Market Mantra
Market outlook
Risk appetite back in vogue!
"Only those who will risk going too far can possibly find out how far one can go." T.S. Eliot quotes.
At the very outset let us be assured that the bulls are going to have a blast this morning; risk appetite seems to have improved further. And, this we are saying despite the disappointments over the IIP report and Infosys results. There is more good news around today than bad news. So, make the most of it.
Aluminium giant Alcoa and chip titan Intel have come out with stellar results. Car maker BMW has raised its outlook. Singapore's Q2 GDP growth beat estimates while the Bank of Japan is likely to boost its economic forecast. Also, the Greek government successfully raised money by tapping the bond market.
The monthly inflation data could play spoilsport but we reckon the markets are resilient and may just be able to hold their own. Whether the rally has enough steam to go farther will hinge on the earnings forecasts (both in India and abroad) and news flow out of Europe and elsewhere. And last but not the least, fund flows will have a bearing on the market.
Trading ideas (Time period: 1-3 days)
Reliance Capital (BUY, above Rs786, Target Rs815): On the daily chart, the stock is on the verge of breaking out from an inverted Head & Shoulders formation with the neckline placed at Rs785. We believe consolidation above this level could lead to a strong rally in the counter. In fact, a detailed study of the daily chart suggests that the stock has given a breakout past its 3-week resistance line. In the same period, the stock made several attempts to break past the resistance but failed. Buying momentum could be accelerated once the stock crosses above Rs795, (i.e.200-DMA). The daily RSI is exhibiting positive divergences. Based on the above-mentioned technical evidences, we recommend traders with high risk appetite to buy the stock above Rs786 for an initial target of Rs815 with strict stop loss of Rs774.
IDFC (BUY, above Rs190, Target Rs198): On the daily chart, the stock has given an upside breakout in Friday's trading session. It suggests that the consolidation range is about to end and may reverse into an uptrend. Few sessions earlier, the stock rallied to its 52-week high confirming the bullish set up. Moreover, the stock has given a close above its key moving averages on expanding volumes. The other supportive technical oscillators are positive and the up move may extend to the levels of Rs198. It is advisable to maintain a stop loss of Rs186 on all long positions.
Derivative strategies (Time period: Till expiry)
± Long PTC July Future in range of Rs109-110 for the target price of Rs115 with a stop loss placed at Rs106.
Lot size: 2000
Remarks: Net maximum profit of Rs12,000 and net maximum loss Rs6,000.
± Long Nagarjuna Construction July Future in range of Rs187-188 for the target price of Rs197 and stop loss placed at Rs182.
Lot size: 2000
Remarks: Net maximum profit of Rs20,000 and net maximum loss Rs10,000.
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% | |||
Result Update: Infosys Technologies (Q1 FY11) – BUY
CMP Rs2,795, Target Rs3,160, Upside 13.1%
± 6% qoq constant currency revenue growth ahead of expectations; volume growth continue to surprise on upside
± Narrow breadth of growth after a broad-based recovery indication in Q4 FY10 was disappointing
± OPM decline was higher than expectation; profit decline in line
± Increases annual gross hiring target to 36,000 driven by acceleration in growth and higher attrition
± Q2 FY11 growth guidance in-line; full-year revenue and EPS guidance raised on strong Q1 FY11
± Reiterate BUY on Infosys, stock may take a breather post the recent rally
Corporate Snippets
± Reliance Industries is looking at yet another shale gas acquisition in North America, its third in three months. (BS)
± NTPC has set the ball rolling to acquire coal mines or form JVs in Australia, Indonesia, Mozambique and South Africa. (BS)
± The 4,000-Mw Kudagi Ultra Mega Power Plant proposed to be set up by the NTPC at Kudagi in Basavana Bagewadi taluk of Bijapur district, has run into rough weather with farmers opposing to accept land prices fixed by the state government. (BS)
± Tata Steel's plans to sell Corus' Teesside Cast Products plant in the northeast of England suffered a setback as the consortium they were in talks with pulled out of the deal. (BS)
± Tata Steel has increased its stake TRF by 2.1% through an open market acquisition of shares. (ET)
± Zensar Technologies is looking to acquire a company in the infrastructure management space. The company has earmarked $100 million for the acquisition and has contracted three companies to search for a prospective partner. (ET)
± NMDC resumed production on Tuesday in central Chhattisgarh state after an eight hour stoppage due to an attack by Maoist rebels. (ET)
± The empower group of ministers chaired by Pranab Mukherjee is expected to meet on July 27 to consider a proposal from the Anil Ambani-led ADAG seeking natural gas from RIL's KG-D6 field. (FE)
± Abu Dhabi Gas Development Company has signed four engineering, procurement, construction and commissioning (EPC) contracts worth US$3.6bn with international companies including Punj Lloyd. (FE)
± The board of Hotel Leelaventure has approved the allotment of 10mn equity shares on a preferential basis to a promoter group entity to keep any hostile takeover bids of rival companies at bay. (BS)
± The Board of Approval (BoA) under the Ministry of Commerce and Industry has approved three special economic zones (SEZs) in the country, including that of Videocon Industries in Navi Mumbai. (BS)
± IFCI Ltd is likely to come up with a bond offering for retail investors in the third quarter (October-December) of this fiscal. (BL)
± Super Religare Laboratories will buy Piramal Healthcare's diagnostic chain for around Rs6bn. (FE)
± UK based Essar Energy, said its subsidiary, Essar Power (EPL), has entered into a binding agreements for acquiring Navabharat Power Ltd. (FE)
± Network18 Group and Sun Network have entered into a strategic alliance to form a pan-India distribution venture, Sun18. (FE)
± Mitsubishi Motors is showing keen interest in having equity participation in the loss-making auto company Hindustan Motors, which is also its current technical partner. (BS)
± Cash-strapped Vishal Retail may soon become a shell company if the restructuring package proposed by lenders is implemented.(ET)
± SpiceJet said it has allotted 5.71 crore shares, aggregating to 16.65% of its stake, to a clutch of WL Ross entities and India Asset Recovery Fund, a fund house. (ET)
± London-listed Essar Energy's arm Essar Power Ltd has agreed to acquire Navabharat Power Pvt Ltd. (BS)
Economic snippets
± Mobile number portability in India could be a non-starter as the government has rejected the proposal of US-based Telcordia Technologies, one of the two companies chosen to implement the technology here. (ET)
± India's fuel demand will grow by 3.2% next year, accelerating from the revised 2% rise expected in 2010, the International Energy Agency (IEA) said in its monthly Oil Market Report. (ET)
± The petrol pricing strategy of oil marketing companies (OMCs) is likely to be clear in the second fortnight of this month. (BS)
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