Market Mantra
Market outlook
Fantastic Friday!
Counting the cost and paying the price aren't things to think about any more. All that matters is value - James Hilton
The hungry bulls will look at lapping up whatever comes their way. Value and rationale could take a backseat. The scary rollercoaster ride of the previous few sessions will take a break as risk aversion has subsided somewhat after China dismissed a report saying it was mulling paring its holding of European bonds. This helped spark a world-wide rally in equities and commodities. The euro too rebounded while gold dipped.
This morning things appear bright. We are looking at a gap-up opening and hopefully another day of solid gains. Asian markets are upbeat following the overnight bounce in the US as well as European markets. Still, it would be foolhardy to take the recent pull-back in stocks as a decisive turnaround and start buying aggressively.
So, one expects the volatility to persist for some time to come owing to uncertainty about the global picture. For India though the prospects appear really good. The next big trigger will come from monsoon and hopefully raingods will be kind this year.
Trading ideas (Time period: 1-3 days)
UCO Bank (BUY, CMP Rs73, Target Rs78): The stock has been consolidating in a narrow range between the levels of Rs73-67 for last three weeks. Yesterday, the stock crossed the upper-end of this trading range. We expect the stock to rally above the levels of Rs74. The daily RSI is already in strong buy mode. The stock has closed above all its key daily moving averages. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs72.5-73.5 with a stop loss of Rs70.5 for a target of Rs78.
LIC Housing Finance (BUY, CMP Rs923, Target Rs960): The stock has seen impressive volume expansion in last few trading sessions and appears to have taken support between Rs875-878 range. It could bounce till somewhere between Rs955-960 levels in the near term. Our argument is further validated after the stock recovered from the low of Rs895 in yesterday's session with strong volumes. Any move above Rs927 could take the stock towards Rs960 and higher in the short-term. Traders are advised to maintain a stop loss of Rs905 and go long. Book partial profit around Rs952 and exit around the levels of Rs960.
Derivative strategies (Time period: Till expiry)
± Long Bharti Airtel June Future in range of Rs262-264 for the target price of Rs273 with a stop loss placed at 258
Lot size: 500
Remarks: Net maximum profit of 5,000 and net maximum loss Rs2,500.
± Long Infosys June Future in range of Rs2645-2650 for the target price of Rs2700 and stop loss placed at 2625
Lot size: 200
Remarks: Net maximum profit of Rs10,000 and net maximum loss Rs5,000.
Mutual funds
| Fund focus | |||||||
| UTI Opportunities Fund | Invest | ||||||
| Fund manager | Harsha Upadhyaya |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs23.2 |
| 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: Cairn India Ltd (Q4 FY10) – BUY
CMP Rs286, Target Rs327, Upside 14.2%
± Net sales jump 281% on rising crude oil production from Rajasthan field, but sales lower than estimates
± Realization for Rajasthan crude at US$67/bbl, 12% discount to Brent much in line with company's guidance
± OPM jumps 537bps yoy on account of benefits of operating leverage
± Maintain BUY rating with a target price of Rs327
Result Update: Tata Motors (Q4 FY10) – BUY
CMP Rs743, Target Rs899, Upside 21.0%
± Consolidated net sales rose 84.6% yoy driven sharp improvement in JLR performance
± JLR continues to report profit at bottomline level on back of robust operational performance
± Strong standalone performance on back of robust growth in volumes and improved realizations
± Standalone margins were under pressure on account of raw material pressures
± Maintain BUY as we see continued recovery in consolidated financial performance
± Sharp down turn in volumes from either Europe or US could be a key headwind
Result Update: BPCL (Q4 FY10) – Under Review
CMP Rs573
± Net sales for Q4 FY10 rises 41.6% yoy primarily driven by higher average realizations and increase in government compensation
± Upstream companies shared under recovery burden worth Rs14.7bn in Q4 FY10 v/s Rs2.3bn in Q4 FY09
± Throughput was higher by 16.8% yoy to 5.7mn tons and market sales were higher by 2.3% to 7.3mn tons
± EGoM meeting on June 7, 2010 could act as a game changing event. Hence, we keep our rating and target price under review
Corporate Snippets
± TCS, Wipro, TechM, IBM, NEC shortlisted for UID project. (BS)
± Infosys looking at acquisition of the size US$500mn. (BL)
± NTPC-BHEL venture is mulling technology tie-up with global companies. (BL)
± Tata Steel to increase stake in Canada mining firm, New Millennium Capital Corp. (BS)
± The Government may give preference in gas allotment to power projects of the ADAG Group if RIL picks up equity stakes in them. (ET)
± GM has snapped its partnership with Reva and will roll out electric cars on its own after it was acquired by M&M. (ET)
± Promoters of Tata Steel may invest Rs1.33bn, a move that would increase the promoters holding by 3% to 38%. (ET)
± M&M is close to buying drip irrigation company Parixit Industries. (ET)
± Bharti starts fund raising for Zain. (BS)
± Private equity player Actis to buy into GVK's power business. (BS)
± Essar Group planning to set-up own port in Africa. (BS)
± Renuka Sugar's acquisition of 51% in Equipav on the verge of turning bitter. (BS)
± Dish TV starts high definition service. (BS)
± Bata to replace small stores with large ones. (BL)
Economic snippets
± The annual monsoon on track to hit the southern coast in the next three to four days. (BS)
± Banks ask RBI to defer liquidity tightening. (BL)
± LIC can't charge fee for transfer of policy, as per the high court judgment. (ET)
± RBI gives thumbs up to SLR cut, in a move to create headroom for Rs20bn liquidity. (FE)
Results Table
| Company | Revenue | % YoY | PAT | % YoY |
| BPCL | 375,700 | 41.6 | 7,031 | (80.6) |
| Tata Motors | 122,297 | 77.4 | 5,970 | 0.9 |
| Power Grid Corp | 22,305 | (3.7) | 5,465 | (11.3) |
| Mphasis Group | 12,205 | 16.4 | 2,672 | 19.0 |
| Cairn India | 6,928 | 281.2 | 2,452 | 1212.6 |
| Colgate Palmolive | 5,359 | 13.5 | 1,143 | 48.3 |
| Simplex Projects | 3,309 | 203.7 | 167 | 185.5 |
| Godrej Industries | 2,278 | 5.6 | 270 | 103.0 |
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