Market Mantra
Market outlook
Curtains down on conviction!
Conviction is worthless unless it is converted into conduct. - Thomas Carlyle
It's may be curtains down for the famous bull fight in Catalonia, Spain but, on the bourses, the fight between the bulls and bears will continue. Recent behaviour on the street suggests both camps lack conviction. The ferocity of the bulls is nowhere in sight except occasionally on some side counters.
We expect a sluggish start and a choppy session in view of the F&O expiry. The finish will hinge on F&O adjustments, few earnings and more importantly global cues. Action will continue in select non-index counters.
RIL results have been a little disappointing and may continue to pressure the overall sentiment. Results will continue to pour in over the next few days and will have a role in shaping the market's direction. What is also slightly worrisome is the drop in core sector growth.
US stocks fell on the Fed's latest assessment of the US economy and a dour report on durable goods orders. Stocks also fell in Europe. China is the only market holding in the green in Asia.
Trading ideas (Time period: 1-3 days)
Sun TV (BUY, above Rs463, Target Rs482): On the weekly line chart, the stock has given a bullish breakout and in the process has also made an intermediate top, suggesting that its short-term trend has turned up. Over the last two weeks, the stock was trading sideways between the range of Rs425-470. 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 Rs463 with stop loss of Rs455 for immediate target of Rs482. Traders are advised to add fresh longs on a successful move past Rs470.
Divis Laboratories (BUY, above Rs777, Target 801): Divis Laboratories has been consolidating in descending triangle after hitting an interim peak of Rs797 last week. Being a defensive counter, the stock has managed to hold above the support levels of triangle of Rs760, despite turbulence in markets this week. We expect buying momentum getting ignited once Divis Labs crosses its slanting resistance line placed at Rs777. Such a breakout should take prices above its interim peak of Rs797, giving an immediate target of Rs805. Oscillators like RSI also corroborates strength in the short term charts with RSI holding above 50 levels, indicating the trend remains positively biased. We advise buying stock above Rs777 with stop loss of Rs765 for target of Rs801.
Derivative strategies (Time period: Till expiry)
± Long Reliance Ind. Aug Future in range of Rs1030-1032 for the target price of Rs1052 with a stop loss placed at Rs1019.
Lot size: 250
Remarks: Net maximum profit of Rs5,500 and net maximum loss of Rs2,750.
± Long Reliance Power Aug Future in range of Rs172.50 -173.50 for the target price of Rs180.50 and stop loss placed at Rs.168.50.
Lot size: 2000
Remarks: Net maximum profit of Rs16,000 and net maximum loss of Rs8,000.
Mutual funds
| Fund focus | |||||||
| HDFC Top 200 Fund | Invest | ||||||
| Fund manager | Prashant Jain |
| Min investment | Rs5,000 | |||
| Latest NAV | Rs199.1 |
| Entry load | Nil | |||
| NAV 52 high/low | Rs200/135 |
| 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: Mahindra & Mahindra (Q1 FY11) – BUY
CMP Rs644, Target Rs712, Upside 10.6%
± Revenues increase 22% yoy driven by strong volume growth in both automotive and farm equipment segments
± OPM at 15% against our expectation of 14.4%
± Volume growth likely to continue driven by improved consumer sentiments in rural areas as current monsoon expected to be close to normal.
± We value M&M at Rs712/share, which includes Rs511 for its automotive business (8x EV/EBIDTA for FY12E) and Rs201 for its subsidiaries; Upgrade to BUY
Result Update: Jindal Steel & Power (Q1 FY11) – Market Performer
CMP Rs630, Target Rs660, Upside 4.7%
± Q1 FY11 standalone revenue of Rs21.2bn was marginally higher than our estimate of Rs20.5bn
± The outperformance in topline was led by higher than expected realisations, which offset lower sales volume
± Average steel realisations jumped 22% qoq in Q1 FY11 on account of superior product mix
± Operating profit remained flat qoq at Rs7.9bn, higher than our estimate of Rs7.3bn
± Average power realisations under JPL increased from Rs4.4/unit in Q4 FY10 to Rs4.6/unit
± JPL registered a 7.4% qoq increase in PAT to Rs5.6bn led by higher production and average power realisation
± Maintain Market Performer rating with a target price of Rs660
Corporate Snippets
± RIL and Essar Oil join race to buy BP's Africa assets. (ET)
± HDFC Bank, Lakshmi Vilas Bank and Central Bank set off a round of deposit rate hikes. (ET)
± EGoM cancels KG gas allocation for ONGC. (DNA)
± NTPC's merchant power business plans to get government nod. (BL)
± Adani Enterprise to invest Rs65bn in coal mining. (BL)
± Yes Bank to raise Rs4.5-5bn in Q2 to fund its business growth. (BL)
± Patch of Maruti Suzuki's largest selling car Alto produced in April this year is facing a potential engine oil leakage problem. (ET)
± Reinsures have settled Aban's US$235mn claims for its semi-submersible rig. (ET)
± Unitech plans to buy AIM-listed group company for over Rs7.5bn. (ET)
± ABB acquires 75% stake in Indian arm. (BS)
± Wipro has filed an application with FIPB to enter the IT defence sector. (BS)
± Wockhardt fails to reach a settlement with FCCB holders. (ET)
± Cholamandalam Investment plans to raise Rs2.5bn via QIP or preferential share issue. (BS)
± Hindustan Aeronautics has signed contract worth 700mn pounds with BAE system and Rolls Royce. (ET)
Economic snippets
± Infrastructure growth slips to 3.4% in June. (ET)
± Finance Ministry has proposed dedicated debt funds to channelise foreign savings into the infrastructure sector. (ET)
± RBI to assess reality lending curbs in November. (DNA)
± Bombay High Court has granted an interim stay on service tax levied by union government on buildings under construction. (ET)
± EGoM fails to decide on KG-D6 gas allocation. (BS)
± Personal computer sales grow 18% in FY10. (BL)
± Union Ministry for New and Renewable Energy to hold talks with banks on funding solar projects. (BL)
Results table
| Name | Sales | % yoy | PAT | % yoy |
| Lupin | 13120 | 20.9 | 1963 | 40.1 |
| Cinemax | 460 | 95.6 | 11 | - |
| ADSL | 2026 | 27.6 | 331 | 45.5 |
| Corporation Bank | 6976 | 49.2 | 3338 | 27.8 |
| Voltas | 14031 | 13.0 | 932 | 18.1 |
| DB Reality | 2648 | 123.7 | 618 | 145.3 |
| HUL | 47939 | 7.1 | 5332 | (1.8) |
| Orbit Corp | 1195 | 8.3 | 202 | 12.1 |
| Godrej Ind. | 9624 | 27.4 | 487 | 197.9 |
| JSPL | 29982 | 8.6 | 9570 | (3.2) |
| M&M | 51242 | 21.2 | 5624 | 40.3 |
| Sobha Developers | 3156 | 78.2 | 343 | 170.1 |
| FSL | 4907 | 1.3 | 321 | (15.6) |
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