Market Mantra
Market outlook
Hungry, but no appetite!
You know my appetite is infinite and greed is more: FM Pranab Mukherjee
The Finance Minister's appetite is not for the stock market but his greed lies in looking beyond the set target for income tax collections this fiscal. Phase out of tax exemptions and widening of the tax base are on the agenda. The 3G revenues and likely stake sale in government companies could well help the government contain the fiscal deficit.
Hunger pangs continue on the Street to lap up quality stocks but risk appetite seems to be waning given the huge volatility. Confused players trying different options including derivatives could find themselves in a dock if they resort to random strategies.
The opening is set to be muted with the Nifty hanging around the psychological 5000 mark where it closed on Wednesday. The critical level to watch out for would be the 4950 zone below which some pressure could set it.
US indices, which were up 1% in early trade, ran out of energy and ended in the red following concerns about BP's battle with the oil spill. BP's stock crashed over 15%. The Dow dropped 41 points after briefly crossing the 10,000 mark this week. The Nasdaq shed 12 points.
Trading ideas (Time period: 1-3 days)
Indian Hotels (BUY, CMP Rs98, Target Rs105): Recent correction in prices from Rs118 to Rs95 so far has found support near the 61.8% retracement of earlier upmove which began from Rs86 levels. As stock did manage to hold above Rs95 levels for second occasion, this has lead to formation of double bottom corroborating with contraction in volumes in second dip. On line chart, a close past Rs98 yesterday confirmed a breakout from falling resistance and a bullish breakout on hourly chart opens potential upside towards 105 levels. We would advise buying stock above Rs98.50 with stop loss of Rs96 for target Rs105.
PFC (BUY, CMP Rs303, Target Rs323): Stock has signaled breakout from pennant formation above Rs300 levels yesterday accompanied with expanding volumes. So far, levels of Rs295-300 was acting as stiff resistance as it corresponded to 3-year peak of Rs297.5, however after yesterday upmove above Rs300, the stock price is likely to surge towards the levels of Rs330 in short span of time based on amplitude of pennant. Oscillators like RSI also broke out from triangle consolidation while stock price has managed to close above the upper range of Bollinger band yesterday which is also likely to assist in building up buying momentum ahead. We would advise buying stock above Rs302 level with stop loss of Rs296 for target of Rs323.
Derivative strategies (Time period: Till expiry)
± Short Dr. Reddy June Future in range of Rs1472-1475 for the target price of Rs1442 with a stop loss placed at 1488.
Lot size: 400
Remarks: Net maximum profit of 12,000 and net maximum loss Rs6,000.
± Long Jindal Steel & Power June Future in range of 620-622 for the target price of Rs636 and stop loss placed at 613.
Lot size: 960
Remarks: Net maximum profit of Rs13,440 and net maximum loss Rs6,720.
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 | Rs1,453cr |
| 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
± SBI plans to raise Rs200bn through a rights issue by the end of the fiscal year. (ET)
± Reliance Industries is likely to enter the telecom space when the opportunity arises. (ET)
± S&P lowers Bharti long-term corporate credit rating to BB+ from BBB. (BS)
± Reliance Power buys three mines of the Sugico group in Indonesia. (ET)
± Bharti Airtel to set up separate tower companies in each of the African nations where it is present. (ET)
± Fortis Healthcare board gives nod to raise Rs27.5bn through fresh issue of securities and also increase its borrowing limit to Rs60bn. (ET)
± Power Grid may sell 20% to public that could raise Rs80bn, which may be equally split between the government and the company. (ET)
± HCL Tech is expanding its infrastructure footprint in Brazil by setting up a multilingual service desk. (BS)
± Bombay High Court has approved the merger of Fem Care Pharma with Dabur India. (BS)
± Ishtitmar Capital World has decided to convert bonds of SpiceJet into equity shares to sell them in the open market. (ET)
± Pipavav Shipyard is all set to construct a new dry dock in Gujarat, which is expected to be the world's biggest dock. (ET)
± Dr Reddy's has got tentative approval from US regulators for asthma drug. (ET)
± French power generation and rail transport major Alstom ties up with Bhel to jointly bid for Rs14bn Chennai Metro Rail Project. (ET)
± Air India to ground 15% of its flights if its employees don't withdraw their plan to strike work from June 11 midnight. (FE)
± Hyundai strike ends, production resumes. (FE)
± GE to make life sciences equipment in India in 2 yrs. (FE)
± Mother dairy plans to roll out a chain of exclusive retail outlets to market entire range of its product across India. (BS)
Economic snippets
± The Government would list 35 public sector companies over the next five years, the move would generate about Rs1,500bn in revenues for the Centre. (ET)
± Bank borrowing from Central Bank crosses Rs600bn for third consecutive day at 5.25%. (ET)
± Government may modify new public holding rule. (BS)
± Automobile sales grew 30% at 12mn units as compared 9mn units for the same month a year ago, highest-ever sales jump since 1996. (FE)
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