Market Mantra
Market outlook
No taxing times for bulls
"My downfall raises me to infinite heights." Napoleon Bonaparte.
Downgrades be dammed! That's perhaps what the bulls might have said as they went about their business despite Moody's pruning Greece's bond rating. What is even better news is that European markets recovered to rise for a fifth consecutive session. US shares on Wall Street posted stronger gains with the S&P 500 moving past the 200-day moving average. This morning stock benchmarks in Asia have continued the momentum, with the Nikkei in Japan leading the advance. Markets are shut in Hong Kong, China and Taiwan.
The current rally appears to have the legs to last a bit longer given the resilient mood across global equity markets. We expect a positive start though concerns of a possible inter-meeting rate hike by the RBI and the revised Direct Tax Code could keep a lid on gains. The key indices may meet with some resistance as they try to scale new heights but the overall undertone remains positive. The near-term sentiment will continue to be driven by newsflow before quarterly results start kicking in next month.
Trading ideas (Time period: 1-3 days)
Chambal Fertilizers (BUY, CMP Rs62.6, Target Rs68): Chambal Fertilizers confirmed breakout from five months of consolidation phase as prices surged above the falling trendline and closed above the Rs62 levels. Stock going forward is expected to catch up buying momentum and head towards its interim resistance of Rs68.5. Upward crossover of short term moving averages like 10DMA and 20DMA above its 50DMA also corroborates shift in trend from sideways to the positive. We advise buying the stock at current levels of Rs63.55 with stop loss of Rs61.50 for target of Rs68.
Praj Industries (BUY, CMP Rs80, Target Rs86.6): Praj Industries has given a breakout from symmetrical triangle yesterday after prices crossed above resistance of Rs79.75.The breakout was also confirmed with surge in volumes with interim target placed at Rs86 based on amplitude of triangle. Although stock continues to trade below its long term moving averages, a breakout in triangle is likely to provide short term breather in the counter and prices can retrace atleast 50% of earlier its decline (Rs98-Rs 75) which corresponds at Rs86.6 levels. We advise buying stock above Rs80.7 with stop loss of Rs78 for target of Rs86.6
Derivative strategies (Time period: Till expiry)
± Long United Phosphorus June Future in range of Rs179-180for the target price of Rs188with a stop loss placed at 176.
Lot size: 1400
Remarks: Net maximum profit of 11,200 and net maximum loss Rs5,600.
± Long MTNL June Future in range of Rs56-57 for the target price of Rs62 and stop loss placed at 52.95
Lot size: 3200
Remarks: Net maximum profit of Rs19,200 and net maximum loss Rs9,600.
Mutual funds
| Fund focus | |||||||
| ICICI Prudential Dynamic Fund | Invest | ||||||
| Fund manager | S Naren |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs97.9 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs97/66 |
| Exit load | 1% <1 yr | |||
| Latest AUM | Rs2,160cr |
| Latest dividend (under dividend option) | 12% (Feb 15, 2010) | |||
| Type | Open-ended |
| Benchmark | S&P CNX Nifty | |||
| Class | Equity – diversified |
| Asset allocation | Equity (83%), Debt (0%), Cash (17%) | |||
| Options | Growth & dividend |
| Expense ratio | 2% | |||
Corporate Snippets
± Cairn India has started selling crude oil from its Mangala oil field in Rajasthan to private sector Reliance Industries and Essar Oil using a heated oil pipeline. (ET)
± ONGC has said that its Assam asset is losing production due to 'infinite' shut-down of Numaligarh Refinery Ltd, a subsidiary of Bharat Petroleum. (BL)
± Oil regulator Petroleum and Natural Gas Regulatory Board has approved the tariff that GAIL India will charge from consumers for moving natural gas through its two main trunk pipelines. (ET)
± Reliance Infratel has all but approved a merger deal that could see its tower assets combine with smaller rival GTL Infrastucture in exchange for Rs150bn in cash and a significant stake in a new entity for shareholders of its parent company. (ET)
± Tata Motors is contemplating a price hike of the new Nanos in the region of Rs5,000-15,000 from August-September this year. (ET)
± M&M will hold negotiations with former JV partner Renault for reforming the Logan platform and making it usable for applications other than passenger cars. (BS)
± Larsen & Toubro, one of the contenders for NTPC's Rs250bn bulk tender, asserted that there was no technical irregularity in its bid. (FE)
± Bank of India raised Rs10bn through bonds. (FE)
± Fortis Healthcare is yet to decide on its course of action to respond to Malaysian fund Khazanah's offer to take control of Singapore's Parkway Holdings. (ET)
± Dr Reddy's said that the US court injunction on the launch of Allegra D24 in America will hit its revenue targets. (ET)
± Cipla plans to acquire a significant minority stake in two biotech companies, one each in Goa and Shanghai, for US$65mn. (ET)
± Gammon Infrastructure entered into a memorandum of agreement for acquisition of an entity, which is setting up a 250MW coal-based power plant in Western India. (FE)
± Rallis India plans to spend Rs1bn over the next 12-18 months towards acquiring new equipment and the launch of various products. (BL)
± Aban Offshore is close to either hiring or buying a drill ship to complete the job in Venezuela. (BL)
± Strides Arcolab has received the USFDA approval for a drug taken for acute migraine attacks. (BL)
± Emami is in the final stages of acquiring a manufacturing unit of an FMCG company in Egypt for ~Rs1bn. (BS)
± Shriram Transport Finance Company's new equipment finance subsidiary, Shriram Equipment Finance Company, will commence operations from September 1, 2010, with an initial capital of Rs500mn. (BS)
± JK Lakshmi Cements plans to invest ~Rs1bn to set up ready mix- concrete plants in Mumbai, Gujarat and North India. (ET)
± DQ Entertainment entered into an exclusive broadcasting agreement with Sun TV Network for the provision of animation content. (BL)
± Falcon Tyres plans to set up Rs5.5bn greenfield project in Uttarakhand to produce tyres for two- and three-wheelers. (BL)
± The government has okayed the sale of a 10% stake each in state-run Coal India and Hindustan Copper, that could raise around Rs150bn. (ET)
Economic snippets
± The government has allowed industrial units to shift from one SEZ to another after approval from the apex authority, the board of approvals. (ET)
± The central government will consider including 28 new cities in the Jawaharlal Nehru National Urban Renewal Mission. (ET)
± Imports of milk, food grains, edible oils and pulses, considered sensitive for domestic producers, surged by 40.5% in 2009-10 to Rs655bn. (ET)
± The government has constituted a group of ministers headed by the finance minister to examine the provisions in the new Mines and Minerals Development and Regulation Bill 2009 that aims to reform the mining sector and attract investments. (ET)
± The government today proposed relief for individuals, companies that pay MAT and entities using the provisions of the Double Taxation Avoidance Agreements in the revised draft of the Direct Taxes Code. (BS)
± The revised discussion paper on the Direct Taxes Code has proposed to tax the income of foreign subsidiaries of Indian companies and has also suggested that a company incorporated outside India will be taxed only when its management is taking decisions in India. (BS)
± The domestic airlines flew 4.8mn passengers in May, an increase of ~22% over the same period last year. (BL)
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