Market Mantra
Market outlook
F&O choppiness…brace for swings!
An idea that is developed and put into action is more important than an idea that exists only as an idea - Buddha
Given the current action in the markets, the bulls seem to have no idea what to do. Today's F&O expiry will only add to the choppiness as we brave for a negative end to the May series. To begin with we expect a shaky start as most Asian markets are trading lower. Besides, the anxiety over the external environment remains.
Results are still pouring in, which may impact the concerned stocks. The Reliance packs could once again be in spotlight on news of fresh collaboration between the two Ambani siblings.
Notwithstanding Wednesday's big bounce the overall scenario remains quite volatile and uncertain with a negative bias. The Dow Jones erased early gains to end below 10,000 despite a couple of encouraging economic reports. The late selling came as the euro dipped below $1.22 on reports that China is reviewing its holding of the shared currency. The dollar index rose above 87. Crude is hovering around $70 a barrel. Gold is trading above $1210.
Trading ideas (Time period: 1-3 days)
Siemens (BUY, CMP Rs691, Target Rs720): On the daily chart, the stock has given an Upside Breakout after closing above its 20-day DMA. The stock has rallied sharply over the past few trading sessions holding on to its support of Rs655 level. On Wednesday, the stock rallied by 3% confirming the bullish set up. The other supportive technical oscillators RSI and Stochastic are exhibiting positive divergence which signifies the up move may extend to the levels of Rs720. Based on above observations, we recommend high risk traders to buy the stock in the range of Rs686-694 for target of Rs720. It is advisable to maintain a stop loss of Rs680 on all long positions.
Axis Bank (SELL, CMP Rs1,157, Target Rs1,120): A sell off on high volumes has led to a reversal on the daily chart. Last week, the stock had surged to a peak of Rs1,244 (20-day DMA). But it proved to be a very strong resistance. On Wednesday, the stock broke below its short-term trendline drawn from January 2010. We expect the selling pressure to continue, which could push the stock back towards the levels of Rs1,120-1,110. We recommend traders to sell the stock at current levels and on rallies up to the levels of Rs1,165. It is advisable to maintain a stop loss of Rs1,180 on the short positions.
Derivative strategies (Time period: Till expiry)
± Long IDFC May 150 Put option in range of Rs0.8-1.1 for the target price of Rs3 for expiry
Lot size: 2,950
Remarks: Net maximum profit of 5,900 and net maximum loss Rs2,950.
± Long SBI May futures in range of Rs2,173 for the target price of Rs2,195 and stop loss placed at Rs2,164
Lot size: 132
Remarks: Net maximum profit of Rs2,904 and net maximum loss Rs1,188.
Mutual funds
| Fund focus | |||||||
| UTI Opportunities Fund | Invest | ||||||
| Fund manager | Harsha Upadhyaya |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs22.8 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs25/12 |
| Exit load | 1% <1 yr | |||
| Latest AUM | Rs1,392cr |
| Latest dividend (under dividend option) | 15% (Jan 22, 2010) | |||
| Type | Open-ended |
| Benchmark | BSE 100 | |||
| Class | Equity – diversified |
| Asset allocation | Equity (95%), Debt (2%), Cash (3%) | |||
| Options | Growth & dividend |
| Expense ratio | 2.3% | |||
Result Update: BHEL (Q4 FY10) – BUY
CMP Rs2,255, Target Rs2,709, Upside 20.1%
± Robust 29% yoy revenue growth aided by 30% growth in power division
± Continues to benefit from lower raw material cost, operating margin expands by 225bps yoy to 18.3%
± Higher depreciation, due to commissioning of the enhanced capacity, partially offset operating profit growth – thus resulting into 42% PAT growth during the quarter
± Order book continues to remain strong at Rs1.4trn, provides earnings visibility for the next 3 years
± Maintain BUY, but reduce target marginally to Rs2,709/share to reflect higher competition in FY12
Result Update: Tata Steel (Q4 FY10) – BUY
CMP Rs484, Target Rs548, Upside 12.1%
± Consolidated Q4 FY10 revenue jumped 8.7% qoq in dollar terms to US$6.1bn led by higher steel realisations
± Standalone revenue of 73.3bn, 12.2% higher on a qoq basis and higher than our estimate on account of a 8.3% increase in realisations
± Volume growth remained flat at 2.1% qoq as the company had announced the mothballing of Teeside plant and had taken maintenance shutdown at one of its blast furnace
± EBIDTA/ton at Corus increased from US$37 to US$94, higher than street expectations
± The expansion in EBIDTA was led by an increase in realisations as manufacturing costs largely remained flat on a qoq basis
± Q4 FY10 adjusted PAT stood at Rs27.9bn, 3x on a qoq basis
± Standalone profit stood at Rs20bn higher than our estimate of Rs13.5bn
± We believe that the 26% correction in stock over the last one month is overdone; Upgrade to BUY with a target price of Rs548
Result Update: PGCIL (Q4 FY10) – Market Performer
CMP Rs103, Target Rs109, Upside 5.8%
± Adjusting for rebates and FERV, revenues in Q4 FY10 grew by 17.3% yoy to Rs22bn against Rs19bn last year
± 40% jump in depreciation was partially offset by lower interest expense
± Better operational efficiency and lower tax outgo translated into 46% yoy growth in adjusted PAT to Rs9.3bn
± Re-iterate Market Performer and target price of Rs109
Result Update: Hindustan Petroleum Corp (Q4 FY10) – Under Review
CMP Rs339
± Net sales for Q4 FY10 rises 24.4% yoy primarily driven by higher average realizations and increase in government compensation
± Upstream companies shared under recovery burden worth Rs13.5bn in Q4 FY10 v/s nil in Q4 FY09
± Throughput was lower by 6.2% yoy to 3.9mn tons and market sales were lower by 4.7% to 6.5mn tons
± GRMs were at US$3.2/bbl in Q4 FY10 v/s US$9.5/bbl in Q4 FY09
± EGoM meeting on June 7, 2010 could act as a game changing event. Hence, we keep our rating and target price under review
Result Update: Indian Hotels (Q4 FY10) – Market Performer
CMP Rs99, Target Rs90, Downside 9.1%
± Q4 revenue rise of 6% yoy below our estimate; largely driven by improved occupancies but ARRs still under pressure
± OPM below expectation but improves 481bps yoy due to tight control over staff and other overheads
± Lower tax burden helps negate increased interest cost; reported PAT jumps ~57% yoy
± ARR revival coupled with volume growth underpins our upgrade to Market Performer with a revised TP of Rs90
Corporate Snippets
± Reliance Industries-RNRL to present gas supply agreement to government in two weeks. (ET)
± Reliance Industries may consider buying minority stake in gas-based power plant of Reliance Power. (ET)
± Mahindra & Mahindra buys majority stake in electric car maker Reva. (ET)
± Bombay High Court refuses to stay state government order asking Tata Power to supply 360MW to Reliance Infra. (ET)
± Reliance Industries has suspended drilling of a well in K-G Basin using a rig hired from Transocean. (BS)
± IVRCL bags an order worth Rs5.67bn. (BS)
± Shopper Stop is close to buy additional 32% stake in Hyper City for 1.25bn. (BS)
± GVK Power and Infra to merge all power units under one sub holding company. (BL)
± HPCL plans to set-up Rs300bn refinery on the west coast. (ET)
± DLF seeks to revive SEZ in kolkatta. (ET)
± Ranbaxy seeks US FDA approval for selling a new drug made in a factory, which is under scrutiny of the US regulator. (ET)
± SpiceJet to raise US$75mn for capex. (ET)
± Bajaj Electrical plans acquisitions in home appliance space. (ET)
± Mukund may sell its Thane land for Rs6bn. (ET)
± Telecom companies have raised Rs360bn to pay for 3G spectrum. (ET)
Economic snippets
± RBI announces measures to overcome short-term liquidity crunch; cuts SLR by 50bps. (ET)
± Government announces measures to stream line and speed-up its disinvestment of PSUs. (ET)
± Broadband Wireless Access (BWA) auction bids cross Rs100bn on 3rd day. (ET)
± Government frees import of radial tyres by removing it from the restricted list. (BL)
± Food inflation to come down to 5% till November says planning commission member Abhijit Sen. (ET)
± Sugar industry seeks lifting of stock limit on bulk users. (ET)
Results Table
| Company | Revenue | % YoY | PAT | % YoY |
| Bank of India | 15,520 | 982.3 | 4,279 | (47.2) |
| BHEL | 140,963 | 26.6 | 19,095 | 41.7 |
| HPCL | 294,299 | 18 | 7,575 | (85) |
| Oil India | 18,321 | 34 | 4,310 | 509 |
| Tata Steel | 275,038 | 4 | 24,340 | - |
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