Market Mantra
Market outlook
Monday morning cheer!
Let us be of cheer, remembering that the misfortunes hardest to bear are those which never come." – Amy Lowell
Two big weekend developments could have a bearing on the market sentiment in the near term. The first one is the Government's announcement that IRDA will continue to oversee ULIPs. This might set at rest long-standing anxiety over the ULIP issue and could revive the sale of the hybrid product. So, keep an eye on the flows from the domestic funds. FII inflows have improved in June after the May carnage.
The second one is China's decision to pursue a more flexible currency policy. Asian markets are up smartly in reaction to the Chinese announcement. The dollar and euro have gained versus the yuan. But, one needs to be a little careful amid some ambiguity over China's proposed currency reform.
We expect a higher opening for the Indian markets. The big question is whether the rally has legs to traverse further distance. The F&O expiry will make things somewhat volatile. If the NSE Nifty manages to sustain above 5300, there could be some comfort, However, selling pressure is not ruled out around those levels.
Trading ideas (Time period: 1-3 days)
SKF India (BUY, CMP Rs479, Target Rs513): The stock has been trading sideways for last couple of weeks. A group of Doji stars have appeared in monthly chart accompanied with drying up of volumes which typically constitute a Flag pattern. After rallying from levels of Rs311-500, a Flag formation is considered to be a short term pause before resuming the next leg of up move. Bullish white candle appearing last week along with spurt in volumes suggests that the consolidation phase is nearing to an end and prices are likely to approach levels of Rs540 in coming days. All time high for stock is placed at Rs513 levels, above which selling pressure is likely to disappear. We advise buying stock at current levels of Rs479 with stop loss of Rs465 for target of Rs513.
IDFC (BUY, CMP Rs169, Target Rs179): In our view, the stock has completed its downfall and has created a short term bottom around the levels of Rs159. From the current level, the stock can only move towards one direction, i.e. upwards. The daily RSI has also given a positive divergence, indicating that price would start moving up. After creating a base around Rs159, the stock has moved up steadily, breaking above the critical resistance line of Rs167. Based on the above observations, we recommend traders to buy the stock at current levels and on declines up to the levels of Rs167 with the support of Rs163 for aN initial target of Rs179.
Derivative strategies (Time period: Till expiry)
± Long Hindustan Zinc June Future in range of Rs966-970 for the target price of Rs995 with a stop loss placed at 957.50.
Lot size: 250
Remarks: Net maximum profit of 6,250 and net maximum loss Rs3,125.
± Short Tata Motors June Future in range of Rs800-803 for the target price of Rs770 and stop loss placed at 815.10
Lot size: 850
Remarks: Net maximum profit of Rs25,500 and net maximum loss Rs12,750.
Mutual funds
| Fund focus | |||||||
| ICICI Prudential Dynamic Fund | Invest | ||||||
| Fund manager | S Naren |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs98.6 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs99/66 |
| 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
± Reliance Industries to foray into power; plans mega investment. (BL)
± Besides getting 468 branches, ICICI Bank will also get control of 58 branches of a regional rural bank sponsored by Bank of Rajasthan. (BL)
± Saudi Binladin Group is all set to buy a 20% stake in Maytas Infra. (BS)
± Reliance Power has started generating power from the second unit of Rosa thermal power project. (ET)
± Dr Reddy's Laboratories is exploring the option of demerging its domestic formulations business and unlocking value. (BS)
± Maruti Suzuki plans to introduce a CNG variant of its recently upgraded WagonR hatchback within the next three months. The upgraded version could cost about Rs 70,000 more. (BS)
± IDFC is likely to divest a 26% stake in its AMC to global fund managers. (ET)
± Promoters of Max India have increased their stake in the company to about 35% last week and are expected to raise their holding further in the near future. (BS)
± Brigade Enterprises has announced that it will raise up to Rs7.5bn by the issue of equity-based securities to various investors by means of public or private offering or QIP or through preferential share allotment. (BS)
± Dabur India has completed the merger with Fem Care Pharma. (ET)
± Gammon Infrastructure to enter thermal power generation business for which it has signed an agreement to acquire a company that is setting up a 250MW power plant. (BL)
± Subhash Projects aims to raise Rs3bn to finance its Bhiwandi water project by selling equity of the special purpose vehicle. (ET)
± Ceat Tyres is planning to set up a greenfield facility at Haridwar in Uttarakhand to make radial and tubeless tyres. (ET)
± Essar Group wants to partner with Uganda's government to explore for oil in the East African country. (ET)
± Ahluwalia Contracts bagged 11 new orders worth Rs5.05bn from various entities. (ET)
± Atul Auto plans to set up a new three-wheeler manufacturing plant in a southern state in the next two-years. (ET)
± Future Group plans to invest Rs6bn over the next 18 months for the expansion of its hyper market retail chain Big Bazaar. (ET)
± Reliance Broadcast Network will form an equal joint venture with US media conglomerate CBS Corp to own and operate TV channels. (BS)
± Novelis could bid for the rolled products division of Rio Tinto Alcan. (ET)
Economic snippets
± FDI in the services sector dropped by 33.5% to US$4.39bn during 2009-10. (BS)
± India's exports grew for the seventh straight month, rising by 34.1% to US$16.1bn in May. (BS)
± The finance ministry said it might tag the securities transaction tax (STT) with the capital gains tax, or continue to levy it in its existing form. (BS)
± Insurance industry regulator Irda has emerged the victor in a tussle over the regulation of socalled unit-linked insurance plans, or Ulips, with the government. (ET)
± India's foreign exchange reserves rose by US$1.69bn last week. (ET)
± Port traffic at the 12 major ports, for the month of May, grew by 4.5% yoy to 48mn tonnes. (DNA)
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