Market Mantra
Market outlook
Time to rest!
There are many things that we would throw away if we were not afraid that others might pick them up - Oscar Wilde
Global markets have heaved a sigh of relief. European leaders have buried the hatchet to avert a possible split in the euro-zone and bolster confidence in the euro. Another major financial crisis has been avoided. But, it remains to be seen how fast the debt-ridden European nations can rebound from here on.
The global economic recovery has suffered a temporary setback. What that means is that the crisis-fighting stimulus will stay for some time to come in advanced nations. Even central banks in emerging countries like India may go slow in raising rates. The dollar may remain firm. Emerging markets with strong growth will benefit from ultra-soft monetary regime in western countries.
For the day, the outlook remains positive though the start will be lackluster. Asian markets are mixed. Stocks in China are up owing to strong economic data. The Hang Seng is in the red. Some choppiness is likely and the main indices may once again slip into a rangebound trade. We would urge caution at these levels.
Trading ideas (Time period: 1-3 days)
M&M (BUY, CMP Rs554, Target Rs584): On the daily chart, the stock has given an upside breakout, considered to be an important bullish signal. The stock is poised for further gains in the next few trading sessions. The undertone is reasonably strong and is likely to push price higher. After consolidating in the range of Rs535-505 for last two weeks, the stock closed above the peak of its trading range of Rs163 on Monday. The upside breakout is well accompanied with decent volumes. We recommend traders to buy the stock at current levels and on decline to levels of Rs550 for a short term target of Rs584. It is advisable to maintain a stop loss of Rs540.
Bank of India (SELL, CMP Rs334, Target Rs317): Bank of India has been on a downtrend since its high of 395 in last week of April 2010. Last week, we saw the stock breaking below its multiple support levels placed around Rs354-355. Further, it formed Bearish candlestick pattern on the weekly chart, confirming the negative trend. The daily MACD has generated a crossover sell signal, suggesting build-up of momentum on the downside. On Friday, it fell below its 200-day DMA. We recommend traders to initiate short positions at current levels and on rallies to Rs338 for target of Rs320 and Rs317. A stop loss of Rs346 is recommended on all short positions.
Derivative strategies (Time period: Till expiry)
± Long Tulip Telecom May Future @ Rs919 for the target price of Rs946 and stop loss placed at Rs908
Lot size: 500
Remarks: Net maximum profit of Rs13,500 and net maximum loss Rs5,500.
± Long Adani Ent May Future @ Rs573 for the target price of Rs585 and stop loss placed at Rs566
Lot size: 400
Remarks: Net maximum profit of Rs4,800 and net maximum loss Rs2,800.
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: Hindustan Zinc – BUY
CMP Rs1,119, Target Rs1,437, Upside 28.4%
± HZL to acquire the Anglo American's zinc assets for US$1.4bn
± Acquisition to increase capacity by 37%
± Deal to be EPS accretive from 1st year
Result Update: Usha Martin (Q4 FY10) – BUY
CMP Rs87, Target Rs118, Upside 35.6%
± Standalone revenue increases 19.2% qoq to Rs5.2bn led by a 27% qoq jump in sales volume
± OPM declined 379bps to 18.5% on account of higher consumption of external metaliks as the MBF was under maintenance shutdown
± Realisations in the domestic market was largely flat on a qoq basis, whereas it declined sharply in its international subsidiaries
± Operating profit of Rs971mn was lower than our estimate on account of the sharp jump in raw material costs
± It has commissioned DRI Plant, Bloom Mill, SMS-III and 30MW Captive Power Plant at Jamshedpur and Bright Bar at Chennai
± Maintain BUY with a price target of Rs118/share
Result Update: Radico Khaitan (Q4 FY10) – Market Performer
CMP Rs126, Target Rs138, Upside 9.1%
± Q4 revenues rise 22% yoy on the back of an estimated 12-14% growth in volumes
± Lower RM, staff and SG&A expenses support margin expansion of over 11ppts
± Co posts a profit on a pre-exceptional basis vs loss of Rs169mn a year ago
± QIP proceeds of Rs3.4bn to be utilized to repay debt; we factor in a 27% reduction in interest cost in FY11 but retain MP with a revised TP of Rs138
Sector Update: Insurance Monthly Update – March 2010
Indian Life Insurance industry witnessed a strong growth in the farewell month of FY10. The industry total Annual Premium Equivalent (APE) grew by 50.1% yoy in March '10 vis-à-vis 27.7% yoy in the previous month. This robust growth was equally contributed by both private players and LIC. In March '10, private players witnessed a strong APE growth of 45.8% yoy vis-à-vis 17.8% yoy in previous month, while state-owned LIC posted a 55% yoy APE jump. March, being a key month for the industry, contributed 23.2% to its annual sales as against 18.8% in the previous year. New premium collection stood at Rs253.3bn compared toRs150.9bn in the last fiscal. Even on a quarterly basis, contribution was greater at 40% of the total sales vis-à-vis 30% in the previous year as investment climate and investor sentiment witnessed a marked recovery.
Debt Market - week ended May 07, 2010
± During the week, bonds rallied across different tenures. The 10-year benchmark 6.35% G-Sec 2020 yield fell by 50bps to 7.63%. Even the 1-year benchmark G-Sec bond yield fell to 4.93%, down by 30bps on a weekly basis.
± The RBI auctioned Rs50bn of 7.02% G-Sec 2016, Rs50bn of 8.20% G-Sec 2022, Rs30bn of 8.26% G-Sec 2027 and Rs20bn of 8.32% G-Sec 2032. The cut-off yield was at 7.39%, 7.77%, 8.12% and 8.22% respectively.
± Food inflation eased for the second consecutive week to 16.04% yoy for the week ended 24 April 2010 vis-à-vis 16.61% yoy in the previous week. Prices eased on the arrival of cheaper winter crops and also on the anticipation of a normal monsoon.
± The People's Bank of China increased banks' reserve ratio by 50 bps, from 16.5% for the big banks and 14.5% for smaller banks, with effect from May 10, 2010.
± The Reserve Bank of Australia raised the benchmark for the sixth time since October 2009. It increased overnight cash rate by 25 bps to 4.50% with effect from May 05, 2010, stating that they would move towards a more neutral monetary policy.
Corporate Snippets
± Vedanta Resources through its subsidiary Hindustan Zinc has acquired UK-based Anglo American Plc's zinc business for US$1.34bn in an all-cash deal. (BS)
± Fortis Healthcare will raise Rs3.8bn through issue of 22.35mn equity shares on a preferential basis to Singapore-based private equity firm GIC Special Investments Pte Ltd. (BS)
± The Maharashtra government intervened with GAIL India to organise gas supply till end-June for one unit of Tata Power's Trombay plant. (BS)
± Bolivia has said that the multi-billion dollar contract it signed with Jindal Steel to develop an iron ore mine has not been rescinded, but the steel company would have to pay a penalty for not fulfilling the terms of the agreement. (BS)
± Tata Power has said that it is not inclined to accept a Maharashtra government order asking it to supply around 300MW to Reliance Infrastructure, setting the stage for an unusual confrontation with the state government, reports Our Political Bureau from Mumbai. (ET)
± US-based Purdue Pharma has filed a patent infringement suit against Ranbaxy, after it had applied for marketing approval of a low-cost version of Purdue's pain relieving medicine, Oxycodone. (BS)
± Radico Khaitan is 'in talks' with Britan's Diageo Plc to reduce stake in their joint venture Diageo Radico Distilleries Pvt Ltd. (FE)
± Usha Martin has chalked out a Rs12bn capital expenditure program, to be invested over a period of 36 months. (BS)
± Tata Teleservices has approached the communication to seek a level playing field and ending the discrimination against the company on the policy front. (ET)
± Fidelity Growth Partners India, the private equity arm of Fidelity International, has taken a significant minority stake in PL Engineering, a subsidiary of Punj Lloyd. (ET)
± Prithvi Information Solutions has acquired US-based Percentix, a business intelligence consulting company specialising in Enterprise Performance Management. (ET)
± Axis Bank has acquired 1.2% stake in Karnataka Bank. (ET)
Economic snippets
± Telecom operators with more than 6.2 MHz of spectrum in GSM will have to pay more if the new Trai formula plans to replace subscriber-based allocation for spectrum. (BS)
± The telecom regulator will unveil sweeping new rules that could strain the finances of some of India's top mobile phone companies and set the stage for consolidation in a crowded and ultra-competitive market. (ET)
± The Telecom Regulatory Authority of India plans to allow spectrum sharing between operators on commercial terms (ET)
± The government has now formally banned foreign direct investment in cigarette manufacturing, closing the door on many foreign companies. (ET)
± The finance ministry and the RBI have asked public sector banks to consider taking over urban cooperative banks, after their efforts to spur consolidation among large lenders drew a blank. (ET)
± Merchandise exports grew by a healthy 54.1% in March to US$19.9bn. (FE)
Results Table
|
| Revenue | % yoy | PAT | % yoy |
| Usha Martin | 5,240 | (1.1) | 457 | 127.4 |
| Radico Khaitan | 2,135 | 21.6 | 96 | 2,141.2 |
| Jubliant Organosys | 6,048 | 10.1 | 920 | 501.7 |
| Dish TV | 3,031 | 46.4 | (598) | 24.0 |
| Orbit Corp | 865 | 86.0 | 194 | 229.0 |
| Bharat Bijlee | 6,560 | 20.2 | 412 | (13.3) |
| Orient Paper | 16,296 | 7.2 | 1,593 | (20.4) |
| UB Enginnering | 2,099 | (53.8) | 102 | (51.7) |
| GIC Housing | 293 | (1.9) | 176 | 2.9 |
| OCL India | 4,177 | 19.5 | 554 | 138.0 |
| Monnet Ispat | 4,384 | 18.4 | 725 | 44.4 |
| Suven Life Science | 361 | (0.9) | 16 | 352.7 |
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