Market Mantra
Market outlook
Cautiously optimistic
Patience can break through iron doors ~ Yugoslavian Proverb.
While the key indices broke new ground with the Nifty breaching 5400 and the Sensex 18,000, a disappointing IIP report played spoilsport. The drop in May industrial output has taken most people by surprise but the overall outlook for the Indian economy still remains pretty robust. If all goes well, including Infosys results and guidance, the Nifty might surpass 5400 in opening trades. How it closes will partly hinge on global cues.
We have been stressing on strong FII inflows lately and Monday's figure once again shows that they are here to stay. Local funds, on the other hand have been cautious. Asian markets are mostly positive though Chinese stocks are in the red. US stocks eked out slim gains while benchmarks in Europe were moderately higher. Alcoa's results have beaten consensus expectations and the aluminium major remains cautiously optimistic.
Back home, Infosys will kick off earnings for the large IT firms. As always, what the tech giant says about the future and its guidance will hold the key. The stock has been hitting 52-week highs lately, and may not move much.
Trading ideas (Time period: 1-3 days)
ICSA (BUY, above Rs150, Target Rs158): On the daily chart, the stock has given a bullish breakout. It suggests that its short-term trend has turned up. Over the last three weeks, the stock was consolidating in the range of Rs140-148. On Monday, the stock advanced from the low of Rs144. The upmove was well supported by healthy volumes, which suggest accumulation. Further, supportive technical oscillators are also positive. We recommend traders to buy the stock above Rs150 for an initial target of Rs158. It is advisable to maintain a stop loss of Rs147.
3i Infotech (BUY, above Rs67, Target Rs74): 3i Infotech has signaled a breakout from falling wedge pattern yesterday after stock successfully managed to close above Rs65 with decent volumes. A falling wedge appearing after prolonged correction acts as trend reversal and in this case we can expect stock to rally 10-14% in near term. The moving averages also corroborate positive trend with prices penetrating above its 50-DMA and immediate resistance is seen near Rs74 levels which correspond to its 200-DMA. We advise buying stock above Rs67 with stop loss of Rs64 for target Rs74.
Derivative strategies (Time period: Till expiry)
± Short ICICI Bank July Future in range of Rs885-887 for the target price of Rs865 with a stop loss placed at Rs895.
Lot size: 250
Remarks: Net maximum profit of Rs5,000 and net maximum loss Rs2,500.
± Long Reliance Infra July Future in range of Rs1152-1154 for the target price of Rs1122 and stop loss placed at Rs1167.
Lot size: 250
Remarks: Net maximum profit of Rs7,500 and net maximum loss Rs3,750.
Mutual funds
| Fund focus | |||||||
| HDFC Top 200 Fund | Invest | ||||||
| Fund manager | Prashant Jain |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs197.2 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs197/135 |
| Exit load | 1% <1 yr | |||
| Latest AUM | Rs8,020cr |
| 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
± Suzlon Energy has bagged orders worth ~Rs1.2bn from Malpani Group to setup, operate and maintain two new wind power projects in Karnataka and Maharashtra. (ET)
± Tata Chemicals has received the approval of shareholders to raise Rs4bn through issue of 11.5mn shares on a preferential basis to promoter Tata Sons. (BL)
± Titagarh Wagons will invest €15mn to buy French rail wagon maker IGF Industries-Arbel Fauvet Rail, its first overseas buy as it looks to tap new markets. (ET)
± GMR Infrastructure has sought shareholders' approval to raise Rs50bn through various instruments to fund expansion and capex plans. (ET)
± NTPC is expected to invest over Rs80bn in Gujarat to commission a coal-based project with a power generation capacity of 1,320 megawatt. (ET)
± Bhilwara Energy plans to dilute 10.8% stake to two foreign investors to raise around Rs2.3bn to part-fund the company's power projects. (BL)
± Nalco has identified mineral assets in Chile, Namibia and Indonesia, and is in the process of floating separate ventures in the foreign countries to buy out the reserves. (ET)
± Procter & Gamble is in the process of taking control of the Ambi Pur air care brand in India. (ET)
± NTPC has scrapped its plans to set up a 4,000-MW power plant in Uttar Pradesh over differences with the state government. (ET)
± RPG Life Sciences has set up two new verticals and plans to launch nine new products.(ET)
± Piramal Healthcare is likely to sell its medical diagnostics business.(ET)
± Union Bank of India has put its non-performing assets, worth Rs5bn (principal value of assets), on the block to improve its financial health. (BS)
± JSPL plans to sign MoU with the Orissa government for its Rs450bn coal to liquid (CTL) project next month. (BS)
± Gitanjali Gems plans to foray into real estate space. It plans to develop 100,000 square feet of commercial real estate in addition to the 400,000 square feet land it is already developing in Mumbai's suburbs. (FE)
± Standard Chartered has entered into an agreement to acquire Singapore-based GE Commercial Financing for an undisclosed amount. (ET)
± GMR Group has emerged as the single largest shareholder in Karur Vysya Bank. It has increased its stake to 4.9%. (ET)
± IL&FS Investment Managers will invest Rs800mn to acquire a 33% stake in Aria Hotels and Consultancy Services. (ET)
± Riding on the success of FIFA World Cup 2010, Mahindra Satyam bags NBA, Singapore Youth Olympic deals. (BS)
± GVK is looking for an anchor investor to revive its special economic zone project in Tamil Nadu. (BS)
± 3i Infotech Consumer Services Limited (3icsl), a wholly-owned subsidiary of 3i Infotech Limited, is planning to acquire a consumer-based organisation in the domestic market for a consideration of US$10mn. (BS)
± SAIL's raw Materials Division recorded 9% yoy growth in production and despatch of iron ore in the first quarter (April-June) of the current fiscal. (BL)
Economic snippets
± Industrial production registered a yoy growth of 11.5% in May — the lowest in seven months and below the 16.5% for April. (BL)
± The government is planning to set up Rs100bn venture capital fund for financing new drug discovery projects in the country. (ET)
± The Reserve Bank of India is likely to announce a sunset clause with a deadline of June 30, 2011, for all loans in the erstwhile benchmark prime lending rate (BPLR) system to help banks migrate to the new base rate model. (ET)
± A high-level committee has said that security related restrictions for importing telecom equipment will not apply to the power sector. (ET)
± The central panel has given nod to the 200mw Gundia power plant in Karnataka after the state government agreed to drop Hongadhala dam from the project reducing land requirement for its construction. (ET)
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