Wednesday, March 31, 2010

Market Outlook 31st March 2010

Derivatives EOD Report on http://www.indiabulls.com/securities/mailermis/derivative-strategy/derivative-EOD-30-Mar-2010.htm

Today Market Update on http://www.indiabulls.com/securities/mailermis/morning-brief/morning-brief-31Mar2010.htm

  Corporate News Headline
Tata Motors has sold 20% stake in Telcon, its construction equipment joint venture with Japan's Hitachi, to its partner for Rs. 11.59 bn. Post the transaction, Tata Motors will own 40% in Telcon, while Hitachi will have 60%, the company said in a statement. (BS)
Larsen & Toubro has bagged orders worth Rs. 11.26 bn for various construction related works. The company has secured these orders from various vendors, including Sterlite Industries India and Tata Steel, L&T said in a filing to the BSE. (BS)
Cairn India can produce up to 2,40,000 barrels per day from its prolific Rajasthan fields, equivalent to output from the nation's largest oilfield of Mumbai High, the company has informed the government. (BS)
  Economic and Political Headline
Pranab Mukherjee pitched for imparting fresh impetus to economic recovery to quickly revert to the 9% growth rate and cross the double-digit growth barrier. (BS)
Confidence among US consumers climbed in March as Americans perceived employment was starting to improve. The Conference Board's confidence index rose to 52.5 from 46.4 in February, the group's report showed. (Bloomberg)
Home prices in 20 US cities unexpectedly rose in January, indicating the housing market is stabilizing as the economy expands. The S&P/Case-Shiller home-price index climbed 0.3% from the prior month on a seasonally adjusted basis, matching the gain in December, the group said in New York. (Bloomberg)

SPOT LEVELS TODAY
NSE Nifty Index   5262.45 ( -0.76 %) -40.40       
 1 23
Resistance 5307.855353.25   5381.50  
Support 5234.205205.95 5160.55

BSE Sensex 17590.17 ( -0.68 %) -121.18      
 1 23
Resistance 17729.6117869.04 17954.74
Support 17504.4817418.78 17279.35

Strong & Weak Stocks
This is list of 10 strong Stocks: 
Chennai Petro, Orient Bank, Hindalco, Sintex, PNB, GMR Infra, Corporation Bank, Bajaj Auto, Cairn India & National Alum.  
And this is list of 10 Weak Stocks
Bajaj Hind, Tulip, Mphasis, KFA, Neyveli Lignite, Uniphos, ICSA, DCB, DCHL & Colpal.
The daily trend of nifty is in Up trend  since 16th February

NIFTY FUTURES (F & O): 
Above 5290 level, expect short covering up to 5316-5318 zone and thereafter expect a jump up to 5341-5343 zone by non-stop. 
Support at 5264 level. Below this level, selling may continue up to 5251-5253 zone by non-stop. 

Buy if touches 5226-5228 zone. Stop Loss at 5200-5202 zone. 
On Positive Side, cross above 5366-5368 zone can take it up to 5392-5394 zone by non-stop. If crosses & sustains this zone then uptrend may continue.

Short-Term Investors: 
Bullish Trend. 
Up Side Target at 5429.95. 
Stop Loss at 5106.55.

STOCK FUTURES (NSE):
EDUCOMP FUTURES 
Speculative selling taken place on yesterday. Not worried too. 
 
If selling continues, then it can tumble up to 688.30 level by non-stop. 
If start recovers, then it can zoom up to 768.55 level and have caution.

POLARIS FUTURES (5 Trading Days Holding) 
Speculative selling on yesterday. Not worried too. 
 
If selling continues, then it can tumble up to 159.80 level by non-stop. 
If start recovers, then it can zoom up to 180.80 level and have caution.

OPTIONS (NSE):
NIFTY 5300 PUT OPTION 
Yesterday's rally was surprising. Impressed too & Bulls should not get

panic at lower levels. 
If rally continues, then it can zoom up to 160.05 level by non-stop. 
If profit booking starts, then it can tumble up to 91.15 level and have
caution.

INFOSYSTCH 2650 PUT OPTION 
Speculative buying on yesterday. Not impressed & Do not get excited too. 
 
If rally continues, then it can zoom up to 112.20 level by non-stop. 
If profit booking starts, then it can tumble up to 51.70 level and have
caution.

Equity:
EDSERV (NSE Cash) (Intra-Day) 
Real selling taken place on yesterday. Bears should not get panic at higher levels.  
 
If selling continues, then it can tumble up to 208.00 level by non-stop. 
If start recovers, then it can zoom up to 242.95 level and have caution.

TATAMOTORS (NSE Cash) (Intra-Day) 
Yesterday's rally was surprising. Not impressed & Do not get excited too. 

If rally continues, then it can zoom up to 780.60 level by non-stop. 
If profit booking starts, then it can tumble up to 740.60 level and have
caution.

HINDCOPPER (NSE Cash) (Intra-Day) 
Yesterday's rally was surprising. Real buying too & Bulls should not get panic at lower levels. 

If rally continues, then it can zoom up to 566.70 level by non-stop. 
If profit booking starts, then it can tumble up to 490.30 level and have
caution.

STCINDIA (NSE Cash): 
Real buying taken place on yesterday. But risk is too high & because Stop Loss is too far on down side at 416.60. Target at 504.40.
 
INVESTMENT VIEW
Electrosteel Castings-Initiates Value Unlocking From Subsidiary  
Value unlocking through listing of EIL: ECL is setting up a 2.2mn tonne steel plant through EIL, in which it holds 40% stake. The total project cost of Rs 7,262cr has been funded through a Debt-Equity ratio of 3:1 and the project has already achieved financial closure.

Of the total equity contribution of Rs1,815cr, ECL has made an investment of Rs726cr. ECL plans to list EIL to raise Rs300cr, which is likely to unlock value for ECL.

Background

Electrosteel Castings (ECL) is a leading player in ductile iron (DI) pipes and is venturing into steel making through its subsidiary Electrosteel Integrated (EIL), which is setting up a 2.2mn tonne steel plant expected to be commissioned by FY2012E.

ECL's backward integration initiatives through allocation of coking coal mines are expected

to result in expansion of EBITDA Margin by 1,304bp over FY2009-12E. The company is also awaiting final environmental clearance for its iron ore mine, which will further lower costs, but has not been factored in our estimates.

Further, listing of EIL in which ECL holds 40% stake could unlock value for ECL. We Initiate Coverage on the stock, with a Buy recommendation and 18-month SOTP Target Price of Rs72, valuing the Core business at 8x FY2012E FDEPS and its investments in the Steel business at 1x Book Value.

Moving towards an Integrated business model: ECL is on track to have in place an integrated business model going ahead through a) Backward integration initiatives led by the allocation of mines, and b) Focus on beefing up its logistic infrastructure to further reduce costs. The company has already started coal production from its coal mines at Parbatpur, Jharkhand.

This is likely to result in EBITDA Margin improving by 1,304bp to 28.0% over FY2009-12E, despite the fall in DI realisations. Moreover, grant of iron ore mining lease, with estimated reserves of 91mn tonnes could further improve Margins, which is not factored in our estimates.  
 
(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.)

INVESTMENT VIEW ON SUGARS
Morgan Stanley: Millers Dump Imported Sugar In The Mkts, Price Drops To Rs 29
Quick Comment: Downside risk to our estimates. 
While sugar stocks have underperformed the market by over 20% in the past month, we believe there is further downside from current levels. A combination of higher than- expected production in F2010, an ongoing slide in domestic and international sugar prices, potential large sugarcane production in F2011, and consensus downgrades will likely drive stock underperformance, in our view.

Our earnings estimates already appear aggressive given the sharp fall in domestic sugar prices over the past week. We remain sellers at current prices.

Domestic sugar prices continue to slide:  

According to the National Commodities and Derivatives Exchange Limited (NCDEX), spot sugar price (S Grade) in the Kolkata market as of March 22, 2010 was ~Rs3,000 per quintal (inclusive of excise duty), which on our estimate, is close to the breakeven price for millers with average sugarcane cost of ~Rs250 per quintal. Interestingly, even as the reported price is ~Rs3,000 per quintal,  

Channel checks suggest that sugar is trading at Rs2,900 per quintal with millers aggressively offloading imported sugar. Surprisingly even potential inventory pipeline re-stocking is unable to support domestic sugar prices at these levels.

Investors may look to play the potential bounce; risk/reward may not be favorable:  
While many investors hold a cautious longer-term view, they also believe that sugar stocks are oversold and they are positioned to play a potential short-term bounce in sugar

stock prices. While the near-term demand supply situation remains fragile, an ongoing sharp fall in domestic sugar prices, coupled with higher-than expected domestic sugar production may lead to panic selling of sugar. It may be difficult for stocks to bounce without the support of higher sugar prices, in our view.

We recommend that investors refrain from taking long-term positions in sugar stocks at current levels. 

(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 30-Mar-20102670.32 2091.03579.29
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category DateBuy Value Sell ValueNet Value
DII30-Mar-2010 1324.361224.25 100.11

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