Market Mantra
Market outlook
Bulls may dance!
Life may not be the party we hoped for, but while we're here we should dance. - Anonymous
The market may have tumbled but it was not as bad as it appeared; the market breadth did not collapse and the decline came on lower volume. Also, outflows from the foreign funds were only marginal in the cash segment. Given that backdrop, we expect the market to resume its ascent today after a slow start. Most Asian markets, barring Hong Kong, are trading in the green. Markets in Hong Kong were shut on Thursday.
Australian shares are up, led by gains in resource stocks after the announcement of a compromise tax deal between miners and the government. US stocks managed to pare their losses despite a trio of weak economic reports. All eyes will be on Friday's payroll data. Analysts are forecasting a drop of over 100,000 in June after strong May addition, though some of this is census-related.
The Nifty may cross 5300 again, but it has to sustain above 5350 for a meaningfully longer period if we are to see 5400 and 5500.
Trading ideas (Time period: 1-3 days)
Mphasis (BUY, above Rs585, Target Rs613): From the high of Rs687 in May 2010, the stock corrected to a low of Rs543, which proved to be a panic bottom for the stock. Since then, the stock has created base around Rs543-545 and staged a bounce back on several occasions. Yesterday, the stock rose by 3% to close above its short-term and long-term moving averages. A move above Rs585 would result in a breakout from a downward sloping trendline. The volumes were on a higher side when compared to last week's trading sessions. The momentum indicator RSI is depicting that the positive trend is likely to continue. We recommend a buy above Rs585 for target of Rs613. It is advised to maintain a stop loss of Rs574.
Divis Laboratories (BUY, above Rs786, Target Rs814): Prices have managed to close above the resistance area of Rs777, thus signaling bullish breakout from the Flag pattern. Since June, the stock has been trading in a narrow band of Rs745-780 with multiple candles having long lower shadows holding above the 20-DMA. Though the daily stochastic has entered in an overbought zone, a bullish crossover in RSI after moving sideways is likely to pave way for smart upmove in the range of 3-5%. As stock continues to remain in the long term uptrend, breakout from flag consolidation is likely to ignite buying momentum once again. We advise buying stock above Rs786 with stop loss of Rs773 for target of Rs814.
Derivative strategies (Time period: Till expiry)
± Long Neyveli Lignite July Future in range of Rs162-163 for the target price of Rs170 with a stop loss placed at Rs158.
Lot size: 2000
Remarks: Net maximum profit of Rs16,000 and net maximum loss Rs8,000.
± Long NTPC July Future in range of Rs200-201 for the target price of Rs210 and stop loss placed at Rs195
Lot size: 1000
Remarks: Net maximum profit of Rs10,000 and net maximum loss Rs5,000.
Mutual funds
| Fund focus | |||||||
| HDFC Top 200 Fund | Invest | ||||||
| Fund manager | Prashant Jain |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs193.0 |
| 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
± ONGC Board has in-principle approved the cluster development of four marginal fields in the Western offshore. (BL)
± After more than two years, Tata Motors has dislodged Korea's Hyundai Motors in India from the second spot in monthly domestic passenger vehicle sales. (BS)
± RCom today announced acquisition of one of India's largest cable service providers, Digicable, in a cashless all-stock deal. (BS)
± Tata Power to raise Rs14bn via coal SPVs. (FE)
± HDFC Bank is now looking for a south-based bank for its next phase of merger. (FE)
± Raymond's plan to utilise 125 acres of land at its Thane plant for residential and commercial purposes has met with strong objection from the Maharashtra Government. (BS)
± ITC is setting up another unit at its existing paper mill in Bhadrachalam at a cost of Rs10bn. (BS)
± The GMR Group has decided to keep on hold an agreement on distribution of promoters stakes among family members. (ET)
± The Government approves $5.25 per mmBtu for ONGC gas. (ET)
± Axis Bank targets 12,000 villages in five years time under financial inclusion plan. (ET)
± Sterlite Energy, the flagship company of Vedanta Resources, has ignited the first unit (600 MW) of its 2,400MW power plant at Jharsuguda. (BS)
± The Blackstone Group has secured 12.5% stake for Rs2.8bn in Monnet Power, a 100% subsidiary of Monnet Ispat and Energy. (BS)
± BK Birla's daughter, Manjushree Khaitan, to be Kesoram vice-chairman. (BS)
± Kesoram Industries to invest Rs11.3bn on cement capacity expansion and additional power generation. (BL)
± SpiceJet may get an expatriate CEO after Sanjay Aggarwal quit the post. (BS)
± MRPL, a subsidiary of ONGC, will revisit its fuel retail business plans as the government has decontrolled petrol prices. (BS)
± Kinetic ties-p with Italian company for engineering services for infra projects. (BL)
± Mangalam Cement studying Mangalam Timber's merger proposal. (BL)
± Tata Chemicals is planning to invest Rs35-40bn to double urea production capacity at its Babrala facility in Uttar Pradesh. (BL)
± Puravankara Projects announced a new project, Purva Skywood, in Bangalore that would see development of 1.25mn sqft of residential space spread over 12.5 acres. (BL)
± Federal Bank to open 31 new branches in Kerala this week. (BL)
± Vijaya Bank has applied to the Government of India for Tier-I capital. (BL)
Economic snippets
± Food inflation declined by a significant 4% to 12.9% for the week ended June 19 due to a high base effect and timely arrival of monsoon rains. (BS)
± FDI in DTH raised to 74% and FM radio to 26%. (FE)
± Department of industrial policy & promotion (DIPP) has initiated an exercise to tweak the foreign direct investment policy for wholesale trading. (ET)
± SEBI has made it tougher for non–finance businesses, which has less than five-year of financial services experience, not permitting it to own stake in an asset management company. (ET)
± May export surges to US$16.1bn, up 35.1% yoy. (BS)
± Maharashtra Government is considering imposition of betterment charge and service tax on developers of residential and commercial complexes adjacent to the mega-infrastructure projects lined up in Mumbai. (BS)
± The Centre's fiscal deficit stood at Rs1lakh crore during April-May 2010, constituting over a fourth of the budget estimate for the entire year. (BS)
± Funds raised by corporate India through syndicated loans and equity issuances have more than trebled to about Rs578bn for the half-year ended June 2010. (BL)
± The European sovereign debt crisis will cause companies and governments in the region to curtail IT spending for 2010, according to Gartner and Forrester. (BL)
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