Market Mantra
Market outlook
Crash...make the best of it!
Things turn out the best for the people who make the best of the way things turn out.- John Wooden
A gap down opening could be a blessing. The Indian market is set to correct at start merely on account of the global crash witnessed over the weekend. A weaker-than-expected U.S. jobs report, continued concerns about the European debt crisis (with Hungary part of the action) and the fall of the euro left no trace of bulls on the street. The worry on the street is if Hungary too is reeling, how bad would the actual situation be with other emerging markets in Central and Eastern Europe?
The Dow is down ~11.4% from its April 26 highs which brings academic interest on whether or not it's heading into a bear market. Asian markets are understandably weak and the contagion in the market will spread to the Indian indices as well. While strong support could set in around the 4950 levels for Nifty, it may be worth a nibble at stocks which will fall for just no fault of their own.
Back home we have the Empowered Group of Ministers (EGoM) meeting today to decide on petroleum products pricing.
Trading ideas (Time period: 1-3 days)
Dabur India (BUY, CMP Rs192, Target Rs205): Recent price activity in Dabur India indicates breakout from rectangle pattern above Rs 189 levels which is likely to trigger an immediate target of Rs 205. After rallying from interim bottom of Rs 157 to Rs 191 levels during early April till month of May, stock went through consolidated for 30 days thus forming a rectangle pattern. Such formation can also be construed towards Flag formation, which generally is positioned in mid of rally. Friday saw the stock surpassing resistance on Bollinger band with bullish crossover in short term averages of 10 & 20 DMA. An inverted head & shoulder on RSI oscillator ensures a sustainable up move projecting a better risk reward ratio. Volumes are low but a move past resistance of Rs 189 is likely to reinforce buying. We advocate Buy on the stock at current levels of Rs192 with stop loss of Rs188 for target of Rs 205.
Dr Reddy (BUY, above Rs1415, Target Rs1520): Stock has been sustaining above Rs 1390 levels since last four trading sessions after a bullish breakout that took place above Rs 1385 levels. Studying price pattern with narrow trading range during last week resembles to a pennant formation which signifies a short term pause after a strong rally. Prior to the pennant formation, strong up move from the levels of Rs 1290-1400 confirmed three white soldier pattern which reaffirms positive momentum in the counter. We expect stock to resume its rally after pennant consolidation and head higher to test levels of Rs1520 on conservative basis in the near term although the breakout projection is quiet encouraging giving medium term target Rs1650. Buy at current levels of Rs1403 with target of Rs1500 and stop loss to be placed at Rs1475 level.
Derivative strategies (Time period: Till expiry)
± Short Yes Bank June Future in range of Rs291 for the target price of Rs277 with a stop loss placed at 299.
Lot size: 2200
Remarks: Net maximum profit of Rs30,800 and net maximum loss Rs17,600.
± Short Hindalco June Future in range of Rs147-148 for the target price of Rs141 and stop loss placed at 150.
Lot size: 3518
Remarks: Net maximum profit of Rs21,108 and net maximum loss Rs10,554.
Mutual funds
| Fund focus | |||||||
| UTI Opportunities Fund | Invest | ||||||
| Fund manager | Harsha Upadhyaya |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs23.7 |
| 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% | |||
Corporate Snippets
± Reliance Industries may foray into nuclear energy after being freed from a non-compete agreement with the ADAG that barred it from investing in some businesses. (ET)
± Fortis Healthcare may avoid a hurried response to counter Malaysian investment fund Khazanah's bid to acquire management control over Parkway Holdings. (BS)
± Tech Mahindra to focus more on the Middle East and African market, in talks with three-four African telecom companies for large contracts. (BS)
± Reliance Communications has granted an in-principle approval to the sale of 26% stake in the company to strategic or PE investors; however, it did not name any buyer or give a timeframe for the proposed sale. (BL)
± AT&T is in talks with Reliance Communications to buy a shade under 15% stake. (DNA)
± SBI to fix base rate around 8%. (FE)
± GAIL set to start work on Dabhol-Bidadi project, To invest Rs 2,000 crore in 2010-11. (BS)
± BEML plans to set up another greenfield manufacturing plant at an investment of Rs3.16bn in Bangalore. (BS)
± JSW Energy plans to invest about Rs20bn in coal mine development. (BS)
± Neyveli Lignite commissioned its lignite-based power plant at Barsingar, in Rajasthan. (BS)
± Maytas Infra wins contract worth Rs1.85bn to build part of a metro rail network in the northern Indian city of Gurgaon. (BS)
± SsangYong Motor lists six companies as its possible buyers, including M&M and the Ruia Group, of the original list of seven. (BS)
± Jaiprakash Associates plans to invest around Rs100bn in the next three years to increase its annual production capacity to 50mn tons from a little over 20mn tons at present. (BS)
± Bharat Forge forms joint venture with KPIT Cummins to produce a hybrid engine technology, which will hit the market in six months. (BS)
± Adhunik Metaliks plans to invest Rs55.68bn in setting up a 2.2mn tons steel plant in Karnataka. (BS)
± Life Insurance Corporation plans to sell its employee housing portfolio worth Rs13bn to its mortgage arm, LIC Housing Finance. (BS)
± R-ADAG emerges as the preferred bidder for acquiring a controlling stake in Over-The-Counter Exchange of India from some of the exchange's existing institutional investors. (ET)
± Amtek Group forms 50:50 joint-venture with US-based American Railcar Industries to make railway wagons in Punjab. (ET)
± SBI might look at raising money through a bond sale abroad during the next quarter. (ET)
± Pipavav Shipyard bags Rs26bn contract to build offshore patrol vessels for the Indian Navy. (ET)
± Ashok Leyland says that it has achieved 229% growth in its May sales to 6,502 units as compared to 1,977 in the same month last year. (FE)
± Apollo Tyres is gearing up to supply tyres to German car maker Volkswagen in Europe. (ET)
± Ashok Leyland and Nissan plan to roll out their first LCV product by mid-2011. (BS)
± Welspun Corp. says it has received orders worth Rs7bn for pipes. (FE)
± Shree Cement enters into a MoU with the Karnataka government to invest Rs20bn for setting up a cement unit and a power plant. (BS)
± CESC acquires 100% ownership in Dhariwal Infrastructure by snapping the remaining 50% for a shade over Rs1bn. (ET)
± Mastek is eyeing an acquisition in the insurance vertical in North America as well as the UK, and could spend up to US$50mn for the same. (BS)
± Bhushan Steel plans to raise funds worth US$500mn from the market to finance the company's greenfield projects. (ET)
± Essar Oil plans to raise US$300mn by selling FCCBs to its promoter to part finance its expansion. (ET)
± Havells India plans to undertake a rebranding exercise in Mexico to introduce products under its own brand. (ET)
Economic snippets
± Government has amended the Securities Contracts (Regulation) Rules to increase the non-promoter holdings in Indian companies to at least 25%. (BL)
± India's forex reserves dipped US$1.4bn in the week ended May 28, reserves are at almost US$272bn. (ET)
± Value of pan India broadband spectrum has reached Rs95bn after 77 rounds of bidding. (BL)
± Government to decide on free market pricing of petrol and diesel and increase the price of kerosene and LPG. (FE)
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