Market Mantra
Market outlook
Payback panic!
We are more disturbed by a calamity which threatens us than by one which has befallen us. - JL Spalding
Global jitters are back to haunt us just when the Indian indices were hoping to surpass previous intermediate highs. Barring double-digit inflation, the Indian economy remains on firm footing. But then we remain at the mercy of the world.
The Indian indices are set to open weak but there could always be a pull back in case there is some improvement in the temporary worries. The markets were disturbed on Tuesday by a host of global reasons. Weak reading on Japanese export demand and household spending and a revised reading on Chinese leading economic indicators sent global indices into a tailspin.
The euro too plunged to record low versus the Swiss franc amid worries over the region's banking system. Renewed fears about liquidity took center stage as Thursday is the due date for repayment of the ECB's 442 billion euro in one-year loans; interbank rates jump to 9-month highs.
Back in the US, recent economic reports have not been too encouraging. Also, the US indices are close to key technical support levels while China is said to have broken them.
Trading ideas (Time period: 1-3 days)
ING Vysya Bank (BUY, above Rs342, Target Rs358): A detailed study of the stock shows a pattern of rounded bottom on the daily chart, signaling temporary bottom. The overall base-like pattern carved out by ING Vysya Bank during the past four weeks appears to be maturing now. In fact, the last couple of sessions it represents a high level bullish congestion area between Rs321-340. We believe that the current bullish consolidation could lead to a potential upside up to the levels of Rs358 and above. We recommend traders to buy the stock above Rs343 for a short-term target of Rs358. It is advisable to maintain a stop loss of Rs335.
GMR Infrastructure Ltd (BUY, CMP Rs58.80, Target Rs65): Stock has been forming a Rounding Bottom in the short term chart which is considered as bullish formation. An appearance of a Falling Window on 7th June 2010 at Rs56.75 levels has acted as stiff resistance so far and three consecutive closing above Rs57 has invalidated the weak structure. Negation of bearish pattern has a positive influence on stock in the near term, unless it is followed by retracement of more than 61.8%. The relative strength in the counter too suggests a positive bias after the stock ended above its 50-DMA yesterday despite weakness in overall market. We advise buying stock above the levels of Rs59.25 for one week delivery with stop loss of Rs56.5 for target of Rs65.
Derivative strategies (Time period: Till expiry)
± Short HPCL July Future in range of Rs436-437 for the target price of Rs422 with a stop loss placed at Rs443.25.
Lot size: 1000
Remarks: Net maximum profit of Rs14,000 and net maximum loss Rs7,000.
± Long Sesa Goa July Future in range of Rs346-347 for the target price of Rs356 and stop loss placed at Rs341
Lot size: 500
Remarks: Net maximum profit of Rs5,000 and net maximum loss Rs2,500.
Mutual funds
| Fund focus | |||||||
| HDFC Top 200 Fund | Invest | ||||||
| Fund manager | Prashant Jain |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs193.2 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs193/135 |
| Exit load | 1% <1 yr | |||
| Latest AUM | Rs7,490cr |
| Latest dividend (under dividend option) | 40% (Mar 12, 2010) | |||
| Type | Open-ended |
| Benchmark | BSE200 | |||
| Class | Equity – diversified |
| Asset allocation | Equity (97%), Debt (0%), Cash (3%) | |||
| Options | Growth & dividend |
| Expense ratio | 1.8% | |||
Sector Update: Insurance Monthly Update – May 2010
YTD APE# for Indian Life Insurance players grew at a modest rate of 5.7% in May '10 on account of weak performance exhibited by the private players. Amongst the private players the weakest performers included Canara HSBC OBC Life (-54.6% yoy), Bajaj Allianz (-51.8% yoy) and Max New York (-50.5% yoy) in terms of APE. However, LIC continued to hold on to its growth momentum with an APE growth of 16.5% yoy.
In a recent development, IRDA has finalized new ULIP norms (effective Sep 1, 2010), which include 1) Extension of lock in to 5 years from 3 years earlier, 2) Compulsory guarantee of 4.5% return on pension products, 3) Cap on charges at 4% for policy lapse/surrender after 5th year and 4) Minimum sum assured increased to 10x of premium from 5x earlier. We believe, these norms will restrict premium growth in FY11.
Corporate Snippets
± State Bank of India fixed its base rate at 7.5%. (ET)
± JSW Steel is planning to invest Rs750bn in both brownfield and greenfield projects to increase its capacity over fourfold to 32mtpa from the present 7.8mtpa by the turn of 2020. (ET)
± JSW Steel may take another six months before Japan's second-largest steel company, JFE Holdings, buys a stake in it. (BS)
± Bharti Airtel said it will invest US$100mn over the next three years to expand in Gabon. (ET)
± ONGC and its partners will sign contracts for half of 34 oil and gas blocks awarded in the latest round of auction under the NELP. (ET)
± ONGC board is expected to consider a fresh cost estimate for development of the G1-GS15 marginal gas field in KG basin by April 2011, exactly five years behind the original schedule. (BL)
± ICRA has upgraded the long-term rating on outstanding Rs45.9bn long-term bonds programme of Indian Oil Corporation from LAA+ and 'positive outlook' to LAAA. (FE)
± Reliance Communications is likely to acquire privately-held cable television company Digicable in a cashless deal. (ET)
± Ashok Leyland has increased prices of its medium and heavy duty vehicles by about 3% with immediate effect. (FE)
± Pantaloon Retail has allotted 10mn warrants to its promoters' group company, Future Ideas Realtors India Ltd. (FE)
± Cadila Healthcare (Zydus Cadila) has launched generic version of Anastrazole tablets (1 mg) in the US market upon receiving an approval from the US FDA. (BL)
± Maytas Infrastructure has reported a net loss of Rs2.5bn FY10, compared with a net loss of Rs4.7bn last year. Its net revenues declined 33.2% to Rs11bn from Rs16.4bn in the previous year. (BS)
± Tata Teleservices, which has won 3G spectrum licences in nine circles, has written to the government asking it to delay the allocations until the issue on usage of Chinese equipment is cleared. (BS)
± Union Bank of India said it has raised Rs5bn as capital by way of debt. (ET)
± Apollo Tyres would increase prices of its products next week. (FE)
± Subros has picked up a minority stake in a new 74:26 joint venture with Japan's Denso. (ET)
± Alembic has decided to hive off its core pharma division into a new entity — Alembic Pharma. (ET)
± RCF has proposed to invest US$1.5bn to set up a gas-based fertiliser plant with a capacity of 1mn tons in natural gas-rich Ghana. (BS)
± AstraZeneca Pharma and Sulzer have sought to delist their Indian subsidiaries. (ET)
± City Union Bank has received board approval to raise up to Rs3bn via QIP. (ET)
± REI Agro's Rs12.5bn rights issue will open for subscription for shareholders from Wednesday. (FE)
± Aqua Logistics board has approved a proposal to raise funds to the extent of US$70mn. (FE)
± Spice Mobiles said it would merge with the parent company Spice Televentures as part of a plan to consolidate the group's telecom businesses. (FE)
± Uflex will invest over US$250mn in the next two years to enhance output at its manufacturing plants and set up new units. (FE)
Economic snippets
± Nasscom will make a pitch to the government, seeking continuity of tax benefits on special economic zones (SEZs) in the Direct Taxes Code (DTC). (ET)
± The government has extended the special duty on import of soda ash from China. (ET)
± The Petroleum and Natural Gas Regulatory Board (PNGRB) issued licence rules for companies laying gas pipelines. (FE)
± The Union finance ministry has agreed to states' demand that tobacco be kept within the ambit of Goods and Services Tax (GST) and alcohol outside it. (BS)
± SEBI on Tuesday said that FIIs will now have to disclose information on Indian securities lent by them to overseas entities (for the purpose of short selling) on a weekly rather than a daily basis. (BL)
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