Market Mantra
Market outlook
Bounce! No big deal!
Life is not about how fast you run, or how high you climb, but how well you bounce.
A bounce back is on the cards at start, thanks largely to a late session rebound on Wall Street. But then remember, Bouncing is more like crashing…. except you get to do it over and over again.
Asian markets are mostly positive, barring the Kospi in Seoul, which is still reeling under the geopolitical tension. The European markets failed to benefit from the recovery in US stocks and ended sharply lower. In fact, markets in Italy, Portugal and Ireland joined Spain and Greece in bear-market territory. The FTSE 100 closed below 5,000.
German finance ministry is reportedly proposing extending the naked short-selling ban to include all German-listed stocks. The bill is due to be discussed next week. Italy has joined Europe's austerity club with deep spending cuts.
What this means is that unknown fears remain and randomness is the order of the day. Volatility is very high and so are uncertainties and risks. With the F&O expiry a day away it only gets wilder. Any sharp snap-back should be used to lighten your mental burden rather than adding positions.
Trading ideas (Time period: 1-3 days)
Sun Pharma (BUY, CMP Rs1,587, Target Rs1,640): After a month long rectangular consolidation, the stock has resumed its uptrend. On the daily chart, it is evident that the volumes decreased during the consolidation period and picked up in yesterday's session, suggesting bullish breakout. The range bound trading appears to be broken and the stock is all ready to surge higher. Our view is further validated after the stock gave a close above the cluster of moving averages placed around Rs1,561. If the stock holds up above the levels of Rs1,595 today, it can post huge upside in the coming trading sessions. We recommend high risk traders to buy the stock in the range of Rs1,580-1,595 for target of Rs1,640. Maintain a strict stop loss of Rs1,560.
Nagarjuna Constructions (BUY above Rs158.50, Target Rs164) : In our view, the stock has completed its downfall and has created a short term bottom around the levels of Rs157. We expect the stock to stage a pullback towards Rs165 levels, which corresponds to 50% retracement from its intermediate peak of Rs179 to Rs152. From the current level, the stock can only move towards one direction, i.e. upwards. However, the bullish formation would be confirmed only above the levels of Rs158.50. We recommend buy on the stock from the above mentioned technical observations. Maintain a stop loss of Rs156 and go long for a target of Rs164.
Derivative strategies (Time period: Till expiry)
± Long Hindalco May 140 Call option in range of 1.90-2.10 for the target price of Rs5.50 for expiry
Lot size: 3518
Remarks: Net maximum profit of Rs12,313 and net maximum loss Rs7,036.
± Long Jindal Steel May Futures in range of Rs614-616 for the target price of Rs630 and stop loss placed at Rs608
Lot size: 960
Remarks: Net maximum profit of Rs15,360 and net maximum loss Rs7,680.
Mutual funds
| Fund focus | |||||||
| UTI Opportunities Fund | Invest | ||||||
| Fund manager | Harsha Upadhyaya |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs22.3 |
| 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: Aban Offshore (Q4 FY10) – BUY
CMP Rs688, Target Rs785, Upside 14.0%
± Income from operations lower than expected on account of lower utilization of assets
± OPM at 64.6%, up 883bps yoy and 283bps qoq driven by fall in costs across categories
± Foreign exchange loss and write-down on investments impacts PAT, which fell 56.1% sequentially
± Sinking of Aban Pearl to leave severe impact on revenues, profits and cash flows
± Lower our target price to Rs785 as we cut our EPS estimates and lower our target multiple
Corporate Snippets
± Bharti Airtel has raised around Rs85bn from a consortium of financial institutions, including SBI, to pay for 3-G spectrum (ET)
± Leading telecom operators, Bharti Airtel, Vodafone Essar and Idea Cellular withdrew their petition before TDSAT, challenging the recommendations of TRAI on 2G spectrum. (ET)
± ONGC is in talks with energy majors BP Plc, Exxon Mobil, BG Group, Eni and BHP Biliton for a strategic tie-up for its Krishna-Godavari basin gas block. (FE)
± The Orissa government has identified land for the solar power projects proposed by NTPC in the state. (BS)
± Coal India has received preliminary expressions of interest from NTPC and Damodar Valley Corporation for import of approximately 5mn tons of coal in 2010-11. (BL)
± DLF is planning to build a 90-storey tall super luxury housing project in Mumbai, which it estimates will fetch Rs150bn. (FE)
± Bajaj Auto, which is jointly developing power bikes with Austria's KTM, plans to launch a model in the next financial year first in Europe and then in India. (ET)
± M&M is looking to buy a strategic stake from private equity players Global Environment Fund and Draper Fisher Jurvetson in the Bangalore-based electric carmaker, Reva Electric Car Company. (BS)
± Biocon, which recently entered into a manufacturing and supply agreement with Optimer Pharmaceuticals, is expecting revenues from the tie-up to touch US$50mn per annum in the next five-six years. (BS)
± GMR Infrastructure plans to raise Rs50bn by issuing equity shares, GDRs, ADRs, FCCBs or through private placement of shares. (FE)
± Reliance Infrastructure expects extra revenue of Rs20bn by FY12 from 11 infrastructure projects, to operationalise during the current financial year. (BS)
± The CA Institute has submitted second and final report on the Satyam scam and the role of the company's statutory auditor in that accounting fraud to the Corporate Affairs Ministry. (BL)
± Adani Group is likely to enter Africa for coal mining projects. (BL)
± The retail arm of RIL has cut its losses as a new centralised supply chain brought savings, and shoppers started spending. (ET)
± Bank of India plans to re-enter mutual fund business, for which it is scouting for a foreign partner. (ET)
± Mastek said its US subsidiary MajescoMastek and BPO firm Genpact formed a strategic alliance to jointly cater to the clients in the insurance, government and financial service space in the US market. (FE)
± Marico announced the acquisition of an aesthetic skincare business of Singapore-based Derma Rx Asia Pacific Pte for an undisclosed sum. (ET)
± HCC has been awarded a contract worth Rs8.9bn by NPCIL to build the main plants for units 7 and 8 of the Rajasthan Atomic Power Project. (ET)
± Hotel Leela Venture plans to launch a share sale to institutions after July to raise about Rs3.8bn and aims to cut debt by Rs7-9bn. (ET)
± Zydus Cadila received a milestone payment of US$10mn from US-drug maker Abbott under a licensing and supply agreement signed earlier this month for 24 products to be sold in 15 emerging markets. (ET)
± Aurobindo Pharma said it has received the nod from the US health regulator to manufacture and market its Valacyclovir Hydrochloride tablets, used for the treatment of chicken pox. (ET)
± Indraprastha Gas Ltd may raise CNG prices in the national capital by Rs5.60/kg to Rs27.5/kg following the government's decision to more than double the price of natural gas. (FE)
± Aban Offshore plans to raise additional long-term resources through issue of FCCBs, GDRs and ADRs not exceeding to US$400mn. (FE)
± GE Shipping will spend around US$577mn over the next three years to increase its tonnage capacity. (FE)
± SpiceJet is considering GDR and follow-on public offer to raise upto US$75mn. (FE)
± Sembcorp Utilities, a company based in Singapore, has picked up 49% stake in the 1,320-MW coal-fired plant of Thermal Powertech Corporation India Ltd, a SPV and subsidiary of Gayatri Projects, for Rs11bn. (BL)
± MTNL plans to issue a fresh tender to select a franchise partner for its 3G operations. (ET)
± Lodha Developers has agreed to pay an arm of the Maharashtra government Rs40.5bn over a period of five years for the right to construct a multi-storied apartment complex and a truck terminus in the central Mumbai suburb of Wadala, the biggest-ever land deal in the city and an indication of rapid demand recovery in the realty market. (ET)
Economic snippets
± Borrowing by telecom companies, which have to pay 3G licence fees to the government, has led to a shortage of liquidity forcing banks to hunt for large deposits. (ET)
± The government will consider changes in rules to allow flexibility to 100% foreign owned and well-capitalized NBFC's in setting up subsidiaries, a provision that was withdrawn by the FDI guidelines issued last year. (ET)
± The EGoM on gas allocation will soon draw up a list of the next set of beneficiaries in the power sector to receive gas from RIL's KG basin. (ET)
± The finance ministry has shot down a telecom department proposal to expedite an end to licence fees for landline services. (ET)
± IT companies can outsource their overseas jobs to units in the SEZ's, a move that will help SEZ's become BPO centers. (ET)
± The bids for broadband wireless access auction in the country reached Rs32bn on Tuesday for one pan-India licence, up 82.7% over the original bid price of Rs17.5bn. (ET)
± Exporters of engineering products and handicrafts may get more fiscal sops to help them tide over the demand crunch. (ET)
± Tyre prices are set to go up again, by 3-4% in June for the fourth time in six months. (BS)
± In the first two years of the current Plan period, the power sector, especially generation projects, saw investments of Rs2.3trillion against the projected Rs1.8trillion, according to preliminary estimates complied by the Planning Commission. (BL)
Results Table
| Rs mn | Revenue | % yoy | PAT | % yoy |
| Nagarjuna Construction | 15,227 | 38.7 | 1,026 | 168.6 |
| GMR Infra | 11,250 | (15.3) | 731 | 37.2 |
| HUL | 43,802 | 8.0 | 5,812 | 47.1 |
| Aban Offshore | 10,210 | 31.9 | 393 | - |
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