Market Mantra
Market outlook
No respite from global jitters
Certainty is the mother of quiet and repose, and uncertainty the cause of variance and contentions. - Edward Coke
Uncertainty continues to haunt global markets despite multi-billion-euro bailout for the troubled euro-zone nations. What's worse, volatility has shot up as risk aversion remains elevated. Gold and the Dollar are attracting safe haven buying while risky assets like stocks and commodities are under pressure. Aside from the European debt crisis, markets are also worried about possible overheating in China. In short, things are not looking bright as of now and the prospects for global equities may take a while to revive.
Today we expect a positive start but early gains may not sustain and the key indices will remain sluggish within a tight range. The NSE Nifty will continue to meet resistance at 5200 and beyond that, at 5300. On the way down, support is placed at around 5115. A bigger selloff could even take the Nifty below 5000. Telecom stocks may fall further on TRAI recommendations and aggressive 3G bids. March IIP data will be out today and is likely to show ~15% growth. Monthly inflation will be released on May 14.
Trading ideas (Time period: 1-3 days)
Idea (SELL, CMP Rs60, Target Rs55): The stock has corrected sharply from the recent peak of Rs69 in April 2010 to the present levels. In last week, every recovery attempt by the stock has faced stiff resistance around its 20-day DMA. On Tuesday, the stock fell below the short-term trendline and also closed below its 100-day DMA. The daily MACD is already in sell mode suggesting build-up of momentum on the downside. Based on above events, we recommend traders to sell the stock on rallies to levels of Rs61 for target of Rs55. A stop loss of Rs62.50 is recommended on all short positions.
Petronet (BUY, CMP Rs84, Target Rs89): On the daily chart, the stock gave an upside breakout in Tuesday's trading session. It suggests that the sideways range is about to end and may reverse into an uptrend. On Tuesday, the stock rallied by over 3% confirming the bullish set up. We continue to remain positive on the stock from technical perspective as the stock has managed to hold on to the support of its 100-day DMA. The other supportive technical oscillators are positive and the up move may extend to the levels of Rs89. It is advisable to maintain a stop loss of Rs81 on all long positions.
Derivative strategies (Time period: Till expiry)
± Long Hotel Leela May Future @ Rs51.1 for the target price of Rs53 and stop loss placed at Rs50.40
Lot size: 7500
Remarks: Net maximum profit of Rs14,250 and net maximum loss Rs5,250.
± Short Dr. Reddy May Future @ Rs1189 for the target price of Rs1170 and stop loss placed at Rs1197
Lot size: 400
Remarks: Net maximum profit of Rs7,600 and net maximum loss Rs3,200.
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 – 2G Update
TRAI has unveiled its much awaited recommendations on 2G spectrum management and licensing regime. The key highlights are 1) No cap on the number of operators/circle as in future spectrum should be delinked from UAS licenses 2) Uniform license fee of 6% from 2013-14 3) GSM spectrum assigned beyond 6.2MHz up to 8MHz to be charged at current (linked to 3G auction) price and at 1.3x current price beyond 8MHz 4) No auction for 2G spectrum even as subscriber linked criteria (SLC) for allotment done away with; TRAI favours linkage of additional spectrum with roll out obligations 5) Promoter lock-in of 3 years removed; M&A approval only if merged entity has not more than 30% of circle subscriber base and/or AGR.
Result Update: Bajaj Hindusthan (Q2 F9/10) – Market Performer
CMP Rs109, Target Rs101, Downside 7.3%
± A ~55% yoy surge in sugar realizations drives 38% jump in sugar revenues; topline up 22.5% yoy
± Higher cane price cripples OPM; EBIDTA falls ~31% yoy
± Cost pressures erodes pre-exceptional PAT; reported PAT declines 61% on lower forex gain yoy
± Weakness in sugar prices to take its toll on F9/11 PAT; lower EPS, TP but maintain Market Performer
Result Update: Hindalco (Q4 FY10) – Not Rated
CMP Rs170
± Adjusted for forex loss, revenue was flat on a qoq basis, as the impact of lower copper volumes was offset by higher aluminium division revenue
± Aluminium business continued to register a strong performance, backed by higher premiums on its products
± Aluminium business was the growth driver for the company's operating profit, accounting for 83% of total EBIT
± Adjusted for forex loss, OPM expands 118bps qoq due to higher aluminium realisations
± Copper division performance was below par on account of low Tc/Rc margins and maintenance shutdown of its smelter
Corporate Snippets
± BSNL, Bharti Airtel, Vodafone-Essar, Aircel, MTNL and Idea Cellular might have to fork out over Rs112bn for having spectrum beyond 6.2MHz, if the government accepts the TRAI's recommendations. (BS)
± Fitch Ratings on Tuesday has affirmed the foreign currency issuer default rating (IDR) of 'BB+' and the national long-term rating of 'AA (Ind)' of Tata Steel. (FE)
± Concerned over the delay in getting clearance from the Centre for its IT SEZ in Chennai, DLF has decided to pull out of the project. (ET)
± Alstom Group said that it has expanded its strategic partnership with Infosys Technologies in areas of global R&D, engineering and engineering IT services. (ET)
± The Water Technology Business Unit of L&T secured Rs8.5bn contract from the Public Works Authority of Qatar for setting up an advanced waste water treatment and urban reuse plant. (BL)
± Godrej Consumer Products is in talks with a clutch of private equity investors to raise US$125mn. (ET)
± Dalmia Cement plans to acquire a sugar mill and is in talks with two companies in Karnataka and Andhra Pradesh. (ET)
± GMR Energy, a subsidiary of GMR Infra, plans to raise US$100mn from IDFC Private Equity in the next few weeks. (BS)
± YES Bank plans to enter the home, personal & education loan and credit cards businesses soon. (BS)
± Telecom conglomerate BT may wait for Tech Mahindra to merge with Mahindra Satyam before it offloads a large portion of its stake in the Mumbai headquartered company. (BL)
± As part of Ranbaxy Laboratories Daiichi Sankyo's proposed three-year plan for exploiting synergies, the Japanese company has set up a new firm, Daiichi Sankyo Espha Company (DSECL), for marketing generic drugs in Japan. (ET)
± Glenmark Pharmaceuticals said it had settled a patent litigation with Merck & Co over its cholesterol-lowering generic drug 'Ezetimibe', following which it can sell the medicine in the US market. (BS)
± Zydus Cadila and Abbott entered into an agreement where the latter will licence 24 branded generics of Zydus products in 15 emerging markets. (BL)
± Jubilant Organosys plans to expand its contract research and manufacturing services business by 20% for which it is in talks with global players. (BL)
± Trent, a retail chain of Tata Group will raise Rs5bn through a rights issue. (FE)
± Srei Venture Capital Ltd, a wholly owned subsidiary of Srei Infrastructure Finance, plans to launch a US$500mn international infrastructure fund. (BS)
± Era Infra Engineering bagged an order worth Rs17.2bn from NHAI. (FE)
± ABG Shipyard sold 0.8mn shares or 2.15% of equity in Great Offshore for Rs369mn. (FE)
± French retailer Carrefour SA plans to open its first wholesale store in New Delhi soon. (BL)
Economic snippets
± The TRAI recommended that the existing GSM players be asked to pay a one time fee, which will be calculated on a pro-rata basis on the final bid amount received in the ongoing auctions for 3G spectrum, for their 2G spectrum beyond 6.2Mhz. (BL)
± The tractor manufacturers in the Delhi region are in trouble due to non-availability of tyres and rising input costs. (BS)
± MET expects that the South-West monsoon over Kerala coast may not take place until May 21, but can follow immediately thereafter. (BL)
± The Cabinet Secretary is slated to chair a high-level meeting on May 25 to deliberate on implementing recommendations of a Planning Commission-led panel on ways to provide a level playing field for domestic equipment manufacturers. (BL)
± RBI has allowed infrastructure finance companies to raise funds through ECBs without obtaining its prior approval. (BL)
± The government will soon set up an inter-ministerial task force to rationalise coal sourcing so as to help key consumers in the power, steel and cement sectors optimise transportation costs. (ET)
Public sector companies will not be allowed to use natural resources, such as mineral reserves, at the cost of sustainable development. (ET)
± Day 27 of the 3G auctions saw one provisional bid amount for pan-India spectrum at Rs140bn. (FE)
Results Table
| (Rs mn) | Revenues | % yoy | PAT | % yoy |
| Hindalco | 54,000 | 43.0 | 6,630 | 146.5 |
| Ranbaxy | 22,665 | 175.7 | 8,718 | - |
| Kotak Mahindra Bank | 12,478 | 13.0 | 4,186 | 98.7 |
| Bajaj Auto Fin | 1,982 | 42.0 | 252 | 66.9 |
| Jain Irrigation | 9,441 | 37.8 | 1,173 | 1,017.5 |
| TIL | 8,548 | 1.1 | 469 | 45.2 |
| HT Media | 3,851 | 12.5 | 480 | 532.3 |
| Monnet Ispat | 4,384 | 18.4 | 725 | 44.4 |
| Bajaj Hindustan | 5,674 | 27.2 | 318 | (60.9) |
| Jindal Drilling | 2,454 | (26.5) | 308 | 103.2 |
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