volumes substantially ahead of expectations
± JLR operating margins to rise further
± Current European crisis could be a party spoiler for JLR
± Maintain BUY with a higher target price
What's In, What's Out – March 2010
Given below is the snapshot of mutual fund activity in Indian equities. The information includes performance of mutual funds, current cash levels and stocks which are in and out of flavour.
Key observations
± Mutual Fund industry witnessed a bumpy ride during the last quarter of the FY10. After reporting a 4.1% mom decline in January and a 2.7% mom growth in February, Indian Mutual Fund industry Average Asset under Management (AAUM) fell again by 4.3% mom in March. Industry AAUM stood at Rs7.5tn, a decrease of Rs338bn on a mom basis. Historically, March, being the last month of the fiscal, results in heavy redemption by corporates and financial institutions due to advance tax payments.
± The top-10 fund houses cumulatively posted a de-growth of 3.8%mom in AAUM, but the fall was lower than the total industry decline. Among the top-10, only four fund houses were able to report a monthly AAUM growth. SBI Mutual Fund witnessed strong growth in March '10 and it sneaked into the seventh position among the private players replacing Kotak Mutual Fund. The other three gainers were UTI Mutual Fund (+1.1%), ICICI Prudential Mutual Fund (+0.6%) and Franklin Templeton Mutual Fund (+0.1%). Reliance Mutual Fund continued to hold its leadership position, but witnessed a decline of 4.6% mom in March '10. Pearless Mutual Fund made its debut last month and moved two position higher to 34th position. It was also the highest AAUM gainer (in percentage terms) in March, by 150% mom.
± In March, heavy redemptions were seen in the income fund category. Its share in the total AUM declined by 11% since last month. There was an outflow of Rs1,644bn in income fund category and it was mainly on the account of the pay-off for the advance tax by the banks and corporates. Equity funds category, which gained 600 bps in the total AUM pie, also witnessed an outflow of Rs20bn. Being the last month of tax planning, ELSS fund category saw decent inflows of Rs6.4bn in March '10 vis-à-vis Rs5.5bn in March '09, an increase of 17% yoy.
± Mutual Fund players went overweight on the financial services and media sectors. Rural Electrification Corpn and DQ Entertainment were among the top-10 buys, as fund houses subscribed to their public offerings. The prospect of further de-regulation in the fertilizers sector has resulted into active buying by the fund houses during the month. Kotak MF and UTI MF went overweight on Chambal Fertilizers, which was among the top-5 additions. The two funds bought ~2.6mn of shares in March.
± Since November 2008, for the first time in 16 months, mutual fund houses were net sellers in the debt category. Fund houses sold approximately Rs93.5bn of debt instruments in the month of March. They continued to be underweight on the equity market and offloaded equities worth Rs40.8bn in March '10. FIIs continued to be overweight in markets, buying equities and debt worth Rs199bn and Rs95bn in March '10.
± Among the top 12 fund houses, the average cash holdings has reduced to 5% in March `10 vis-à-vis 6.9% in February `09. Eleven out of twelve fund houses hold less than 10% cash in their portfolio. ICICI Prudential continues to holds the highest cash at 10.2% among the top 12 fund houses. Reduction in cash levels was on account of huge dividend payout by the fund houses during the month. Franklin Templeton MF is the only fund house to increase cash holdings in real term in its equity schemes by Rs1.2bn.
Corporate Snippets
± HDFC has revived its teaser home loan rates for two weeks to protect market share. (ET)
± L&T to make industrial tyres with Mitsubishi. (ET)
± ONGC says that it will not be economically viable to produce gas from its Krishna-Godavari basin block at current sale price of US$4.2/mmBtu. (ET)
± SAIL is in talks with Posco and Kobe Steel for technology tie-ups for jointly setting-up steel plants. (ET)
± IOC may see revenue loss on fuel sales jump 63% in FY10. (BS)
± Bank of India has cut interest rates on its bulk deposits by up to 1.25% across various tenures with immediate effect. (ET)
± Tata Motors global sales grow 39% in March. (BS)
± Ranbaxy has voluntarily recalled two consignments of one of its antibiotics from US market. (BL)
± UBI to raise upto US$500mn through a maiden MTN programme. (BL)
± Japan's JFE is in advanced talks to buy a small stake in JSW Steel. (ET)
± Jet Airways seeks more FSI for BKC plot, eyes lease income. (ET)
± Triveni Engineering has formed a JV with GE to make and sale steam turbines for small power generation projects. (ET)
± Aurobindo Pharma has received final approval for Ondansetron orally disintegrating tablets from US FDA. (BL)
± Pipavav Shipyard is in talks to buy an oil rig and shipping company in West Europe. (ET)
± Glodyne close to buying a US company for Rs5bn. (ET)
± Areva T&D has won three turnkey project orders worth Rs630mn. (BL)
Economic snippets
± WPI inflation for the month of March stood at 9.9%. (BS)
± Domestic air traffic climbs 23% yoy in March 2010. (ET)
± CMI pegs FY10 growth at 7.1% and FY11 growth at 9.2%. (ET)
Confidentiality & Disclaimer: This message contains confidential information and is intended only for the individual named. If you are not the named addressee you should not disseminate, distribute or copy this e-mail. Please notify the sender immediately by e-mail if you have received this e-mail by mistake and delete this e-mail from your system. E-mails are notencrypted and cannot be guaranteed to be secured or error-free as information could be intercepted, corrupted, lost, destroyed arrive late or incomplete, or contain viruses. The sender, which includes India Infoline Limited and its group companies, will not be liable for any errors or ommissions in the contents of this message which arise as a result of e-mail transmission. If verification is required please request a hard-copy version. This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments.
No comments:
Post a Comment