Market Mantra
Market outlook
Starting trouble - Bulls hope to move forward
Do not fear going forward slowly; fear only to stand still. - Chinese Proverb
Bulls have been staging some smart recoveries in recent days only to be forced to retreat the next day. The culprit remains shaky global markets. Volatility has jumped amid renewed concerns over weak economic numbers coming out of China and the US.
Today won't be any different. So, after the hard work of Wednesday, the bulls will suffer another setback, at least in opening trades. The latest economic data points from the US and China leave a lot to be desired.
China's manufacturing expanded at a slower pace for a second month in June. A disappointing private-sector jobs report offset more upbeat manufacturing data ahead of Friday's monthly employment report.
Also, Moody's has placed Spain's credit rating on review for a possible downgrade. Asian markets are mostly in the red this morning following another bad day on Wall Street and in Europe. The good news for India is the market appears to be resilient and fund flows remain positive.
Trading ideas (Time period: 1-3 days)
Lupin (BUY, above Rs1,974, Target Rs2,035): On the daily chart, the stock is moving in a bullish Price channel. In the above pattern, the stock slopes up and is bound by an upper and lower trend line. The upper trend line marks resistance and the lower trend line resembles support. The lower support line was formed from second week of May 2010. Subsequent lows later in the week confirmed the support line. The upper resistance line is drawn from first week of May 2010 onwards. Since then, the stock has been moving back and forth between the two parallel lines. We expect the stock to break past the critical resistance levels of Rs1,974. We recommend traders to buy the stock above Rs1,974 for a target of Rs2,035 with stop loss of Rs1,948.
Power Grid Corporation (BUY, above Rs104.75, Target Rs111): After hitting an intermediate top of Rs120 in the month of April, the stock witnessed correction of almost 18%. However, in the last one month, declining trend stabilized and led to formation of descending triangle pattern with amplitude of Rs8. Though triangle is considered as a continuation pattern, a breakout above Rs104 calls for extension of pullback towards Rs112, which is also 61.8% Fibonacci retracement of decline from Rs120 to Rs100. Appearance of Morning Star pattern on Monday followed with Bullish Piercing Line pattern yesterday, will support the short term uptrend in the counter. We advise buying stock above Rs104.75 with stoploss of Rs102 for target of Rs111.
Derivative strategies (Time period: Till expiry)
± Short IDFC July Future in range of Rs181-182 for the target price of Rs173 with a stop loss placed at Rs185.
Lot size: 2000
Remarks: Net maximum profit of Rs16,000 and net maximum loss Rs8,000.
± Long Bharti July Future in range of Rs263-264 for the target price of Rs273 and stop loss placed at Rs258
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% | |||
Corporate Snippets
± GMR Infra and GVK have approached the competition commission of India to get clearance for a 10% hike in aeronautical charges like landing and parking traffic. (ET)
± Tata Power to raise Rs14bn by selling 15% in 2 coal SPVs. (ET)
± Two Republican lawmakers back US Loan for Reliance Power for a coal-fired plant in Madhya Pradesh. (ET)
± Mexico has denied setting up a refinery project with Reliance Industries. (BS)
± L&T bags orders worth Rs13.83bn. (BS)
± M&M is looking at buying one of the Australian facilities of Boeing. (BS)
± Sumitomo to buy 4.5% in Kotak Bank for Rs13.66bn. (ET)
± MTNL cuts ISD rates to Rs1/min. (ET)
± The Customs, Excise & Service Tax Appellate Tribunal has asked JetLite, a subsidiary of Jet Airways, to pay Rs1bn as a pre-deposit on a service tax dispute. (BS)
± Dunlop and Falcon to raise tyre prices. (BS)
± Essar Oil to invest Rs12bn at Raniganj for second and third phase development of its coal-bed methane block. (BS)
± Shoppers Stop raises stake in Hypercity by 32%. (BS)
± IGL bags Ghaziabad city gas license. (BS)
± NMDC increase iron-ore fines price by 11% or Rs300/ton. (DNA)
± REC to raise US$400mn via ECB and Rs20bn from local bonds. (DNA)
± Rolta is in hunt for companies with business intelligence capabilities for acquisition. (DNA)
± Bag films may sell stake to raise funds. (ET)
Economic snippets
± Cabinet secretariat has asked disinvestment department to insure that meetings of the EGOMs take place on time to speed up the sell-off program. (ET)
± FDI in May rises 5.6% to US$2.21bn. (ET)
± Centre is mulling over creation of an independent body to regulate retail sector. (BS)
± TRAI now seeks lower FDI cap in FM, TV news uplink. (BS)
± Oil companies hike ATF price by 3.2%. (BS)
± Government to develop policy framework for shale gas exploration. (BS)
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