Market Mantra
Market outlook
Contagion contained…temporarily!
Knowing that there is worse pain doesn't make present pain hurt any less – Anonymous
After several days of turbulence, we are in for a gap-up start this Monday morning as the EU and the IMF have agreed on an emergency funding facility worth as much as €720bn in loan guarantees and credits to stabilise the eurozone. The ECB will buy government bonds in the secondary market to calm jittery credit markets. The Fed will reopen dollar swap program and Bank of Japan has offered $21.6bn in liquidity.
Asian markets are mostly positive. US stock futures and euro jumped on euro zone package news. Markets in Europe are also likely to open higher on the news of deal among European nations to help stabilize troubled economies.
Needless to say, bourses in India will also start on a stronger footing. Shares in Nifty 50 will also be affected by the proposed changes in free float of its constituents. Reliance and ADAG group shares will remain in focus following the SC verdict. The latest IIP data will be out on Wednesday and is expected to be robust. Monthly inflation figures will be announced later in the week.
Trading ideas (Time period: 1-3 days)
IOC (BUY, CMP Rs309, Target Rs330): The stock has seen impressive volume expansion in last few trading sessions and appears to have taken support between Rs300-301 range. It could bounce till somewhere between Rs325-330 levels in the near term. Our argument is further validated after the stock recovered from its 200-day DMA in Friday's session with strong volumes. Any move above Rs310 could take the stock towards Rs325 and higher in the short-term. Traders are advised to maintain a stop loss of Rs300 and go long. Book partial profit around Rs325 and exit around the levels of Rs330.
Indian Hotels (BUY, CMP Rs108, Target Rs114): On the daily chart, the stock has given an upside breakout, considered to be an important bullish signal. Last few weeks for the stock has been characterized by a sustain downtrend. However, the stock has managed to find support around the levels of Rs101. On Friday, it attempted a smart rally, closing well above day's open. The stock price has corrected from a peak of Rs113 during April 2010 to the levels of Rs101. With other oscillators suggesting a positive formation, we expect the upside to continue. We recommend traders to buy the stock at current levels and on decline to levels of Rs106 for a short term target of Rs114. It is advisable to maintain a stop loss of Rs103.
Derivative strategies (Time period: Till expiry)
± Re-iterate Long Maruti May Future @ Rs1,275 for the target price of Rs1,320 and stop loss placed at Rs1,255
Lot size: 200
Remarks: Net maximum profit of Rs9,000 and net maximum loss Rs4,000.
± Long Reliance Media May Future @ Rs187.7 for the target price of Rs200 and stop loss placed at Rs183.50
Lot size: 600
Remarks: Net maximum profit of Rs7,380 and net maximum loss Rs2,520.
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% | |
Result Update: KPIT Cummins Infosystems (Q4 FY10) – BUY
CMP Rs115, Target Rs141, Upside 22.4%
± Strong dollar revenue growth of 8.1% qoq was in-line with expectations
± 3-month Sparta integration drives robust growth in US region, manufacturing business IT vertical and non-Top 10 clients
± OPM contract sharply by 170bps qoq to 19.6%; net profit declines marginally
± Management guides for robust 25% US$ revenue growth and a muted 5%+ earnings growth in FY11
± Automotive and Semicon verticals, SAP services and Emerging markets to be the key growth areas in FY11
± Downgrade estimates but maintain BUY on KPIT
Result Update: Bank of India (Q4 FY10) – SELL
CMP Rs348, Target Rs302, Downside 13.1%
± Net interest income was up 8%yoy, net profit, however declined by sharp 47%yoy
± Non-interest income declined by 8%yoy; operating expenses, too came in higher
± Loan book grew 18%yoy (7%qoq); international loan book reported sturdy 23% yoy growth
± Deposits were up 21%yoy; led by 27%yoy growth in CASA deposits
± Asset quality continues to worsen, GNPL up 98%yoy, NNPL too up 2.5x yoy
± Capital remains adequate, downgrade to SELL on concerns over rising NPL's
Corporate Snippets
± SC directs Reliance Industries to initiate renegotiation with RNRL within six weeks on the terms of the gas supply agreement so that their interests are safeguarded. (BL)
± JSW Steel reported that its crude steel production has increased by 20% to 560,000 tonnes in April. (BL)
± IRB Infra bags Rs12bn road project. (BL)
± JSL has signed a MoU with the Orissa Government to set up a 1,320MW super critical thermal power plant at Luni. (BL)
± Apollo Hospitals will add 2,200 beds over the next two years with an estimated investment of Rs10bn. (FE)
± Tata Steel will raise Rs100bn of debt to finance its 3mn tonne expansion in Jamshedpur and to part-pay debt at Corus. (DNA)
± Dabur plans to go ahead with its overseas acquisition plans this fiscal, particularly in the personal care and healthcare segment, in the Middle East and African countries. (ET)
± Sun Pharma is voluntarily recalling about 27,000 bottles of anticholesterol medicine Gemfibrozil tablets from the US market after impurity levels exceeded permissible limits. (ET)
± Cipla in talks to make and supply drugs to global pharmaceutical firm Pfizer as the US-based company plans a foray in the generics business space. (ET)
± RCom to launch IPTV service in Mumbai, Delhi in three months. (ET)
± LIC Housing Finance plans to raise Rs200bn during the current fiscal to fund its business growth. (ET)
± Alcon Inc plans to rope in strategic manufacturing alliances and joint ventures with Cipla. (BS)
± The three Patni brothers of Patni Computer may get a premium for selling their stake to Japanese strategic investor NTT Data, compared to PE firm General Atlantic. (ET)
± Ansal Properties plans to raise Rs710mn by selling 6.94% stake to a group of investors led by Enam Investment Services. (ET)
± Kemrock Industries plans upto Rs18bn investment in 4-5 years. (BS)
± Dalmia Cement and Kohlberg Kravis Roberts together with its affiliates have signed a definitive agreement under which KKR is planning to invest Rs7.5bn in the company's subsidiary. (BS)
± DCM Shriram plans to send Rs80mn in two years to develop a lignite mine in Rajasthan. (BS)
± Triveni Engineering plans to list the demerged entity Triveni Turbine on the domestic bourses by the end of 2010. (BS)
± Nava Bharat Ventures unit has concluded the purchase of 65% equity stake in Zambia-based Maamba Collieries from ZCCM-Investment Holdings Plc. (BS)
± Gemini Communication acquires African telecom and internet services provider Rosy Blue Wireless. (ET)
± The government may rework natural gas allocation priorities to accommodate ADAG's Dadri power plant. (ET)
± Retail investors to get 5% discount in Engineers India's follow-on offer. (ET)
± Great Offshore likely to ink joint venture with foreign offshore player. (ET)
± Tinplate is working with Corus group to explore joint marketing opportunities for food and beverages packaging in Europe. (ET)
± Private telecom companies ask the government not to give any concessions to BSNL and MTNL regarding payments for third-generation airwaves. (ET)
Economic snippets
± The value of the auction for 3G spectrum moves up to Rs129bn.(BL)
± Foreign exchange reserves were up US$157mn to US$278bn for the week ending April 30. (BL)
± The government may soon ask companies with less than 50% foreign equity to seek approval of the FIPB to make any downstream investment. (BS)
Results Table
Results table
| Companies | Revenue | % yoy | PAT | % yoy |
| KPIT Cummins | 1971 | (6.1) | 208.0 | 8.3 |
| Bank of India | 15,517.0 | 8.3 | 4,279.0 | (47.2) |
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