Friday, July 9, 2010

Market Mantra: Technicals – Essar Oil (Buy), Oriental Bank of Commerce (Buy); F&O – BPCL (Short), Bharti (Short)




Market Mantra

 

Market outlook

Altering market

 

Life is like an ever-shifting kaleidoscope - a slight change, and all patterns alter. - Sharon Salzberg

 

With the US market managing to stretch its winning streak to three sessions, and European stocks smiling again we expect another positive start back home. However, the pattern seems to be changing for the Asian markets which don't seem to be too excited. This may just hold back the bulls unless global cues are supportive.

 

The NSE Nifty failed to close above 5300. It would be interesting to see if it manages to crack 5350 today. Even if it does breach that level there is likely to be stiff resistance around these levels.

 

Good thing for India is that its fundamentals are pretty solid. Inflation, which remains a big worry, is expected to moderate with a good monsoon. Fund flows have been encouraging after May's big outflow though there is always a risk on this front if the global picture turns ugly again. The results of European bank's stress tests on July 23 will be a key event to keep an eye on. We also have the RBI review on July 27.

 

Trading ideas (Time period: 1-3 days)

Essar Oil (BUY, above Rs141, Target Rs150): The stock has broken out from an Inverted Head & Shoulders pattern on the daily chart on Thursday. The Head and Shoulder Bottom has taken place after an intermediate downtrend (from a peak of Rs104 in April 2010 to a low of Rs115 in May 2010). A successful move above the neckline (Rs141) will mark a change in trend. The neckline also coincides with its 200-DMA, which substantiate uptrend in the near term. The above mentioned pattern contains three successive troughs with the middle trough (head) being the deepest and the two outside troughs (shoulders) being shallower. At lower levels of Rs114-115, volumes dried down (head) and a significant expansion in volumes is seen near the neckline of the pattern. We recommend traders to buy the stock in the range above Rs141 with stop loss of Rs136.50 for an immediate target of Rs150.

 

Oriental Bank of Commerce (BUY, CMP Rs338, Target Rs356): Oriental Bank of Commerce has broken out above the falling resistance line after it surpassed the levels of Rs332 with accelerating volumes. In the past few weeks, the stock traded sideways forming whipsaws with its short term moving averages. However this time, back to back three white candles are likely to set positive momentum along with positive crossover in RSI. The intermediate trend continues to remain strong and a breakout from descending triangle above Rs338 will provide a decent upside ranging from 7-8%. We advise buying stock above Rs338 with stop loss of Rs330 for target of Rs356 for 1-week delivery.

 

Derivative strategies (Time period: Till expiry)

±  Short BPCL July Future in range of Rs703-705 for the target price of Rs673 with a stop loss placed at Rs718.25.

Lot size: 500

Remarks: Net maximum profit of Rs15,000 and net maximum loss Rs7,500.

 

±  Short Bharti July Future in range of Rs281-282 for the target price of Rs271 and stop loss placed at Rs286

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

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

±  R-Power raises Rs131bn debt for Andhra UMPP. (BS)

±  Bajaj Auto and the Renault-Nissan alliance today signed a MoU to produce the ultra-low-cost car which is likely to hit India and overseas market by 2012. (BS)

±  Bharti Airtel will expand its submarine cable offerings globally to target business opportunities in over 100 countries by 2013. (ET)

±  United Spirits to host seven fashion tours across India. (BS)

±  Jindal Power Limited, a subsidiary of JSPL, has decided to change the site of its proposed 1,320MW power plant in Angul district to avoid use of irrigated land for the project. (BS)

±  L&T Infrastructure Finance Company, a subsidiary of L&T, received the status of 'Infrastructure Finance Company' from RBI. (BS)

±  IOC said there will not be any revision in the oil price hike if global crude oil prices do not fluctuate wildly. (ET)

±  Axis Bank looking to sell all its 4,200 ATMs to third-party service providers. (BS)

±  Power Trading Corp is in talks with private equity fund SAIF Partners to sell up to 11% in unlisted unit PTC Financial Services (PFS). (ET)

±  Suzlon Energy has got an order from HPCL for a 25.5MW wind power project at Akal in Jaisalmer district of Rajasthan. (BL)

±  Godrej Consumer Products has completed the acquisition of Argentinian hair care company Argencos for an undisclosed amount. (ET)

±  Top managers from the private sector may soon be invited to apply for running state-owned telecom companies BSNL and MTNL. (BS)       

±  HCL Infosystems acquires 60% stake in Dubai-based IT services and solutions company, NTS Group, for an estimated US$6.5mn. (BL)

±  The Network 18 Group is creating two new listed entities to simplify its holding structure and realign its businesses into broadcast and emerging media. (BL)

±  Jubilant Organosys demerges non-pharma business. (BL)

±  Titagarh Wagons acquired an ailing French freight car and rolling stock manufacturing company for Euro12.5mn. (BL)

±  Biocon plans to launch drugs in eye-care segment. (BL)

 

Economic snippets

±  CCEA has granted a 3-year drilling moratorium to 30 deepwater block production-sharing contracts (PSCs) signed under various rounds of exploration till the fifth round of NELP, where drilling commitments are pending as on January 1, 2009. (BS)

±  The rate of wholesale food inflation fell for the second consecutive week to 12.6% for the week ended June 26. (BS)

±  India to grow at 9.5% in 2010, says IMF. (BS)

±  Passenger vehicles to register 12-13% growth in 2010-11, as per Siam. (BS)

±  Centre to award 100MW solar projects by August. (BS)

±  Imports of telecom equipment into India could face further delays as the Centre has just expanded the list of 'core equipment' that will now require mandatory security clearance. (ET)

±  Government will spend around Rs1.2bn in the next two years for an ambitious healthcare programme to prevent, detect and control the spread of cancer, diabetes, heart ailments and stroke. (ET)

±  National Bank for Agriculture and Rural Development will refinance crop loans worth Rs400bn in the current fiscal. (ET)

±  The government said that Indian accounting standards will converge with International Financial Reporting Standards (IFRS) by 2011, even as issues like fair value and depreciation are being ironed out. (ET)

 

 

 

 



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