Market Mantra
Market outlook
Trend is friend
When in doubt, predict that the present trend will continue. - Merkin's Maxim
Paul the psychic octopus was bang on in its prediction and the world has a new soccer champion in Spain. Off the field, the focus will be on the stress tests of the European banks; the results will be out on July 23. With reports indicating that the outcome may not be as grim as feared earlier coupled with encouraging US retail sales data, global equities got a lift last week. Hopefully, that trend will continue this week as well, as markets world over brace for corporate earnings.
The start back home is likely to be rather subdued. Most Asian markets are largely flat. The key event to watch out for today is the IIP data for May. There could be some softening but the overall reading should still be pretty robust. June's inflation numbers will be out on Wednesday and is likely to witness some increase. The two economic indicators will have some bearing on the outcome of the RBI policy meeting later this month. In between the two data points we will have Infosys results.
Trading ideas (Time period: 1-3 days)
Dwarikesh Sugar (BUY, above Rs76.50, Target Rs83): The stock has seen a swift decline from the multiple resistance levels of Rs123-126 in February 2010 to a low of Rs47. Since then, the stock has gradually moved higher retracing some of its losses. Friday's upmove is very encouraging and could potentially lead to a fresh uptrend in the near term. Every indicator study has generated multiple positive divergences. The stock has strong support around Rs72. A rally from current levels can see the stock test the levels of Rs85 in the short- term. We recommend traders to buy the stock above Rs76.50 with a stop loss of Rs73 for target of Rs83.
Autoline Industries (BUY, CMP Rs 145, Target Rs162): After trading sideways for almost 10 months, the stock has given breakout from falling channel last week after the stock successfully managed to close above the upper range of channel corresponding at Rs136 with good volumes. Such a breakout is likely to trigger positive momentum in the near term with upper range of resistance getting converted to support zone. Similar breakout is also seen in daily RSI oscillator as underlying strength in the counter has forced RSI to move above last six months of intermediate peaks. We expect buying momentum in the counter to remain upbeat in coming week and hence advise buying stock in range of Rs143-146 with stop of Rs140 for target of Rs162.
Derivative strategies (Time period: Till expiry)
± Short HDFC Bank July Future in range of Rs2009-2013 for the target price of Rs1960 with a stop loss placed at Rs2029.
Lot size: 125
Remarks: Net maximum profit of Rs5,000 and net maximum loss Rs2,500.
± Long Praj Industries July Future in range of Rs82-82.50 for the target price of Rs86 and stop loss placed at Rs80
Lot size: 4000
Remarks: Net maximum profit of Rs16,000 and net maximum loss Rs8,000.
Mutual funds
| Fund focus | |||||||
| HDFC Top 200 Fund | Invest | ||||||
| Fund manager | Prashant Jain |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs196.9 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs197/135 |
| 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% | |||
Q1 FY11 Sector Previews
± Automobiles
± Banking
± Cement
± FMCG
± IT Services
± Metals
± Oil and Gas
± Power
± Telecom
Corporate Snippets
± GVK to invest Rs10bn in Bangalore airport expansion. (BL)
± NMDC may make a downward revision of ore prices for the October-December quarter, going by the present trends in the global market. (BL)
± Bharti Airtel will invest US$150mn in Kenya to help boost network and capacity distribution. (FE)
± Reliance Industries raises US$1bn to fund projects. (ET)
± PowerGrid Corporation invites bids from banks to manage a 20% stake sale, in order to raise more than Rs75bn and comply with the new listing rules. (ET)
± United Bank of India puts a ceiling on its lending rates at 14.25% a year. (ET)
± Bharat PetroResources, promoted by Videocon and BPCL, plans to bring natural gas from its Rovuma Basin block off the coast of Mozambique in southern Africa. (BS)
± Engineers India follow-on public offer is likely to mop-up Rs10bn and will open on July 27. (BS)
± Essar Oil raises US$147mn by selling FCCB to part finance expansion plan. (ET)
± Government has allowed LIC, IFCI, IDFC and other NBFCs classified as an infrastructure finance company to issue tax-free infrastructure bonds. (BS)
± Super Religare Laboratories is in advanced talks to buy Piramal Healthcare's diagnostic chain for up to Rs8bn. (ET)
± Everonn plans to build 300 schools for Rs36bn by 2015. (ET)
± Reliance Life says it is looking for a strategic investor and also proposes to come out with an IPO once the guidelines are put in place by IRDA and SEBI. (DNA)
± Jubilant Organosys has demerged its agri and performance polymer business. (DNA)
± KEC International has bagged orders worth Rs6.1bn for supply of turn-key transmission lines and cables to various geographies across the globe. (FE)
± Tata Motors will invest about Rs100bn on product development, capacity enhancement and plant modernisation spread over 2-3 years. (FE)
Economic snippets
± Foreign exchange reserves rose by US$1.3bn to US$278bn for the week ending July 2. (BL)
± Centre's indirect tax collections grew 43% in the first quarter of this fiscal to Rs569bn. (BL)
± Food and agriculture minister says he favours ending the government's role in fixing sales quota in the sugar industry. (TOI)
± Diesel subsidy may be set at Rs1.49/litre. (ET)
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