| Nifty likely to move in tight range of 100 points | |
 | Nifty exhibiting ascending triangle which is bullish breakout pattern if upper trend line breaks. Price is close to upper trend, expecting to break in few sessions. Nifty is currently trading above 8 and 34 Day EWMA indicating upward movement. If Nifty continues to trade above 34 Day EWMA then we could see upside up to 5,550 during the coming week. Technical momentum indicator Stochastic is currently moving in overbought zone, and expecting to rise further. RSI is trading in neutral territory at 55 showing positive crossover. Stocks to Watch: 1) HDIL: BUY 2) BHEL: Sell |
| Buying is expected in Realty, IT, Oil& Gas and Power stocks | |
 | India's medium-term growth trajectory remains promising amid a still gloomy world outlook. better diversification in manufacturing & service sector contribution to GDP, underleverage and better demographics will continue to accelerate growth in the Indian economy. Indian economy expanded at the fastest pace in Q1 June 2010. The GDP grew 8.8% in Q1 June 2010. Sensex is Currently, trading at PE of 21.68, premium to its peers. However, this premium could be justified given its macro strengths and diversified index composition. Next week, buying is expected in Reality, IT. Oil& Gas and Power stocks if Nifty sustain 5,480 level while selling pressure could witness in consumer durable, FMCG and banking stocks. Investors will eye on the data of industrial production for July 2010 which is due on Friday, 10 September 2010. |
| Global markets is likely to stay firm, though weaker unemployment data from US could weigh | |
 | Global equity markets rebounded during the week led by some strong economic data from US and China. Manufacturing data from US and China came better than expected while consumer confidence in US rose in the month of August. Strength in Euro against dollar lifted European indices while lower equity values underpinned buying activity. Further, markets looks to hold gains made during the week as economic data are supporting. Also, there will also be another round of US Treasury auctions, next week featuring USD 67 bn bonds. Though, the unemployment rate data from US could weigh on markets. Moreover, investors eyed will be on the interest rate decision from Japan, England and Canada. |
| Crude prices likely slip down, Gold prices may rise modestly | |
 | Crude prices are expected to slip down in the coming week as the US refineries will perform a seasonal maintenance and therefore reducing the demand for crude oil. Moreover, the refineries are cutting back on the operating rates which will further reduce the demand for crude oil. The Hurricane Earl may also hit the eastern seaboard in the coming week, thus bringing the prices further down. The gold prices are expected to advance in the coming week. The precious metal may register gains on speculation that global economic slowdown will spur demand for safe haven assets. The domestic demand will also stay strong, following the international trends and amidst the upcoming festivals and wedding season. |
| Liquidity in the market is expected to tighten in the short term | |
 | Liquidity in the market is expected to tighten in the short term as quarterly advance tax payments which will start from mid-September may suck Rs 40,000 crore from system. However, liquidity situation will improve after June-September monsoon rains as government spending is expected to pick up post monsoon rains. In the near term, both bond yields and call rates may witness some tightening. |
Sensex (18,221.4)
September has brought a fresh whiff of optimism with it. This has helped equities shrug the mounting concerns aside to prance higher. The Sensex that was on the brink of collapsing below 18,000, reversed along with its global peers to close firmly above this level once more.
The holiday-laden week ahead is not likely to alter the ongoing trend in the market. Stock-specific action could continue even as the index attempts to hold at current level. FIIs turned net buyers once again after their cautious stance in the last week of August. Volumes turned weak towards the end of the weekend. Open interest continues to pile high though market participants are now learning to live with this high figure.
Oscillators in the daily chart continue to signal caution. The 10-day rate of change oscillator is still featuring in the negative zone while the 14-day relative strength index is poised at 54. This implies that the Sensex has to rally a little further before the near-term view for the index turns positive. Weekly oscillators are moving sideways in the neutral zone denoting an ambivalent outlook over this time-frame.
The eighth month of this calendar is also complete and the Sensex has gained 4 per cent since the beginning of this year. July and August were especially trying since the index was confined to an extremely narrow range between 17,500 and 18.500 in this period. Sheer lack of momentum from a long-term time-frame is depicted in the monthly rate of change oscillator declining from 96 to 7 since the beginning of this calendar.
The upward moving trend channel that was forming from mid-July was breached in the ongoing decline leading to the assumption that one leg of the medium-term uptrend from May 25 trough is complete. The correction that now ensues can make the index move in the band between 17,500 and 18,500 for few more weeks.
The resistance in the zone between 18,500 and 18,600 will continue to daunt the index. But target on a move above this zone remains at 19,300. It is to be noted that the short and medium term trend continue to be up and a close below 17,500 is needed to signal that the index is heading towards the lower boundary of its intermediate term range around 15,500.
The Sensex is currently hovering around the resistance at 18,225. The multiple trajectories that the index can take over next week can be summarised as under,
Failure to make any headway in the early part of the week will result in a decline to 18,024 or 17,820 in the days ahead. Down-move will accelerate only on a close below 17,820 dragging the index to 17,700.
If the Sensex closes above 18,250 on Monday, it can head to a new 52-week high at 18,536. Target on a close above this level is 18,740.
In other words, the index can move sharply in either direction in the days ahead. Short-term view will stay positive as long as the index trades above 17,820.
Nifty (5,479.4)
The Nifty too reversed from the intra-week low of 5,349 to close 70 points higher. Key short-term resistance for the index is at 5,472 and the index is pausing just around this level.
A weak start to the week will see the Nifty declining to 5,411 or 5,350 in the upcoming sessions.
Short-term traders can hold their long positions as long as the index trades above the first support.
Down-move will accelerate on a decline below 5,350, giving the index targets of 5,313 and 5,236.
However all would be well if the Nifty manages a close above 5,500 early next week. This will pave the way for the Nifty rising to a new yearly high of 5,575 in the days ahead. Target on a close above this level would be 5,639.
We continue to advise caution to medium term investors as long as the index trades below 5,600.
Medium-term target above 5,600 stays at 5,780.
Better-than expected US jobs data and improved manufacturing data helped the Dow move back to the positive zone for the year. Other global benchmarks too moved higher last week. European indices such as the CAC, DAX and FTSE closed on a very strong note with around 3 per cent gains.
The medium-term down-trend from April highs however continues to be in force in these indices. The CBOE VIX reversed sharply lower to close at the near-term support at 21.3. A close below this level would mean that the bulls could be on the rampage again as optimism gains upper hand. The Dow recorded a spectacular rally last week to close 297 points higher. This index has reached the second resistance at 10,420 indicated in our last column. Close above this level will pave the way for the index heading towards the resistance band between 10,650 and 10,750. Near-term support for this index is at 10,120. Asian benchmarks were gung-ho and many such as Jakarta Composite, KLSE Composite, PSE Composite and Thailand SET index raced to new yearly highs last week.
Pivotals
Reliance Industries (Rs 925.6)
Reliance Industries achieved our target of Rs 920 and then ended the week with 2.5 per cent loss. The stock continues to be in a medium as well as short-term downtrend. The stock declining further to its crucial intermediate-term support at Rs 900 is on the cards as long as it trades below Rs 950 levels. Short-term traders should tread with caution in the ensuing week as the stock is moving sideways in a narrow range of Rs 915 and Rs 950. Strong up move above Rs 970 would mitigate the stock's short-tern downtrend and it that scenario a rally to Rs 990 or Rs 1,000 is possible.
Medium-term downtrend stays in places as long as the stock trades below Rs 1,050. Key support and resistance for the stock is at Rs 910 and Rs 970 respectively.
State Bank of India (Rs 2,773.5)
The stock declined in line with our expectation and achieved our first target of Rs 2,750 on Tuesday and later on closed the week just above this level with weekly loss of Rs 29.6. The stock is currently pausing above near-term support of Rs 2,750. A fall below this level will drag the stock lower to Rs 2,750 and then to Rs 2,675 or Rs 2,650. Traders with short-term perspective can hold their short position with stop at Rs 2,800. Near-term trend is down from August 27. However, a move above Rs 2,800 will mitigate the near-term downtrend and it can head to Rs 2,850 levels.
Medium-term trend is up for the stock since this February. Investors with medium-term perspective can remain invested with revised stop-loss of Rs 2,400.
Tata Steel (Rs 539.9)
The stock surged 5.8 per cent last week, weakening its prior short-term downtrend. Though the stock moved up last week, the decreasing volume in the daily chart signals cautiousness. Moreover, significant short-term resistance is at Rs 550. Inability to exceed this resistance will result in the stock moving range bound between Rs 520 and Rs 550. Traders can initiate fresh long position on a strong up move beyond Rs 550 with target of Rs 570.
However, as long as the stock trades below Rs 570, the stock's medium-term trend remains bearish and it has the possibility to decline to Rs 510 in the medium-term.
Infosys Technologies (Rs 2,771.6)
The stock bounced up from its intra-week low of Rs 2,666, negating our prior view and finished the week with 2.3 per cent gain. The stock is currently testing immediate key resistance of Rs 2,800 and its 50 day moving average positioned around Rs 2,790. Short-term traders can initiate long position only on a strong move above Rs 2,810 levels with initial target of Rs 2,840 and then Rs 2,883. Failure to move above Rs 2,800 will pull the stock lower to Rs 2,730 and Rs 2,700 in the short-term.
Medium-term trend continues to be up for the stock and investors can prolong their holdings with stop at Rs 2,600.
BEML (Rs 1,134.3)
The stock turned red hot and jumped 4.8 per cent on Thursday, breaching its immediate resistance level of Rs 1,040. This bullish momentum prolonged on Friday as well and the stock ended the week with 12.6 per cent gains. There is an increase in volume over the past two trading sessions. The daily relative strength index is reaching the overbought territory and the stock price is moving above the upper boundary of the Bollinger bands also indicating an overbought stock. Hence we don't rule out minor correction to its near-term supports at Rs 1,100 or Rs 1,080.
With this spike, the stock decisively penetrated its 200-day moving average and appears to have resumed its long-term uptrend that commenced from its December 2008 low of Rs 280. The stock's uptrend trend can prolong and could test its next key resistance at Rs 1,240 to Rs 1,250 band in the medium-term. On the other hand, a fall below Rs 1,080 will drag the stock to Rs 1,000 or Rs 980.
EIH (Rs 150.8)
The stock jumped 11 per cent following its announcement of a 14.12 per cent shares sale to Reliance Industries Investment and Holding on Monday and subsequently finished the week with those gains. The medium-term trend is up for the stock from its June 2010 trough of Rs 112. The stock recently breached its long-term significant resistance at Rs 140 and is trading well above its 50 and 200-day moving averages.
Strong move above its immediate resistance level of Rs 160 will lift the stock to Rs 180 in the medium-term. Nevertheless, inability to exceed Rs 160 will pull the stock lower to Rs 140. A fall below Rs 133 will weaken the stock's medium-term uptrend and it can decline to Rs 127 or even lower to Rs 120. —
Index Strategy - Benefit from the bear put
The Nifty hasn't had much luck over the last few sessions, what with it failing to break past its earlier high. This in addition to low implied volatility and high PCR suggests that the market could come under pressure. We suggest traders to set a bear put strategy using strikes 5,500 and 5,300. You can set it by buying Nifty Sep 5,500 put (closed at Rs 91) and selling Nifty Sept 5,300 put, which closed at Rs 34. The spread will entail an initial cost of Rs 57 apiece (or Rs 2,850 per lot).
Note that the bear put would turn profitable only when Nifty decreases in price. For this spread, the maximum profit zone would be hit when the index declines below 5,300 on expiry, as both options will then expire in the money. Note that in such a scenario, the higher strike put that was purchased will have higher intrinsic value than the lower strike put that was sold. Thus, maximum profit would be equal to the difference in strike price minus the cost of setting the spread (Rs 143).
Maximum loss will occur if the index closes above 5,500 on expiry. In such a scenario, both options will expire out of money with no value, and so, the entire net debit paid for the spread (Rs 57 a lot) will be lost. The breakeven point for the strategy is at 5,443.
Exit options
Exit the strategy and cut your losses if the index moves decisively past its key resistance at 5,550 before expiry. You can also close the spread if the market provides you with a profitable exit opportunity much before expiry. With the markets expected to be volatile, closing the spread prematurely at a profit is advisable.
Tata Motors: The long-term outlook for Tata Motors appears positive. However, the stock could see some pressure in the short-term. After registering its all-time high at Rs 1,058.5 in mid-August, the stock has been moving in a narrow range. Its immediate support appears at Rs 994, while resistance is at Rs 1,026. A drop below Rs 994 could weaken Tata Motors to Rs 853 and even to Rs 782. We expect the stock to move in a narrow range in the short-term with a downward bias.
F&O pointers
The Tata Motors futures closed at Rs 1,019.45 as against the spot close of Rs 1,014. The futures have shed open interest on Friday, indicating long winding. This signals that traders may not be sure of more upside from current levels. Option trading also indicates neutral view as 1,040 and 1,020 calls and 1,000 put accumulated open interest. However, the accumulation was not heavy.
Strategy
Traders with a penchant of risk can consider shorting Tata Motors September futures with a stop-loss at Rs 1,026 (on a closing day basis). Stop loss can be shifted progressively, in case the stock opens on a negative note, so as to protect the profit.
Traders could also consider short strangle. This can be initiated by selling both 1,040 call and 980 put. The call closed on Friday at Rs 24.5 and the put at Rs 17.2.
Short strangle strategy is a limited profit, unlimited risk option trading strategy taken when one thinks that the underlying stock will experience little volatility in the near-term. Maximum profit for the short strangle occurs when the underlying stock price on expiration date is trading between the strike prices of the options sold. At this price, both options expire worthless and the options trader gets to keep the entire initial credit taken as profit. Here the maximum profit could be the premium collected i.e. about Rs 42 per contract. The loss could be unlimited if Tata Motors takes a firm upside or downside move. The strategy therefore is strictly only for traders who can afford to take such a high risk. Moreover, writing (selling) options involves higher margin commitments.
Buoyant automobile sales, promising long-term outlook for telecom batteries and a diversified presence in the industrial segment are positives.
Batteries on charge
Investors with an appetite for risk and a long-term perspective can consider an exposure to the Amara Raja Batteries stock. The company is a pioneer in VRLA (Valve Regulated Lead Acid) batteries. Buoyant automobile sales, promising long-term outlook for telecom batteries and a diversified presence in the industrial segment signify good earnings visibility.
At the current market price of Rs 208, the stock trades at a price-earnings multiple of 11 times its trailing 12 month earnings. This is at about 50 per cent discount to Exide Industries that trades at 21 times.
Riding high on auto
The company derives 55 per cent of its revenues from the sale of automobile batteries. Of this, over 65 per cent comes from the high-margin replacement sales.
While OE margins may be lower, the strong demand for automobiles bodes well for the company's volume growth. More so, because Amara Raja supplies across all segments of the auto industry. Maruti, Hyundai, Mahindra and Mahindra, Tata Motors, Ford, TAFE, Ashok Leyland and Swaraj Mazda are among its clients. Besides, robust auto sales now indicate that there will be good replacement demand for batteries three to four years down the line.
Hence, to cash in on such demand, Amara Raja has tied up with OE clients to service the replacement demand of their (OEM's) customers. The company joined hands with Maruti Suzuki for a co-branded battery called 'Amaron MGB' to be sold through Maruti's outlets. Also, the company sells two-wheeler batteries in the aftermarkets and is expanding capacities for the same.
In July this year, it entered into an agreement with Honda to develop two-wheeler batteries.
Moreover, Amara Raja has pioneered in developing batteries for hybrid vehicles. It supplied batteries to the micro hybrid Scorpio, from the Mahindra stable and has also completed design and development of a micro hybrid programme for the Tata Ace.
Down, but not out
Under the Power Stack and Quanta brands, the company supplies batteries to the industrial segment. While the demand for automobile batteries pushed up sales and profits in the last few quarters, the industrial batteries division has been a dampener.
For the quarter ended June 2010, the company's net sales rose 45 per cent year-on-year to Rs 446 crore while profits fell by 16 per cent to Rs 36 crore. This is partly attributable to the prices and offtake of industrial batteries being impacted by theslowdown in the telecom industry due to tariff wars and postponement of capex plans of tower companies. But the long-term outlook for the telecom industry is intact.
Several companies which have been allotted 2G spectrum over the last two years are beginning to enter into infrastructure-sharing agreements with existing ones.
This, along with WiMax and 3G spectrum availability, necessitate enhancing efficiency and upgrading existing networks. This implies batteries of higher capacity would be required to power the same. Besides, replacement demand for batteries sold over the last two-three years will also kick in. The company will be able to leverage on its existing relationships with companies such as BSNL, Airtel, Idea, Tata teleto cater to this demand. Amara Raja is also expected to introduce the FAT (Front-Access Terminal) back-up batteries for telecom players which carry the advantage of convenience and cost efficiency.
Diversified presence
While telecom brings in 60 per cent of the industrial segment revenues, UPS, Railways and power utilities bring the rest.
Large-scale computerisation of banking networks and government departments, creation of high-powered data centres in IT and financial services industry, increasing penetration of PCs and the continued power shortage situation are expected to keep the market for UPS batteries ticking.
Also, Amara Raja's batteries power over 50 per cent of Tier-II and III AC coaches of the Railways and over 40 per cent of their signalling and telecom power supply. Government's priority to expand railway connectivity and modernise facilitiesand the intention to make India a manufacturing hub for coaches in South Asia lends visibility to earnings from this front.
Margin outlook
Amara Raja's operating profit margins took a hit in the first quarter, falling by almost ten percentage points Y-o-Y to about 14 per cent. While this can partly be attributed to pricing pressures and slower offtake of telecom batteries, price of lead, the key raw material has been a major reason. After peaking at $ 2370 per tonne in January 2010, lead prices currently hover around $1900-$2000 , implying margins may stabilise from now on.
While the company may be able to pass on some increase to customers, it may not score over Exide in terms of input prices.
Exide's acquisition of smelting companies relatively shields it from lead price volatility.Amara Raja too is trying to leverage its relationship with JV partner, Johnson Controls, for lead procurement.
If you're worried a fall in the broader market might wipe out your gains, there are some ways you can protect yourself from market vagaries.
Is the equity market ripe for a correction now? A simple question, but with no simple answer. So, while market analysts debate that, is there a way retail investors can shield their portfolios from the effect of a market fall? Many can, indeed, if they take judicious recourse to derivatives. Often conceived as high-risk instruments, and rightly so, derivatives can help during times of indecisiveness, when investors are in two minds about the market's direction. This article dwells on some simple derivative strategies that investors can adopt during such times of uncertainty.
Downside insurance
If your portfolio value has appreciated significantly with the market and you are worried a fall in the broader market might wipe out your gains, you can hedge against market vagaries by buying index put options. Since put options gain in value in a falling market, they help reduce the linkage between your portfolio and CNX Nifty.
But how many puts do you need to buy to protect your portfolio? Well, for that, first find the weighted average beta of your portfolio (refer to Table 1). The portfolio beta will reveal the extent to which the market gyrations influence its value. The higher the beta, the higher the correlation with the index (a beta of 1 is considered in line with the index).
To arrive at the number of puts needed, divide the product of the current value of your investment and portfolio beta by the Nifty value (spot into lot size). The strike price of the puts would depend on the hedge you require. For instance, if you want to hedge against a drop of 10 per cent in the bellwether index, buy yourself puts at a 10 per cent discount to the spot price (see Table 2). You can buy either near-month puts or far-month ones, depending on how soon you fear the markets may fall. Avoid current month contracts on days nearing the settlement day, as options would then tend to lose time value of money faster; in such cases, consider buying next month contracts.
Possible outcomes: If Nifty falls more than 10 per cent, as you had feared, your index puts will gain and make up somewhat for the notional loss your portfolio might have suffered. However, if the market doesn't correct then the purchased puts will expire worthless.
The premium paid for the puts, nonetheless, would be a one-time payout — the cost of insuring your portfolio. Portfolio hedging, however, may not be effective if stocks you hold suffer price corrections when the market does not. Separately, do take note of the brokerage commissions and other charges too.
Large shareholdings
What about investors who have a large holding in a particular company — either through employee stock options or through years of accumulation? Well, such investors too can hedge their stock holdings, depending on when they want to cash out on their investments.
If you are planning to sell the large holding of a particular stock in the near future (say, within a month), you can protect yourself from a sudden correction in either the broad market or the stock price. Hedge against market correction by buying index put options, depending on the percentage of loss you can tolerate (similar to portfolio hedging).
You can lock in the gains against any unfavourable price movement in the stock, in many ways. The simplest way is to buy out-of-money put options on the stock (if it is traded in the derivatives market). Since buying put options gives you the right to sell the shares at the strike price during the lifetime of the contract, select the option strike depending on the price at which you will be comfortable selling it.
Remember to match the lot size of the option with the number of shares you want to sell. Now if the share price does fall, the gain in the option premium would make up for the notional loss, and if it doesn't, the one-time premium outflow would be the cost of hedging.
'Covered-call' strategy
Using a covered call strategy is another way. This strategy involves selling 'out-of-money' stock call options (high strike price), while simultaneously holding an equivalent position in the underlying. Note that selling the call gives the buyer the right to buy the shares from you at the strike price on or before the expiry of the contract.Investors sitting on idle long-term holdings can also use this strategy to generate additional gains, provided they can forecast a trading range. While writing options is risky, it is not so in this case, as an equivalent equity holding would back it.
For instance, assume you want to sell 4,000 shares of ITC (from delivery) later this month, but fear that a market correction could ruin your plans. You can set a covered call by selling two lots (since one lot has 2,000 shares) of ITC call options at a price you would be comfortable selling it, say 170 strike. Note that while you can increase the strike price of the calls sold, you may not find enough buyers for such calls.
Possible outcomes: If the stock trades flat, the options will expire worthless and you will get to keep the initial premium. You get to keep the premium even when the stock price falls, as the options expire worthless then too. In both these scenarios, you would have outperformed the stock's returns in the cash market.
But if the stock price were to rise beyond the strike price (Rs 170), you will have to part with your shares at that price. You would, therefore, miss any upside potential in the stock in the cash market. That, however, should not worry you, as you were ready to sell shares at that strike price (Rs 170) in the first place.
The disadvantages
While the NSE has added many stocks to the F&O list, the list still isn't exhaustive. There could be instances of some of your stocks not being traded in the derivatives segment. Besides, unlike Nifty contracts, derivative contracts on stocks have different lot sizes which, in most cases, may be higher than your stock holding.
Investors will need to have a commensurate holding in a particular stock, before they take to hedging strategies involving stock options. Investors may also need to be mindful of the damning effect the time value of money can have on option premiums. While far-month contracts are available, they come at a high price.
Protective collarDid you know that you can use a combination of puts and calls to contain downside risks, and at a much lower cost? The Protective Collar does just that. You can set this spread by buying stock puts for a lower strike price and selling same-month calls for a higher strike price.
This strategy, however, is best suited for investors sitting on a significant notional gain. Such investors can use the strategy to lock into the minimum selling price by buying puts for that strike.
Take the example of ITC again. You set a protective collar by buying two 160 puts. This would lock in the minimum gains (Rs 160 minus the average stock acquisition cost) you expect from the stock. Select the strike price of the call such that you would be comfortable selling your shares at that price. You can then sell two 170 calls.
Depending on the strikes you select, there can also be cases where you may shell out very little. In this example, the protective collar now caps your downside risk (to Rs 160) as well as the upside potential (to Rs 170).
Possible outcomes: If the stock price falls much below the strike price of the put option, gains from the long put position will offset the notional loss in portfolio value. The calls will expire worthless and you get to pocket the premium.
If the stock price rises beyond the strike price of the call options, it will result in a loss, which the rise in value of the stock holding will offset. The put option will expire worthless, but the investors stand the risk of their calls being exercised. This may require them to part with their stock holdings at the strike price of the call (Rs 170).
However, if the stock price trades in a range between the put strike (Rs 160) and the call strike (Rs 170), both the options will expire worthless. In this case, you gain/lose only the cost of setting the spread.
- Supp / Resis levels for intraday for 6th Sep Monday in SPOT
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| *LTP stands for Last Traded Price as on Friday, September 03, 2010 4:04:57 PM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
#1R1 stands for Resistance level 1 @1S1 stands for Support level 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| #2R2 stands for Resistance level 2 @2S2 stands for Support level 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
#3R3 stands for Resistance level 3 @3S3 stands for Support level 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The levels given above are with respect to previous closing price on the NSE / BSE. |
| ||||||||||||||||||||||||||||||||
INVESTMENT VIEW
BUY Garware Polyster
CMP 199.35/-
From Sept'10, the Polyster film makers have raised the prices further by 25/- per Kg [from 150/- to 175/-]. Again there is no change in input costs, so whole of the incremental revenue will add to gross profits.
Further the Polyster film market has improved significantly from April'10 showing better demand and realizations. This will boost sales, margins and profits in FY'11, together with decline in finance cost, PAT will go up significantly in FY'11.
On top of this - Company may develop its prime property at Andheri, Mumbai [This land alone is worth Rs 250 Crs]; which can generate huge cash flows in next couple of years. Company also has surplus land at prime locations at Nasik & Aurangabad [worth Rs 400 Crs,.].
So against present Mkt cap of only Rs 350 Crs, investors are getting land assets worth appx. Rs 650 Crs, free. As the present stock price is not even discounting real worth of stock, based on expected FY'11 EPS of Rs 60 & improved Debt equity profile of the company.
With average realization going up further from Sept.'10 by hefty 25/- per Kg, we expect significant improvement in Sept and still better PAT in Dec'10 quarter. We have revised EPS estimate for FY'11 to Rs 60/- from Rs 47/- earlier.
BUY or Add more
Arvind Parekh
+ 91 98432 32381
