Market outlook
Not in the best of health!
From the bitterness of disease man learns the sweetness of health. - Catalan Proverb
The world may be observing Health Day but the bourses don't seem to be in a state of well being. However, there is nothing bitter as yet. Investors need to stick to their prescribed course of maintaining caution at higher levels.
For the day, we expect a flat start and some resistance at even slightly higher levels. On the global front, the S&P and Nasdaq managed to inch higher while the Dow closed in the red. The Asian markets are mostly higher.
The economic recovery may lose steam, despite recent moderate improvements, according to the Fed minutes from their recent policy meeting. Policymakers indicated that they could raise rates as soon as they see continued signs of life in the economy, according to the minutes.
U.S. light crude oil for May delivery rose 22 cents to settle at $82.86 a barrel on the New York Mercantile Exchange, the highest point for crude since October 2008.
The rupee weakened marginally after hitting a 19-month high on Monday. Reports indicate that the central bank may have intervened.
Trading ideas (Time period: 1-3 days)
Power Finance Corp (BUY, CMP Rs272, Target Rs287): On Tuesday, the stock surged sharply on impressive volumes above its critical resistance levels of Rs269. It now faces a resistance at Rs285-288 levels and should have a minimum upside till that level. Our argument is further validated after the stock gave an upside breakout on Tuesday's session as the price broke through the top of a trading range. Moreover, the stock has given a close above its short-term moving averages. We recommend traders with high risk appetite to buy the stock in the range of Rs270-274 with a strict stop loss of Rs264 for an initial target of Rs287.
Kotak Bank (BUY, CMP Rs782, Target Rs810): On Tuesday, the stock advanced by over 2% suggesting continuation of an intermediate uptrend. Moreover, the swift movement in the stock over the last few trading sessions is backed by high volumes. The stock is hovering around its 100-day DMA. The daily RSI is already in strong buy mode. A move past Rs784 could take the stock towards the levels of Rs810-815 in the short-term. Keeping in mind the above-mentioned evidences, we recommend high traders to buy the stock between the range of Rs778-784 with a stop loss of Rs768 for an initial target of Rs810.
Derivative strategies (Time period: Till expiry)
± Long Indian Hotels Co. Ltd. April Future @ Rs106 for the target price of Rs114 and stop loss placed at Rs103
Lot size: 3,798
Remarks: Net maximum profit of Rs30,384 and net maximum loss Rs11,394.
± Long Shipping Corporation of India Ltd April Future @ Rs164 for the target price of Rs172 and stop loss placed at Rs161
Lot size: 2,400.
Remarks: Net maximum profit of Rs19,200 and net maximum loss Rs7,200.
Mutual funds
| Fund focus | |||||||
| Reliance Growth Fund | Invest | ||||||
| Fund manager | Sunil Singhania |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs450.9 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs450/201 |
| Exit load | 1% <1 yr | |||
| Latest AUM | Rs6,733cr |
| 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% | |||
Sector Update: Iron ore – 'Turning Gold'
Company Update: NMDC – SELL
CMP Rs303, Target Rs272, Downside: 10.3(%)
Company Update: Sesa Goa – Market Performer
CMP Rs475, Target Rs474, Downside: 0.2(%)
Chinese spot iron ore prices have surged 30% YTD and are currently trading above US$150/ton. Led by strong demand in China, spot prices have jumped 136% on a yoy basis. China has continued to remain a dominant force in the iron ore market, accounting for more than 50% of the total sea-borne trade. Last week, Brazil's Vale, the largest iron ore supplier, broke its 40- year custom of selling ore on a yearly contract at a fixed rate; they signed quarterly contracts with Japanese steel producers. The revised contract prices now stand at US$100-110/ton, which are 70% higher than the FY10 annual contract prices of US$61/ton FOB (freight on board). However, the Chinese steel producers are still negotiating the contracts. Considering the strong Chinese demand for iron ore and the lack of domestic capacity, we believe, Chinese steel producers are expected to follow suit. We expect the rates for the prevailing quarter of US$100-110/ton to remain constant throughout the year. We have upgraded our estimates for NMDC and Sesa Goa based on the events over the last one month. We upgrade the target price for NMDC from Rs246 to Rs273 and for Sesa Goa from Rs423 to Rs474 on account of the rise in iron ore realisations. However, remain concerned over the rich valuations the companies are trading at and maintain our SELL recommendation on NMDC and Market Performer on Sesa Goa.
Corporate Snippets
± NTPC's plan to enter nuclear power generation business might take off soon, with the government planning to allocate a site for the development of 2X700mw capacity to the proposed NTPC-NPCIL JV. (FE)
± NTPC plans to borrow Rs200bn in financial year 2010-11, 70% of which has already been tied up, as it quadruples generation capacity. (BS)
± BHEL along with two of its other JV partners are expected to commence work on the Rs25bn Integrated Coal Gassification Combined Cycle power plant at Vijayawada in Andhra Pradesh in June 2010. (BS)
± BHEL's Tiruchy unit plans to increase the R&D spend by 73% to Rs4bn. (BS)
± Tata Steel reported 18% growth in sales to 6.17mt during the fiscal 2010, against 5.23mt in the same period last year. (BL)
± IOC refineries have achieved overall capacity utilization of 102% during 2009-10. (BL)
± Wipro plans to exit its babycare and vanaspati business. (BS)
± Wipro Technologies, the global IT services business of Wipro, announced that it has signed a partnership agreement with Philips to offer Blu-ray middleware and solution development services around Philips' developed Blu-ray technology. (BL)
± Malvinder and Shivinder Singh stepped down from the board of Religare Enterprises to focus on the group's healthcare business, handing over charge of the financial services firm to the family's trusted aide Sunil Godhwani. (ET)
± Godrej Consumer Products acquired the Indonesian household product maker PT Megasari Mamsur, as well as its distribution arm, PT Intrasari Raya for Rs12bn in an all cash deal. (BS)
± Jindal Power, an arm of JSPL, raised Rs100.6bn loan for its 2,400MW Tamnar power project in Raigarh, Chhattisgarh. (BS)
± Unitech has formed a panel of five board members to push the demerger of its non-core business into a separate entity. (ET)
± In a bid to expand its haircare portfolio, Kolkata-based Emami is test-marketing a few products, including a shampoo, in Andhra Pradesh. (BS)
± ACC plans to ramp up its annual production capacity to 30mtpa by the end of this financial year through brownfield projects. (BS)
± ICRA Online, the wholly-owned subsidiary of ICRA, has partnered with the UK-based IDEAcarbon to offer carbon rating services in India. (BL)
± Suzlon secured an order from the Gujarat State Fertilizers & Chemicals to set up, operate and maintain an 18MW wind energy project at Adodar in Porbandar district. (BL)
± Punj Lloyd bagged two orders worth Rs2.4bn for a processing unit and setting up offsite facilities at the Mangalore Refinery. (FE)
± Simplex Infrastructures secured orders worth Rs21.7bn during fourth quarter of 2009-10 fiscal. (FE)
± NMDC will be added to the FTSE All-World Index and FTSE All-Emerging Index effective from the start of trading on April 13, 2010. (FE)
± Reliance Power will soon start generating revenues from the sale of electricity as it has started commercial operations of its first unit at Rosa Power Project in Uttar Pradesh. (BS)
± Ruchi Group has signed a pact with Japanese conglomerate Mitsui to form a JV company for setting up steel service centers across the country to cater to automotive, white goods and construction sector. (FE)
± Coal India plans to invest Rs60bn in foreign acquisitions this financial year and is currently evaluating 10 overseas proposals that include five proposals for equity infusion. (BS)
± Coal India's profit after tax jumped 300% to Rs83bn last year, compared to Rs20bn during 2008-09. (BS)
± Coal India plans to step up its focus on value addition and plans to invest US$480mn in setting up 20 washeries with a capacity of 111.1mt over the next two to three years. (BL)
± Essar Oil plans to lay a 160-km pipeline from Durgapur to Kolkata to transport gas from its CBM blocks to consumers in West Bengal. (BS)
± Dish TV plans to expand its subscriber base to 10mn in one year from 7mn today. (BS)
± Temasek Holdings Pte is seeking stakes in Indian power producers, including GMR Group, as they double capacity to meet demand. (BS)
Economic snippets
± Sponge iron industry in Chhattisgarh plunged into raw material crisis as production in nearly half the units had been suspended after disruption in the supply of iron-ore from Orissa. (BS)
± DTH subscribers are likely to double in the next 2 years, up from 20mn at present. (BS)
± The online auction system for third generation (3G) and broadband wireless access (BWA) spectrum will prevent firms from placing unrealistic bids. (BS)
± Private and cooperative sugar mills have appealed to the Centre to reconsider its decision on extending duty-free import of raw sugar for bulk consumers till April 30, 2011. (BS)
± Data released by TRAI, in the quarter ended December 2009, indicated a rapid increase in the subscriber base from rural areas. (BS)
± The government is planning to link domestic coal prices to the gross calorific value of the product, a step which may lead to an increase in prices of the fuel. (BS)
± The biofuel industry is finding it tough to remain in business, with both government pricing and raw material availability working against them. (BS)
± In its endeavour to make the public issue process more efficient, SEBI has proposed to reduce the time between the closure of the issue and listing to 12 days from May 1. (BS)
± India and the US on Tuesday set up a Cabinet level economic partnership forum that is expected to encourage massive investment by US companies in Indian infrastructure, while the US will want to be reciprocated by deeper financial sector reforms. (FE)
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