Friday, March 12, 2010

Market Outlook 12th Feb 2010

  Corporate News Headline
NMDC is planning to invest around Rs 24 bn to lay a pipeline between its Chhattisgarh plant and Visakhapatnam in Andhra Pradesh. The proposed pipeline will transport iron ore from Bailadila mine in Chhattisgarh to Vishakhapatnam. (BS)
Fortis Healthcare will buy 23.9% of Singapore healthcare provider Parkway Holdings for USD 685 mn, giving it access to the Southeast Asian markets. Fortis has agreed to buy the stake from buyout firm TPG Capital. (ET)
Bharti Airtel announced the launch of its digital media business, its foray into entertainment, to deliver content to a range of users, including producers and media firms. The Company will not produce any content, but market and cater to a variety of users such as animators, gaming firms, news channels, cinemas and banking institutions. (ET)
  Economic and Political Headline
India's Food Price Index rose 17.81% in the 12 months to February 27, while the Fuel Price Index was up 11.38%, the Government said. The rise in the Food Price Index was marginally lower than an annual rise of 17.87% in the previous week. India's Primary Articles Price Index was up 15.08% year-on-year as on February 27. (BS)
China's inflation reached a 16- month high, industrial output climbed and new loans exceeded forecasts, adding to the case for the Government to roll back stimulus measures. Consumer prices rose 2.7% in February from a year earlier, as per the National Bureau of Statistics. (Bloomberg)
The trade deficit in the US unexpectedly narrowed in January as imports fell for the first time in five months, indicating demand is cooling. The gap shrank 6.6% to USD 37.3 bn from USD 39.9 bn in December as refineries imported the fewest barrels of crude oil in a decade, Commerce Department figures showed in Washington. (Bloomberg)

NSE Nifty Index   5133.40 ( 0.34 %) 17.15       
 1 23
Resistance 5156.635179.87   5207.13  
Support 5106.135078.87 5055.63

BSE Sensex 17167.96 ( 0.41 %) 69.63      
 1 23
Resistance 17237.2617306.56 17398.05
Support 17076.4716984.98 16915.68

Strong & Weak  stocks
This is list of 10 strong stocks:  
Sintex, Hero Honda, Sun Pharma, LITL, Ambuja Cement, Siemens, ICICI Bank., Pir Health, Sun TV & Abb Ltd.  
And this is list of 10 Weak stocks: 
Balrampur Chini, Bajaj Hind, Renuka, ICSA, Chambal Fert, Pantaloon Retail, Mphasis, BPCL, Hind Petro & Hind Uni Lvr.
Nifty is in Up trend  
 
NIFTY FUTURES (F & O):
 Above 5164-5166 zone, rally may continue up to 5171 level and thereafter expect a jump up to 5185-5187 zone by non-stop. 
Support at 5136 & 5137 levels. Below these levels, expect profit booking up to 5112-5114 zone and thereafter slide may continue up to 5091-5093 zone by non-stop. 
Buy if touches 5083-5085 zone. Stop Loss at 5061-5063 zone. 
On Positive Side, cross above 5193-5195 zone can take it up to 5215-5217 zone by non-stop. If crosses & sustains this zone then uptrend may continue.

Short-Term Investors:
 Bullish Trend. 
Up Side Target at 5239.70. 
Stop Loss at 5050.30.

Equity:
TEXMOPIPES (NSE Cash) 
This scrip rallied on yesterday & Bulls fell short of expectations. Rally should be considered as a speculative rally. 
If rally continues, then it can touch 161.40 level during intra-day trades. It should close this level for further uptrend. 

Stop Loss for is too far on down side at 137.00 level.

RELIANCE (NSE Cash) 
This scrip rallied on yesterday & Bulls fell short of expectations. Rally should be considered as a speculative rally. 

If rally continues, then it can touch 1035.00 level during intra-day trades. It should close this level for further uptrend. 
Stop Loss for is too far on down side at 995.00 level.

HDIL (NSE Cash) 
Fallen yesterday. Bulls failed & that too this scrip closed in negative territory. Further fall expected. 

If down trend continues then this scrip can touch 296.30 level during intra-day trades. It should close below 296.30 level for further selling too. 
If short covering starts, then bears have to run up to 319.20 level and have caution.

UNITECH (NSE Cash) 
Fallen on yesterday & in line with expectations. Bulls may try to rig up during intra-day trades and have caution. 
If down trend continues then this scrip can tumble up to 62.20 level during intra-day trades. It should close below 62.20 level for further selling too. 

If short covering starts, then bears have to run up to 80.40 level and have caution.

OPTIONS (NSE):
NIFTY 5100 CALL OPTION 
Rally expected on yesterday & Bulls beaten expectations. Positive News on cards, but rally should be considered as a speculative rally.  
If rally continues, then expect a jump up to 109.45 level by non-stop. 
Unexpectedly if profit booking starts, then it can tumble up to 71.70 level by non-stop and have caution.

RELIANCE 1020 CALL OPTION 
 
Rally expected on yesterday & Bulls fell short of expectations. Rally may continue. 

If rally continues, then expect a jump up to 26.80 level by non-stop. 
Unexpectedly if profit booking starts, then it can tumble up to 11.35 level by non-stop and have caution.

STOCK FUTURES (NSE):
HINDZINC FUTURES 
Rally was surprising & Bulls fell short of expectations on yesterday. Rally may continue & Rally should be considered as a speculative rally. 

Buy with a Stop Loss of 1181.20 level for Intra-Day Gains. Target at 1291.60 level.

BRFL FUTURES 
Nice move on yesterday & Bulls fell short of expectations. Rally should continue today & Bulls will tighten their grip in later part of the week up to 19.03.2010.  
 
Buy with a Stop Loss of 215.20 level with a Target of 243.00 level. It may zoom even up to 245.20 level on (or) before 19.03.2010. 
Stop Loss on (or) before 19.03.2010 should be at 208.80 level.


Sugar-Sweet No More

 
The fall in sugar stocks underlines the massive speculative build-up on a sector which virtually has nothing going for investors. With 9 per cent recovery, Cane bought at Rs 260 a quintal works out to Rs 30 per kg of sugar. Add capital and processing costs, and viola anyone selling white at Rs 30 per kg makes no. Investors must realise that in the Sugar trade, it is the retailer that makes margins of atleast Rs 10 per kg, but in a down cycle the integrated mill owners make no money.
 

Sugar stocks have been one of the worst performers this week. Some stocks such as Bajaj Hindusthan and Balrampur Chini have dropped by over 10 per cent in the last three trading sessions. Since the beginning of the year, sugar stocks have underperformed the Sensex and the Nifty, dropping 20 per cent.

 

The fall in these stocks shouldn't come as a surprise. It was expected, particularly in the background of sugar prices rising to over Rs 40 a kg without any fundamental reasons. When sugar prices began to gain, stocks of companies in the sector too began to rise.

 

But as the prices dropped, the stocks have followed suit. In the domestic market, prices have been on the downswing since the third week of January and since February 1, the market has seen about 30 per cent fall in the prices. The global market too witnessed a similar fall during the period.

 

On Thursday, white sugar in London was quoted at $547 a tonne against a peak of $767 seen at the beginning of the year. Raw sugar prices, too, have tumbled below 20 cents a pound. For traders, it would be a safe bet to keep off from these counters for now.

 

Here's why

 

The primary reason for sugar prices to surge was that the production this season (October 2009-September 2010) was expected to be 15-16 million tonnes (mt) against 15 mt last season. The Indian Sugar Mills Association on Tuesday said the production may be higher at 16.8 mt compared with the initial estimates.

 

Farms in western Uttar Pradesh still abound with sugarcane. That will mean production in the State, the country's highest producer, will be more by at least 1 mt. Also, farmers are reporting yields that are at least 23 tonnes higher per hectare. Besides, this season at least 7 mt of sugar was expected to be imported, while opening stocks are estimated at 3.7 mt.

 

On the demand side, the domestic consumption is seen unchanged at 22 mt.

 

This means supply will easily outstrip the demand. However, it is unlikely to be that way as imports could now be lower. Already, the global trade is under pressure with many buyers trying to rework the deals in the face of declining prices.

 

Adding to the pressure on the market is Brazil's production doubling in February in the Centre-South, the largest growing region in the world.

 

No taste for sugar

 

A report by Kingsman said buyers are keeping away from buying sugar in the falling market. Besides this, large global funds have all begun to sell their holdings in sugar, making the scenario totally bearish.

 

On the revenue outgo side, mills are still having to pay a higher price for the cane. For instance, in Uttar Pradesh they are still paying Rs 261 a quintal for cane. In other States, the mills pay farmers anything over Rs 200 a quintal for the cane.

 

In Maharashtra, a tug-of-war has broken out between the mills and traders in view of the falling prices. The mills are not ready to sell sugar below Rs 3,200 a quintal. Besides the realisation from sugar, mills also get revenue from molasses and bagasse. But these incomes are seen as a cushion against the fall in sugar prices.

 

There are also reports that some smart operators who had stocked up on sugar when it was ruling at around Rs 15 a kg are now offering the commodity at less than Rs 30 a kg.

All this means sugar companies are likely to be under tremendous pressure. The current quarter could see a drop in the mills' profits.

 

What is perceived is that sugar companies could now be just profit-making units rather than ones making super-profits.

 

In these circumstances, it is most likely that sugar stocks will be totally in a bear grip Any recovery in the prices will be short-lived with global funds taking the opportunity to bail out. That will hold true for the stocks too. 

(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.)

MARKET BUZZ:
 
(May not be useful for day-traders.) 

Hitachi Home PO Rs 315 (Mangal Keshav)

 
Hitachi Home-On Solid Ground 
BSE 523398 

(On FY12e EPS of Rs 30, the stock should trade up to Rs 315.)

 

Penetration level of Room ACs one of the lowest amongst consumer durables

Penetration level of room AC segment, forming more than 80% of the company's revenue, is one of the lowest amongst consumer durables at 2% in India. At regional level also, room AC penetration is lowest in India compared to 20% in China, 45% in Malaysia, 52% in South Korea and 70% in Taiwan.

 

Dominant market share across AC segments

 

Hitachi is a leading player in room AC segment with 10% market share. In commercial AC segment, Hitachi is #1 in telecom tower AC segment with 33% share and 17% share in ductable commercial ACs.

 

Highest revenue growth rate amongst peers during FY06-09

 

During FY06-09, Hitachi's revenue have compounded at highest rate amongst peers at 22%. during the same period, Whirlpool's revenue grew at 16% CAGR and MIRC electronics' revenue grew at 6% CAGR. This has been primarily due to Hitachi's presence in only AC segment compared to peers which are present across consumer durables segments.

 

Expansion of AC manufacturing capacity by a substantial 60% to 4 lac units

During FY10, the company expanded AC mfg capacity by a whopping 60% to 400,000 units at a cost of Rs500mn. This facility should enable Hitachi to manufacture chillers which were being imported earlier leading to profitability improvement.

 

Profitability back on track in 9MFY10

 

During FY09, profitability was adversely impacted due to slowdown in revenue growth, increase in raw material prices (copper in particular) and forex losses on account of ECB loans to fund capacity expansion. However, during 9MFY10 profitability has returned to normalcy with revenue growth rates coming back to earlier levels as well as forex impact turning favourable.

 

Risks: 
Rise in raw material prices, particularly copper

 

Valuation:

 

We estimate revenue and PAT to compound at 26% and 51% respectively during FY09-12. We recommend BUY on the stock with target price of Rs315 at 10x FY12E EPS. 

(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.)


FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category DateBuy Value Sell ValueNet Value
FII11-Mar-2010 2235.071930.2 304.87
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category DateBuy Value Sell ValueNet Value
DII11-Mar-2010 1059.871262.57 -202.7
Disclosure: I don't have any positions in the above said scrips & NIFTY FUTURES.
Disclaimer:
"I do not make any warranties, express or implied, as to results to be obtained from using the information in this e-letter.  Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report."

--
Arvind Parekh
+ 91 98432 32381