Market Mantra
Market outlook
No stress for bulls
Good tests kill flawed theories; we remain alive to guess again. Karl Popper.
Guessing is really less required to predict today's trading outlook. Unlike the weather in Mumbai, the prospects look bright and beautiful today in the wake of one of the biggest global rallies in recent memory. Risk appetite seems to have returned overnight, perhaps temporarily as equities and commodities raced across the globe.
Optimism about the upcoming earnings season propelled the Dow above 10,000 for the first time since June 28. A stronger euro helped push commodity shares, cooling some worries for now about the European debt crisis.
For once, banks led the advance as traders turned optimistic about the eurozone stress tests and after the world's second biggest custody bank said earnings would beat expectations. Also, world stocks were seen oversold technically.
We see a gap-up opening with the Nifty expected to pierce 5300. It remains to be seen if the index manages to cross 5350 and stay above that.
SEBI's move to halve exposure margins in the F&O segment may also boost sentiment.
In terms of global data watch, the Bank of England and the ECB will hold their policy meeting.
Trading ideas (Time period: 1-3 days)
Amara Raja Batteries (BUY, CMP Rs189, Target Rs197): On the daily chart, the stock has given an upside breakout, considered to be an important bullish signal. Last few months for the stock has been characterized by a sideways movement. However, the stock has managed to find support around the levels of Rs180. On Wednesday, the stock had a smart rally, closing well above day's open. With other oscillators suggesting a positive formation, we expect the upside to continue. We recommend traders to buy the stock at current levels and on decline to the levels of Rs188 for a short term target of Rs197. It is advisable to maintain a stop loss of Rs184.
Godrej Consumers (BUY, above Rs350, Target Rs365): The stock has been moving sideways and in a narrow range of Rs337-Rs350 for almost a couple of weeks after rallying sharply from Rs302 to Rs372. As of now, the stock is successful in adhering to its 50% retracement support corresponding at Rs337 which earmarks inherent strength in the counter. After yesterday's close above Rs348, RSI signaled a positive crossover along with bullish piercing line pattern on candlestick. This dual confirmation is likely to trigger positive momentum in coming days. We advise buying stock above Rs350 with stop loss of Rs344 for target of Rs365.
Derivative strategies (Time period: Till expiry)
± Long Sesa Goa July Future in range of Rs341-342 for the target price of Rs352 with a stop loss placed at Rs336.
Lot size: 500
Remarks: Net maximum profit of Rs10,000 and net maximum loss Rs5,000.
± Long Sterlite Industries July Future in range of Rs160-161 for the target price of Rs168 and stop loss placed at Rs156
Lot size: 1000
Remarks: Net maximum profit of Rs8,000 and net maximum loss Rs4,000.
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 | Rs194/135 |
| 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
± IDFC to raise Rs8.4bn through the sale of convertible securities to Khazanah, investment holding arm of Malaysian government and Actis. (ET)
± Reliance Infra to buy power from three suppliers for the next three years. ((ET)
± Maindra Satyam sets up centre for BASF services in Chennai. (ET)
± NMDC in talks to buy coal mines in Russia. (ET)
± Kingfisher Airlines has agreed to pay all its dues to HPCL by July 31
± Gitanjali Gems enters into real estate business. (BS)
± Media companies such as PVR, Balaji Telefilms and UTV Motions have opposed tax on copyright services. (BS)
± PTC arm, PTC Financial Services Ltd (PFS) to list by November. (DNA)
± Reliance Mediaworks has raised its stake in Fame. (DNA)
± Ruchi Soya plans to acquire 150,000 hectares of land for palm plantation in Africa and Asia. (BS)
± SCI not to bid for JNPT fourth container terminal. (DNA)
± Karuturi Global to invest US$100mn in its new sugar unit in Ethiopia. (DNA)
± Coal India may tap capital markets via IPO in October. (ET)
Economic snippets
± Sebi relaxes exposure margin norms for derivatives. (BS)
± Government mulls restrictions on hot-rolled coil imports. (BS)
± The RBI has urged FM to allow the Securities and Insurance Laws ordinance 2010 to lapse since it could affect the autonomy of all regulators including the Central Bank. (BS)
± Tea prices to firm up on low output. (BS)
± RBI board may discuss private banking license today. (BS)
± Telecom Commission has failed to take a decision on BSNL listing in its meet on Wednesday. (ET)
± Government may raise FDI in defence sector. (ET)
± FICCI demanded that the MAT rate to be cut to 15% of the book profit in the Direct Tax Code. (ET)
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