Tuesday, March 16, 2010

Market Outlook 16th March 2010


  Corporate News Headline
L&T has bagged a project worth Rs. 20.35 bn from ONGC Mangalore Petrochemicals Ltd to set up an aromatics complex at Mangalore special economic zone. (BS)
BHEL has won a Rs. 33.48 bn contract to set up 376 MW captive power plant at the upcoming Paradip Refinery Project of Indian Oil Corp in Orissa. (BS)
HCC acquired a controlling stake in Swiss real estate firm Karl Steiner AG in an all-cash deal for around Rs. 1.50 bn, a move that will pave way for the company to enter the European and Gulf markets. (BS)
  Economic and Political Headline
Driven by increasing food prices, India's annual rate of inflation, based on the wholesale price index, rose to 9.89% in February from 8.56% in the previous month. The latest data released by the commerce ministry showed food prices jumped 17.79% last month, while those for primary articles rose 15.54%. Manufactured products were up 7.42%. (BS)
Manufacturing in the New York region expanded in March, indicating factories are sustaining production and lifting the US economy. The Federal Reserve Bank of New York's general economic index fell to 22.9 this month from 24.9 in February. (Bloomberg)
Industrial production unexpectedly rose in February, due in part to gains in demand for computers and semiconductors that signal the pickup in US business investment is being sustained. Production climbed 0.1%, the eighth consecutive increase, as utility use and mining increased, figures from the Federal Reserve showed in Washington. (Bloomberg)

NSE Nifty Index   5128.90 ( -0.16 %) -8.10       
  1 2 3
Resistance 5152.90 5176.90   5202.75  
Support 5103.05 5077.20 5053.20

BSE Sensex 17164.99 ( -0.01 %) -1.63     
  1 2 3
Resistance 17219.94 17274.89 17354.29
Support 17085.59 17006.19 16951.24 

Strong & Weak  stocks
This is list of 10 strong stocks:  
LITL, Hind Zinc, Hero Honda, Patni, Chennai Petro, TCS, Sesa Goa, Ambuja Cement, Wipro & Sun TV.  
And this is list of 10 Weak futures: 
Balrampur Chini, Bajaj Hind, Chambal Fert, ICSA, Nagarjuna Fertil, Dish TV, Triveni, FSL, Tata Comm & BEML.
Nifty is in Up trend  

NIFTY FUTURES (F & O):
Above 5146 level, expect short covering up to 5150-5152 zone and thereafter expect a jump up to 5162-5164 zone by non-stop. 
Support at 5120-5122 zone. Below this zone, selling may continue up to 5119 level and thereafter it can tumble up to 5109-5111 zone by non-stop. 
Below 5097-5099 zone, expect panic up to 5086-5088 zone by non-stop. 
On Positive Side, cross above 5173-5175 zone can take it up to 5185-5187 zone by non-stop. Supply expected at around this zone and have caution.

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

Equity:
INFOSYSTCH (NSE Cash) 
Yesterday's uptrend was surprising. Uptrend should continue today also. Rally should be considered as a speculative rally. 

If rally continues, then it can touch 2791.00 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 2636.00 level and have caution.

TCS (NSE Cash) 
Rally expected on yesterday & Bulls beaten expectations. Uptrend should continue today also & Bulls should not panic at lower levels. 
If rally continues, then it can zoom up to 850.85 level by non-stop. 
If profit booking starts, then expect a surprise fall up to 791.15 level and have caution.

ABAN (NSE Cash) 
Fall expected on yesterday & Bears beaten expectations during intra-day trades. Fall may continue today also & should be considered as a speculative selling. 

If fall continues, then it can tumble up to 1182.10 level during intra-day trades. It should close below this level for further downtrend. 
If short covering starts, then it can zoom up to 1252.90 level and have caution.

TATASTEEL (NSE Cash) 
Yesterday's uptrend was surprising. Uptrend should continue today also. Rally should be considered as a speculative rally. 

If rally continues, then it can touch 617.95 level during intra-day trades. It should close this level for further uptrend. 
If profit booking starts, then expect a surprise fall up to 590.45 level and have caution.

OPTIONS (NSE):
NIFTY 5100 PUT OPTION 
Closed Positively on yesterday & that was a surprise. Uptrend should continue & it should be considered as a speculative rally. 

If rally continues, then it can zoom up to 67.00 level by non-stop. 
If profit booking starts, then it can tumble up to 26.60 level by non-stop and have caution.

RELIANCE 1000 PUT OPTION 
Closed negatively on yesterday & in line with expectations. Fall should continue & it should be considered as a speculative fall. 
If fall continues, then it can tumble up to 1.95 level by non-stop. 
Unexpectedly if short covering starts, then it can zoom up to 9.75 level by non-stop and have caution.

STOCK FUTURES (NSE):
TRIVENI FUTURES 
Surprisingly closed negatively on yesterday & that too Bears beaten expectations. Fall should continue today and Bears should not get panic too. 

Sell with a Stop Loss of 126.00 level for Intra-Day Gains. Target at 113.15 level.

DENABANK FUTURES 
Surprisingly closed negatively on yesterday. That was a surprise. Fall may continue up to even up to 19.03.2010. Selling should be considered as a speculative. 
Sell with a Stop Loss of 80.75 level with a Target of 73.25 level. It may tumble even up to 66.65 level on (or) before 19.03.2010. 
Stop Loss on (or) before 19.03.2010 should be at 84.05 level.


INVESTMENT VIEW
Mckinsey: Asia Ex-Japan Entering A Multi-Year Bull Market In White Goods
Mckinsey & co. 
Transitional Shift In Consumption Pattern, Urbanisation & Rising Income will Turn India into a multi-billion dollar,  multi-year growth market for Hitachi, Whirlpool, LG & Samsung

Asia won't replace the United States as the lead engine of global growth—at least not for five to ten years. At the end of 2008, the GDP of the whole of Asia was just under $14 trillion, roughly the same as the GDP of the United States alone.

Private consumption accounted for only about half of Asia's GDP, compared with 72 percent in the United States. Asia's three billion people spent less than $7 trillion; America's 300 million, upward of $10 trillion.

If Asia fails to stoke internal consumption, the region may grow more slowly over the next decade than it did in the last.

In developed and emerging Asia alike, cities are by far the dominant nodes of mass consumption, and their importance will surely grow. In Japan, more than half of all consumers live in Tokyo or Osaka. A fifth of South Korea's live in Seoul.

In China, the McKinsey Global Institute estimates, more than 350 million people will leave the countryside by 2025, creating more than 23 mega-cities with population upward of 5 million.

In India, more than 700 million people will make the same journey by 2050, creating as many as 36 mega-cities. The scale of these migrations has no precedent. They will create huge opportunities for global consumer companies—but also huge headaches.

Think Regionally, Act Locally

The most successful global consumer enterprises are radically reshaping their organizations and business models to suit the region's rapidly evolving high-growth markets.

Asia's emerging economies are leading the world out of recession, and the region's consumers are taking the baton from their over-extended counterparts in developed countries. Are the largest global consumer enterprises ready for this momentous shift?

McKinsey's experience suggests that even the most sophisticated multinationals must change significantly to realize Asia's growth potential. The region is as diverse as it is vast. Its markets come in a bewildering assortment of sizes and development stages, and its customers hail from a multitude of ethnic and cultural backgrounds.

Their tastes and preferences evolve constantly. The speed and scale of change in Asian consumer markets can surprise even experienced executives. To meet the challenge, global companies will have to organize themselves regionally to coordinate strategy and use resources in the most efficient way while at the same time targeting the tastes of consumers on a very local level.

In Asia's high-growth markets, these companies face intense competition from low-cost local players; customers with modest incomes, disparate preferences, and minimal brand loyalties; and fragmented distribution channels. Some of the problems will recede as the region's economies mature.

For now, though, the savviest players are trading their old  management practices—including largely independent country operations and centralized administrative structures—for leaner, faster, more flexible, and regionally collaborative ones.

They are strengthening their in-country operations while creating small, fast, and entrepreneurial regional leadership teams, which at their most successful adeptly allocate resources across markets, leverage scarce executive talent, drive innovations from one market to another, and relentlessly cut costs.

Four general principles sum up the changes needed to reach Asia's new consumers through a strategy that's both regional and local. Global companies must revamp their corporate structures so that operations in Asia enjoy a high status commensurate with its long-term profit potential and have the autonomy needed for significant results.

They have to focus on growth opportunities in urban clusters. Their products and prices must be tailored to local preferences. Finally, they must learn how to market, sell, and distribute products through a variety of channels and retail formats.

For global consumer companies, building this kind of regional–local structure can be an enormous challenge—but it can't be ignored.

Instead of treating Asia as a sideshow, they must act on the assumption that success in Asian markets is necessary for survival.

Go where the growth is

Asia won't replace the United States as the lead engine of global growth—at least not for five to ten years. At the end of 2008, the GDP of the whole of Asia was just under $14 trillion, roughly the same as the GDP of the United States alone.

Private consumption accounted for only about half of Asia's GDP, compared with 72 percent in the United States. Asia's three billion people spent less than $7 trillion; America's 300 million, upward of $10 trillion.

If Asia fails to stoke internal consumption, the region may grow more slowly over the next decade than it did in the last.

Yet some observers think private consumption in the region's emerging economies could grow enough, as early as this year, to offset falling consumption in the United States and the European Union.

Even under dour assumptions about the prospects for Asian economies, the region is likely to contribute more than half of all growth in global consumption by 2020.

Such macroeconomic perspectives understate Asia's significance for individual companies. In dozens of product categories, the Asian consumer is already global king.

China is the world's biggest market for many household products, including TVs, refrigerators, and air conditioners. This year, for the first time ever, China will probably top the United States and Japan as the world's largest automobile market by number of vehicles sold.

China's rank may slip back again as sales in those two advanced economies recover. Even so, with China's car ownership at fewer than 14 vehicles per thousand citizens, compared with more than 400 per thousand in the United States, the long-term trend is clear.

For manufacturers such as GM and Volkswagen, which made big bets in China early, booming sales there help offset home market losses. Later arrivals like Ford and the big Japanese carmakers are scrambling to catch up.

Change the game

Asia's emerging markets are a hypercompetitive free-for-all. Local rivals offer products with incremental innovations in ever-shorter product cycles—typically, at prices global companies find hard to match.

Consumers don't know established global brands and show little loyalty to the brands they do know. Marketing  strategies are complicated by the uneven development of Asia's telecom networks.

The predominance of small, family-owned retail outlets thwarts efforts to control the distribution and display of products. For global consumer giants, fidelity to methods that work back home can be futile.

Leverage innovation and talent through regional teams

One key to success is rethinking organizational models. Many global companies try to use an international division run from the global home office to supervise their operations in Asia.

Companies with large operations there may well have a regional headquarters, but often it oversees an assortment of country-specific fiefdoms that don't collaborate and sometimes operate in their own languages, frustrating

communication.

For Asia, that's often the worst model, leaving C-level executives at headquarters two layers from the most important growth markets, oblivious to the speed of change and the scale of the opportunity.

So global consumer companies are experimenting with alternative management practices and organizational models to ensure that Asian operations get the capital, talent, and C-level attention they need to compete.

Some companies organize Asian operations as independent business units, with their own capital budgets, partnerships, and P&Ls.

Yum! Brands, for instance, has three divisions: the United States, China, and elsewhere. In 2008, after years of running retail operations in China and Japan separately, Wal-Mart Stores established an Asia office in Hong Kong to spread best practices across the region.

Often, successful Asian organizational models involve teams of senior executives with diverse cultural and market experiences, who work together to improve performance throughout the region.

These regional teams set priorities, as well as mobilize expertise and resources to achieve scale advantages that can't be realized at the level of any single Asian market. They plan strategically; drive supply chain and cost-cutting initiatives; oversee recruitment, product development, and strategic alliances; and make crucial decisions about distribution channels, formats, and categories.

Collaboration and a sense of entrepreneurial pace characterize these regional teams. Top executives and specialists hop around markets, encouraging product designers in China, for example, to learn from innovations in Japan or a supply chain leader in India or to investigate techniques that simplified operations and lowered costs in Malaysia.

According to many executives, getting managers throughout the region to speak a common language is essential for spreading such best practices.

Think cities, not regions or countries

To be effective in Asia, consumer companies must think regionally but sell locally: they do better by focusing on urban clusters than by conceiving of an entire country as one market.

In recent years, many multinationals have tried to understand Asian markets more precisely by dividing them into subnational mega-regions or attempting to craft multi-tier urban strategies based on population size or household income.

Because these approaches miss crucial variations in consumer preferences and behavior, resources are invested less than optimally.

McKinsey's experience suggests that in Asia, urban clusters are the most appropriate strategic and marketing unit for consumer businesses. Often, we advise clients to forget the forest and see the trees.

In developed and emerging Asia alike, cities are by far the dominant nodes of mass consumption, and their importance will surely grow. In Japan, more than half of all consumers live in Tokyo or Osaka. A fifth of South Korea's live in Seoul.

In China, the McKinsey Global Institute estimates, more than 350 million people will leave the countryside by 2025, creating more than 23 mega cities with populations upward of 5 million.

In India, more than 700 million people will make the same journey by 2050, creating as many as 36 mega cities. The scale of these migrations has no precedent. They will create huge opportunities for global consumer companies—but also huge headaches.

After pouring into the cities of China and India, the migrants will assume new social identities. They will be open to new foods, fashions, forms of entertainment, and ways of living, but they will be fickle customers unfamiliar with established brands.

Asked to identify the top contenders in apparel, Asia's new urbanites are as apt to name local upstarts as, say, Louis Vuitton or Gucci.

As they prosper, their preferences will probably grow more diverse. In 2005, when McKinsey initiated extensive surveys of Chinese consumers, we found that the size and GDP of the cities where they lived predicted their spending habits reliably.

People who lived in Beijing, Shanghai, and other first-tier cities, for example, tended to buy similar products. Over the next three years, as the number of China's middle-and high-income households tripled, geography became more important. By 2008, city of residence predicted 9 out of 12 of these attitudes.

Thus, in recent years, the market for premium refrigerators has grown by 20 percent in Shanghai but by only 8 percent in neighboring Nanjing. Consumers in Guangzhou are much more likely to buy cameras with sophisticated LCD screens than those in Shenzhen, another first-tier city only 100 kilometers away, who demand portable, thin models.

Global companies must think carefully about where and how to play in Asia's urban markets.

Customize locally, don't tweak

Long gone are the days when global companies could charge Asians a premium to buy products designed for consumers in developed markets. It's not enough even to tweak existing product lines for Asian sensibilities.

Success now requires the ability not only to understand regional and local tastes and preferences but also to design products and services in Asia.

South Korea's LG Electronics struggled when it came to India in the 1990s until a change in foreign-investment rules enabled the company to invest in local design and manufacturing facilities.

Noting, for example, that many Indians use their TVs to listen to music, LG introduced new models with better speakers and, to keep prices competitive, less costly displays.

The company marketed many other original products, including appliances with programming menus in local languages, refrigerators with brighter colors and smaller freezers, large washing machines for India's big families, and microwaves with one-touch "Indian menu" functions.

Those innovations were possible because LG invested heavily in local R&D and staffed its operations with thousands of top-notch Indian designers and engineers.


LG's product innovation center in Bangalore is the company's largest outside South Korea. The company is India's market leader in TVs, refrigerators, air conditioners, and washing machines.

Local design is all the more important in Asia because customers in many of its markets expect a very wide variety of offerings and short innovation cycles.

Yum! Brands' Pizza Hut restaurants in China sell as much Chinese food as pizza, and in 2004 the company launched a new chain, East Dawning, that serves only Chinese food. KFC tailors menus to local palates and launches new items every month. Tingyi, the Taiwanese company that is the mainland's leading instant-noodle vendor, used local designers to reshape a whole product category, creating separate premium and low-cost brands.

In Asia, price is a crucial part of customization. For all but a few categories, volume—not a high profit margin—is the key to sustainable success. Products in categories such as apparel, automotive, and consumer electronics are sinking to price points that were unthinkable only a few years ago.

What's more, sophisticated consumer companies like P&G and Hindustan Lever have repeatedly found that compelling entry-level products and brands are essential for attracting consumers to higher-priced ones, often by "de-engineering" premium products to focus on the features and attributes that Asian customers value most.

P&G, for example, cut the price of Crest toothpaste more than 50 percent in China by reducing the cost of packaging, which is less important to consumers than being able to  choose from a variety of flavors.

Financing can play a role too. Levi Strauss recently announced that it would let customers in India pay in three monthly installments for jeans costing more than $33. A pilot version of the program, in Bangalore, showed the company that consumers who took advantage of this option spent an average of 50 percent more.

Introducing it enabled Levi Strauss to preserve the status of its jeans as an upmarket, aspirational product, while bringing them within reach of millions of less affluent young consumers.

In pushing prices lower, supply chain management matters no less than financing and design. Asia's savviest consumer businesses have embraced the techniques pioneered by fast-fashion retailers and Japanese automakers in picking up the pace and lowering the costs of the entire supply chain.

LG, for instance, has shortened order-fulfillment cycles in Asia from months to just weeks. Retailers and consumer product companies are learning that fast supply chains for some categories assure fresher products and a quicker response to trends in everything from fashion to consumer electronics.

Learn to market and sell across a variety of channels

Penetration rates for traditional and online media are lower in developing Asia than in developed markets, so efforts to influence purchase decisions are more complex.

 Consumer companies must be adept at shaping the consumers' view of brands across a number of channels and through a variety of media—not only TV, radio, print, and the Internet, but also events, outdoor ads, mobile messaging, instore promotions, and educational campaigns.

 Managing this shift to multichannel retailing and sales calls for new approaches to marketing and brand building.

Modern retail chains account for only about a third of all consumer goods sales in China and for less than a fifth in India; small, family run shops are much more important. In all formats, consumer product companies must somehow influence access to shelf space and display, since point-of-sale factors have an ever greater impact on purchase decisions.

 

For now, key-account management is less important in Asia than it is in developed markets. Many global companies get things wrong because they attempt to rely on the sales teams of third-party distributors and the key-account-management routines that worked at home or in the past.

 

Adapting quickly to capture growth from direct-to-consumer channels will also probably become more important in Asia, as it already is elsewhere. In some urban clusters, for categories such as consumer electronics and apparel, online sales growth is beginning to overtake traditional channels.

 

In Japan, sales in direct channels have exceeded those in department stores so far this year. Sales at TaoBao, China's largest online retailer, have soared to more than $14 billion annually since it was launched, in 2003. LancĂ´me reports that its partnership with Baidu, China's largest search engine, helped lift online sales in China by 30 percent.

 

And AmWay has become one of China's largest consumer packaged-goods companies by selling its products door-to door through a network of 300,000 sales representatives.

 

As Asia's economies evolve and mature, today's frenetic, hyper-competitive, fragmented marketplace will inevitably give way to a more settled one, with fewer players enjoying larger market shares and better margins.

 

The penetration of modern retail formats will increase. But the journey will be long and filled with twists and turns.

 

As the winners learn to make decisions quickly to meet the demand for speed, scale, localization, and low costs, they will test and adopt new and more entrepreneurial management practices. These companies will probably share four characteristics.

 

Their fast, adaptive business models will leverage scale and innovation throughout Asia, and regional organizational structures and operating practices will reflect this shift. But resources will be focused locally, on the development of category, format, and brand strategies targeting the explosive growth opportunities of sharply defined urban clusters, not countries.

 

Products tailored and priced to meet cluster-level tastes and needs will be supported by faster, lower-cost supply chains.

 

Finally, brand marketing skills will be used to market and sell across a variety of channels. For global consumer businesses, the struggle for Asia has now been joined—cluster by cluster, city by city.

 

(Mckinsey: Marketing & Sales Practice) 
 

(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)
CategoryDate Buy ValueSell Value Net Value
FII 12-Mar-20102651.76 2280.08371.68
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category DateBuy Value Sell ValueNet Value
DII12-Mar-2010 1324.081414.89 -90.81

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