Tuesday, July 7, 2009

Market Outlook for 7th July 2009

 
 
NIFTY FUTURES LEVELS
RESISTANCE

4221
4359
4495
4630
4766
SUPPORT
4144
4109
3973
3838
Buy TITAN IND,DABUR (I) 

Strong & Weak  futures  
This is list of 10 strong futures:
Edu Comp, Patel Eng, GT Off Shore, Tulip, Colpal, Gail, Dabur, Titan, Hind Uni Lever & Cipla.
And this is list of 10 Weak futures:
Orchid Chem, Tata Motors, Bhusan Steel, Bharat Forge, BRFL, Ad Labs Film, Praj Ind, Nation Aluminium, Aban & RCOM. 
 Nifty is in Down Trend.
 
NIFTY FUTURES (F & O):  
Above 4221 level, expect short covering up to 4357-4359 zone and thereafter expect a jump up to 4493-4495 zone by non-stop.
Support at 4144 level. Below this level, selling may continue up to 4109-4111 zone by non-stop.

Rebound expected at around 3973-3975 zone. Stop Loss at 3838-3840 zone.

On Positive Side, cross above 4628-4630 zone can take it up to 4764-4766 zone. If crosses and sustains this zone then uptrend may continue.
 
Short-Term Investors:
Bullish Trend. 3 closes above 4270 level, it can zoom up to 4830 level by non-stop.
Already SL triggered. 3 closes below 4270 level, it can tumble up to 3990 level by non-stop.
 
BSE SENSEX:  
Higher opening expected. Recovery should start. 
Short-Term Investors:
 
Short-Term trend is Bearish and target at around 12478 level on down side.
Maintain a Stop Loss at 14931 level for your short positions too.
Already SL triggered.
 
 
POSITIONAL BUY:
Buy TITAN INDS (NSE Cash) 
Uptrend should continue.
Mild sell-off up to 1186 level can be used to buy. If uptrend continues, then it may continue up to 1243 level for time being. 

If crosses & sustains at above 1290 level then uptrend may continue.

Keep a Stop Loss at 1138 level for your long positions too.
 
Buy DABUR (I) (NSE Cash) 
Recovery should start.

Mild sell-off up to 125 level can be used to buy. If recovery starts, then it may continue up to 132 level for time being. 

If crosses & sustains at above 136 level then uptrend may continue.

Keep a Stop Loss at 122 level for your long positions too.
 
 
FII DATA
FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category Date Buy Value Sell Value Net Value
FII 06-Jul-2009 2137.3 3620.33 -1483.03
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category Date Buy Value Sell Value Net Value
DII 06-Jul-2009 2663.35 1847.64 815.71
 
Global Cues & Rupee  
The Dow Jones Industrial Average closed at 8,324.87. Up by 44.13 points.
The Broader S&P 500 closed at 898.72. Up by 2.30 points.
The Nasdaq Composite Index closed at 1,787.40. Down by 9.12 points.
We did't get Rupee update.
 
DELIVERY BUY
Indus Fila-Dark Horse
Repeated orders, rapid inorganic expansion, and attractive valuations augur well for the Bangalore-based garment designer and manufacturer Indus Fila. From the macro perspective, penetration of organised retailing in the country and increased brand awareness for the garments are also a significant driver for higher growth and could result in better margins in the long-term.
 
Business  
To stay ahead in the competitive Indian textile market, Indus Fila has an integrated setup starting from yarn dyeing, yarn weaving, cloth processing, and lastly cloth garmenting. This helped the company to control 80% of the value chain as compared to 50% that a pure textile player might have. This advantage enables the company to earn a comparatively higher margin if as they do not outsource.
 
Its domestic clients list includes Gokaldas, Page Apparels, Madura Garments and Celebrity Fashions, Indus Fila has an agreement to supply garments with all these companies. Majority of the sales comes from the domestic market, where it fulfills the requirement of the outsourcing companies like Gokaldas, who in turn supplies to international brands.
 
It also supplies directly to the international brands mentioned above. Till date, Indus Fila does not manufacture garments in its own brand name. However, due to its manufacturing capability and penetration of organised retail in the country, the company could launch its own brands in the domestic market, which could further drive margins.
 
It manufactures colour dyed, solid dyed fabrics for domestic purposes and men's shirts and women's tops for exports. It intends to enter the high-end garments sector like lower wear, sports wear, etc. Indus Fila wants to position itself in the mid to high-end garment segment.
 
Investment rationale
  Indus Fila had raised Rs 166.24 crore in March 2007 in its public issue. The company has expanded rapidly through acquisition. Before going public, the company was outsourcing around 31% of the total cloth weaving capacity. After the first phase of expansion it would increase the capacity by 17% and 39% in the second phase. Overall this would result in 64% capacity enhancement. Complete in-house manufacturing would improve operating margins and result in higher profit.
 
While expanding organically the company had also taken the inorganic route. The inorganic route is a better strategy in the textile market. It reduces significant time if there is buoyancy in demand.
 
The company has been using the inorganic route to complete the expansion as stated in the red herring prospectus (RHP) filed for the public issue. This may reduce the cost of acquisition.
 
The expansion started with the acquisition of a 51% stake in Indus Garments (India) for Rs 9.35 crore in July 2007. Indus Garments has an installed capacity of 36 lakh garments per annum and products are exported to American and European countries.
 
Recently the company has announced one more acquisition of Tulip Apparels and the board approved the amalgamation with the company itself subject to court approvals. Tulip Apparels is the apparel contract manufacturer based in Bangalore.
 
Financials
  According to estimates, the Indian textile industry is expected to grow at a rate of 16% in value terms and touch $115 billion in the next five years. And the exports are expected to grow at a rate of 22% for the same period. The negative part is textile companies run on wafer thin margins in the range of 2% to 8% depending on which part of the value chain the company is.
 
To survive in this kind of market, coupled with high debtor days and inventory that makes business more difficult to run, Indus Fila and many other companies have gone one step ahead by integrating the value chain. This advantage reduces dependence on the outside supplier.
 
The complete control on the value chain enables them to deliver consistent and similar quality and gradation, which is the most important factor in the textile market. 

Getting regular and large orders is the major concern for Indus Fila. Not able to meet the required quantity of sales vis-à-vis capacity could lead to higher operating cost. Unable to deliver consistent quality and gradation as per the client requirement could cancel the supply and affect the profitability significantly.   
 
(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
--
Arvind Parekh
+ 91 98432 32381