Market Mantra
Market outlook
A better day!
Live neither in the past nor in the future, but let each day's work absorb your entire energies, and satisfy your widest ambition. - Sir William Osler
It's the summer of discontent for world markets and the bulls may continue to face the heat for some time to come. As for today, thankfully, the outlook appears slightly better.
The euro-zone debt crisis is clearly the culprit and despite a spate of bailout efforts investors remain skeptical and pessimistic. The German plan to ban naked short selling of certain financial instruments has added to the woes. US stocks recovered from session lows to end moderately down. Asian markets are flat to positive. The dollar index has come off a bit while the euro has regained some lost ground. Still, one should continue to be on guard as things remain volatile and uncertain amid considerable external risks.
Telecom stocks will be in focus as 3G auction has finally ended. ONGC and Oil India will gain as the Government has hiked the price of natural gas. SJVNL will list on the bourses today.
Trading ideas (Time period: 1-3 days)
DLF (SELL, CMP Rs279, Target Rs270): The stock had been on steady fall from the levels of Rs500 registered during the first week of November 2009. However, the stock has formed a lower highs and lower lows since then. The level of Rs282 has proved to be major support zone for the stock in the last four months. On Wednesday, the stock fell 3.5% and breached the key support levels of Rs282. The momentum indicator is exhibiting negative divergence. Based on above technical evidence, we recommend traders to sell the stock up to Rs279-280; it is advisable to maintain a SL of Rs283 for an intraday day target of Rs271-270.
Cipla (BUY, CMP Rs312, Target Rs321): The stock has corrected significantly from its highs of Rs354 witnessed during the month of April. Yesterday, the stock managed to bounce back from its 200-dma of Rs308. We expect the stock to bounce back to Rs320 levels .Further, with the market witnessing huge intraday gyrations, Pharma stocks being defensive in nature provide better risk- reward ratio. We recommend traders and investors to buy this stock at Rs312 with a stop loss of Rs307 for target of Rs319 and Rs321.
Derivative strategies (Time period: Till expiry)
± Long Tata Motors May Future in range of Rs714-716 for the target price of Rs 730 and stop loss placed at Rs 708
Lot size: 850
Remarks: Net maximum profit of Rs13,600 and net maximum loss Rs6,800.
± Long ICICI Bank May Future in range of Rs834-836 for the target price of Rs860 and stop loss placed at Rs 820.95
Lot size: 350
Remarks: Net maximum profit of Rs9,100 and net maximum loss Rs4,550.
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% | |
Event Update: Telecom – 3G Update
India's 3G auctions eventually ended on May 19 after more than a month and 183 rounds of intense bidding among top 6 telcos. The auction, arguably the most successful domestic sale of a natural resource, pegged the value of pan-India 3G spectrum at ~Rs170bn or 5x its reserve price. Meanwhile, including BSNL/MTNL payouts, the government is assured of a windfall of US$14.8bn, nearly double that of the budgeted amount.
Contrary to our expectation, Bharti did not put in a pan-India bid but won 13 circles for Rs123bn. Rcom also bagged 13 circles, including Mumbai and Delhi, for Rs86bn while Vodafone with 9 circles restricted itself mostly to Metros+'A' service areas. As expected, Tata Tele (9) and Idea (11) won bids in their respective area of influence. Aircel garnered 13 circles for Rs65bn, including 4 Metro/A category licenses.
Event Note: Gas Price Hike – Impact Analysis
The Government of India has approved hike in APM gas price from Rs3,200/scm to Rs6,818/scm. The revised price is close to US$4.2/mmbtu, the price approved by Empowered Group of Ministers (EGOM) for Reliance Industries' KG-D6 gas. The decision comes as a big trigger for ONGC and Oil India, as it substantially improves profitability for both companies. For ONGC, we estimate an increase of Rs14 in FY11E EPS and for Oil India, we expect an increase of Rs10 in FY11E EPS. One of the key reasons for the steep valuation discount for ONGC and Oil India, when compared with regional peers has been lower gas prices. We believe, the price hike, is the first step towards a market determined pricing mechanism for natural gas in the longer term. We maintain our BUY rating on ONGC and Market Performer on Oil India.
Result Update: Everonn Systems India (Q4 FY10) – BUY
CMP Rs368, Target Rs558, Upside 51.6%
± Revenue growth significantly beats estimate driven by outperformance in all business segments
± ViTELS revenue growth was driven by robust school and college additions
± Strong revenue growth in ICT business despite no schools additions; Edures and Toppers also post robust growth.
± Consolidated OPM contract by 430bps qoq to 30.6% due to sharp margin fall in ViTELS
± Everonn turns OCF positive in FY10; upgrade revenue estimates but lower margin assumptions
Corporate Snippets
± Government has doubled the price of natural gas produced by ONGC and OIL India. (ET)
± RIL curtails production of crude oil in KG D6 field due to cyclone Laila. (ET)
± Tata Power has approached Bombay High Court against a state government order to continue supply to Reliance Infra at regulated price. (BS)
± M&M to launch its pick-up trucks in US by end of 2010. (BS)
± Kingfisher airlines likely to speed-up restructuring process. (BS)
± Ranbaxy European unit has recalled select batches of 3 drugs. (BS)
± Maruti plans to launch a new alto with K-series engine of higher capacity. (BS)
± BSNL and MTNL may get waiver on 3G spectrum payments. (ET)
± SAIL is getting ready big to buyouts of mines abroad. (ET)
± Panacea Biotec vaccine get clean chit from WHO. (ET)
± Axis Bank buys office space for Rs7.8bn from Bombay Dyeing. (BL)
± SRF to invest Rs10bn on specialty chemicals plant. (BL)
± Indian Coal Ventures Ltd (ICVL) to offer stake to private steel companies. (ET)
Economic snippets
± The government is set to pocket Rs677bn from the 3G spectrum auction ended yesterday. (ET)
± Bank credit rises by Rs130bn during the fortnight ended May 7th 2010. (BS)
± Indian companies raise US$2.8bn through ECB, FCCB in April. (BS)
± Government has approved 24 FDI proposal worth Rs14bn. (BS)
± India's export rise 36% yoy in April due to low base effect. (ET)
± Delhi International Airport Ltd has applied for 1-yr extension to collect airport development fee. (BS)
± Rupee posts biggest 1-day fall in 15 months; bond yields at their lowest level since December'09. (ET)
± Paper companies to increase prices by 5-7% in June. (BS)
± Government may lift 3-year old ban on wheat exports. (ET)
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