Market Outlook 19th Feb 2010

Corporate News Headline
•	Sun Pharma received approval from the US health regulator for generic version of anti-allergic product Prometh syrup. (BS)
•	Idea Cellular has alloted 19.91 crore shares to the shareholders of Spice Communications that has been merged with the Company. (BS)
•	Fedders Lloyd Corporation said the company in a consortium with Spain's Cobra Instalaciones bagged a power distribution project worth Rs. 2.57 bn from Madhya Pradesh Kshetra Vidyut Vitaran. (BS)
Economic and Political Headline
•	India's food price inflation eased in early March but fuel inflation continued to rise, adding upward pressure on headline inflation and maintaining the case for the Reserve Bank to raise rates at its April policy review. Data released showed the food price index rose 16.30% in the year to March 6, lower than an annual rise of 17.81% in the previous week, continuing a downward trend for the second straight week. (BS)
•	The cost of living in the US was unchanged in February, underscoring the Federal Reserve's forecast that inflation will remain low. The consumer-price index didn't increase for the first time since a decrease in March 2009, and followed a 0.2% gain in January, Labor Department figures showed. Excluding food and energy costs, the so-called core index increased 0.1%. (Bloomberg)
•	The index of US leading indicators rose 0.1% in February, pointing to an economy that may expand at a slower pace in the second half of 2010. The increase in the New York-based Conference Board's measure of the outlook for three to six months matched expectations and followed a 0.3% rise in January. (Bloomberg)

SPOT INDEX LEVELS TODAY

	5245.90	( 0.27 %)	14.00
		1	2	3
Resistance		5262.90	5279.90	5304.15
Support		5221.65	5197.40	5180.40

	17519.26		( 0.17 %)	29.18
			1	2	3
Resistance			17572.39	17625.52	17702.91
Support			17441.87	17364.48	17311.35

Strong & Weak stocks

This is list of 10 strong stocks: 

Chennai Petro, India Hotels, Idea, JSW Steel, Hindalco, Triveni, ICICI Bank, Sail Ltd, Indusind Bank & Polaris Software. 

And this is list of 10 Weak stocks: 

Renuka, Balrampur Chini, Bajaj Hind, Nagarjuna Fertil, Tulip, ICSA, Chambal Fert, Hind Petro, Dish TV, IOB.

Nifty is in Up trend  

NIFTY FUTURES (F & O):

Above 5268-5270 zone, rally may continue up to 5274 level and thereafter expect a jump up to 5284-5286 zone by non-stop. 

Support at 5243 & 5244 levels. Below these levels, expect profit booking up to 5225-5227 zone and thereafter slide may continue up to 5209-5211 zone by non-stop. 

Buy if touches 5204-5206 zone. Stop Loss at 5188-5190 zone. 

On Positive Side, cross above 5290-5292 zone can take it up to 5305-5307 zone by non-stop. If crosses & sustains this zone then uptrend may continue.

Short-Term Investors:

Bullish Trend. 

Up Side Target at 5438.30. 

Stop Loss at 5105.50.

Equity:

ICICIBANK (NSE Cash) 

Rallied on yesterday & rally was disappointing. Bulls fell short of expectations. Buying should continue today also. 

If rally continues, then it can touch 992.00 level during intra-day trades. It should close above this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 949.00 level and have caution.

INFOSYSTCH (NSE Cash) 

Rallied on yesterday & rally was disappointing. Bulls fell short of expectations. Buying should continue today also. 

If rally continues, then it can touch 2897.40 level during intra-day trades. It should close above this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 2733.70 level and have caution.

SBIN (NSE Cash) 

Rallied on yesterday & rally was disappointing. Bulls fell short of expectations. Buying should continue today also. 

If rally continues, then it can touch 2111.65 level during intra-day trades. It should close above this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 1948.00 level and have caution.

HINDCOPPER (NSE Cash) 

Fallen on yesterday & it was a surprise. Bulls fell short of expectations & that too, this scrip closed negatively. Selling should be considered as a speculative selling too. 

If fall continues, then it can tumble up to 440.45 level during intra-day trades. It should close below this level for further downtrend. 

If short covering starts, then it can zoom up to 591.75 level by non-stop and have caution.

OPTIONS (NSE):

NIFTY 5200 CALL OPTION 

Rallied on yesterday & Bulls fell short of expectations. Uptrend should continue & Rally should be considered as a speculative buying too. 

If rally continues, then it can zoom up to 111.80 level by non-stop. 

If profit booking starts, then it can tumble up to 55.30 level by non-stop and have caution.

TATASTEEL 640 CALL OPTION 

Rallied on yesterday & Bulls fell short of expectations. Uptrend should continue & Rally should be considered as a speculative buying too. 

If rally continues, then it can zoom up to 14.25 level by non-stop. 

If profit booking starts, then it can tumble up to 5.55 level by non-stop and have caution.

STOCK FUTURES (NSE):

WELGUJ FUTURES 

Rallied on yesterday & Bulls beaten expectations. Uptrend should continue today also & Rally should be considered as a speculative rally. 

If rally continues, then it can touch 294.60 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 269.80 level and have caution.

POLARIS FUTURES (4 Days Holding) 

Bullish Trend expected in next 4 trading days & Bulls should not get panic at lower levels. Uptrend should continue today & Bulls should not get panic today. 

Buy with a Stop Loss of 165.65 level with a Target of 185.05 level today. It may zoom even up to 197.60 level in next 4 trading days. 

Stop Loss for next 4 trading days can be kept at 153.70 level.

INVESTMENT VIEW

Heidelberg Cement-Undervalued, should trade upto Rs 100-Rs 125 

BSE 500292; CMP Rs 52.10

Heidelberg Cement- Substantial Undervaluation

At CMP of INR 52.10, the stock is trading at an EV/tonne of USD 41 (on current capacity of 3.1 mtpa), which is a steep discount to large-sized pan India companies (which are trading at USD 110-135/tonne) and other similar sized companies within the sector.

 Vision to reach 15-20 mtpa by 2014

The company aims to achieve 15-20 mtpa of capacity by 2014. It is looking at both organic growth and inorganic opportunities to achieve this target. India remains a focus market for Heidelberg (Global); hence, the parent is likely to continue to fund its subsidiary's domestic expansion initiatives.

Capacity to expand to 6.0 mtpa from 3.1 mtpa currently by March 2012

HCIL currently has a capacity of 3.1 mtpa and is working on a 2.9 mtpa brownfield expansion that is likely to come on-stream by March 2012. Total expansion cost is pegged at ~INR 9.0-9.5 bn, which is estimated to be funded through a mix of internal accruals and debt.

The company is also considering a few options for acquisitions in West India for clinker support (at present, it purchases clinker for the ~1 mtpa Raigad grinding unit in Maharashtra).

Accumulated losses wiped off; net cash at INR 4.9 bn

Heidelberg (Global) infused ~INR 3.6 bn in August 2006 in HCIL (erstwhile Mysore Cement; MCL), which helped the company repay total outstanding debt of ~INR 3 bn.

During Q1CY09, HCIL had absorbed all its accumulated losses (at the time of acquisition, MCL's unabsorbed losses stood at INR 3.5 bn). As on December 31,2009, HCIL had net cash of INR 4.9 bn.

Favourable regional exposure with 70% of current sales in central India

HCIL sells ~70% of its output in central India (55% - UP, 35% - MP) that has witnessed healthy YTD demand growth (UP – 20.8%, MP – 13.7%). Demand supply balance is likely to be less impacted in central and eastern India vis-à-vis South and West.  

(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	Date	Buy Value	Sell Value	Net Value
FII	18-Mar-2010	2458.17	1973.5	484.67

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	18-Mar-2010	1152.47	1205.62	-53.15

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

Market Outlook 18th Feb 2010

Corporate News Headline
•	Larsen & Toubro has won an order worth Rs. 10.13 bn from state-run explorer Oil and Natural Gas Corp. (BS)
•	GAIL India said it plans to transit 21% more natural gas through its pipelines at 114.8 million cubic meters per day in 2010-11 fiscal. (BS)
•	Housing Development Finance Corporation raised Rs. 5.00 bn through a zero-coupon bond issue, two sources familiar with the transaction said. (BS)
Economic and Political Headline
•	An Empowered Ministers' panel meeting is likely to take some decisions to tackle price rise and finalize the draft Food Security Bill, which seeks to give the poor the right to get rice and wheat at Rs 3 per kg. (BS)
•	Wholesale prices in the US fell in February more than anticipated, led by a drop in fuel costs and signaling there are few inflation pressures building in the early stages of the economic recovery. The 0.6% decrease in prices paid to factories, farmers and other producers was the biggest since July and followed a 1.4% January increase, according to figures from the Labor Department in Washington. Excluding food and fuel, so-called core prices climbed 0.1%. (Bloomberg)
•	UK jobless claims fell in February at the fastest pace since 1997, suggesting the economic recovery is strengthening as Britons prepare for a general election within weeks. The number of people receiving unemployment benefits dropped 32,300 from January to 1.59 million, the Office for National Statistics said in London. (Bloomberg)    5231.90 ( 0.65 %) 33.80          1 2 3 Resistance 5269.22 5306.53   5352.57   Support 5185.87 5139.83 5102.52 17490.08 ( 0.61 %) 106.90         1 2 3 Resistance 17581.42 17672.75 17768.73 Support 17394.11 17298.13 17206.80

Strong & Weak stocks

This is list of 10 strong stocks:  

JSW Steel, Educomp, TCS, Chennai Petro, Hindalco, Sesa Goa, Indusind Bank, LITL, Jindal Saw & Hero Honda. 

And this is list of 10 Weak stocks: 

Balrampur Chini, Bajaj Hind, Dish TV, ICSA, Nagarjuna Fertil, Chambal Fert, KS Oils, Hind Uni Lvr, KFA & IOB.

Nifty is in Up trend  

NIFTY FUTURES (F & O):

Above 5240 level, rally may continue up to 5257-5259 zone by non-stop. 

Support at 5225 & 5230 levels. Below these levels, expect profit booking up to 5204-5206 zone and thereafter slide may continue up to 5185-5187 zone by non-stop. 

Buy if touches 5166-5168 zone. Stop Loss at 5148-5150 zone. 

On Positive Side, cross above 5276-5278 zone can take it up to 5294-5296 zone by non-stop. If crosses & sustains this zone then uptrend may continue.

Short-Term Investors: 

Bullish Trend. 

Up Side Target at 5438.30. 

Stop Loss at 5105.50.

Equity:

ARSSINFRA (NSE Cash) 

Rallied on yesterday & Stunning performance too. Buying should continue today also & Bulls should not get panic at lower levels. 

If rally continues, then it can touch 941.85 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 781.00 level and have caution.

RELIANCE (NSE Cash) 

Rallied on yesterday & rally was disappointing. Bulls fell short of expectations. Buying should continue today also. 

If rally continues, then it can touch 1093.50 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 1047.10 level and have caution.

AXISBANK (NSE Cash) 

Rallied on yesterday & rally was disappointing. Bulls fell short of expectations. Buying should continue today also. 

If rally continues, then it can touch 1175.40 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 1118.65 level and have caution.

UNITECH (NSE Cash) 

Fallen on yesterday & Fall was surprising. Selling should continue today also & Bears should not get panic at higher levels. 

If fall continues, then it can tumble up to 70.10 level by non-stop.  

If short covering starts, then expect a surprise jump up to 76.10 level and have caution.

OPTIONS (NSE):

NIFTY 5200 CALL OPTION 

Rallied on yesterday & Bulls beaten expectations. Uptrend should continue & Bulls should not get panic at lower levels. 

If rally continues, then it can zoom up to 96.50 level by non-stop. 

If profit booking starts, then it can tumble up to 28.30 level by non-stop and have caution.

TATASTEEL 640 CALL OPTION 

Rallied on yesterday & Bulls beaten expectations during intra-day trades and thereafter profit booking pared gains. Rally should be considered as an intra-day rally. 

If rally continues, then it can zoom up to 11.65 level by non-stop. 

If profit booking starts, then it can tumble up to 1.65 level by non-stop and have caution.

STOCK FUTURES (NSE):

TRIVENI FUTURES 

Rallied on yesterday & Bulls fell short of expectations. Uptrend should continue today also. 

If rally continues, then it can touch 135.10 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 123.35 level and have caution.

CIPLA FUTURES (5 Days Holding) 

Bullish Trend expected in next 5 trading days & Bulls should not get panic at lower levels. Uptrend should continue today & Bulls should not get panic today also. 

Buy with a Stop Loss of 318.05 level with a Target of 351.30 level today. It may zoom even up to 356.90 level in next 5 trading days. 

Stop Loss for next 5 trading days can be kept at 314.00 level.

INVESTMENT VIEW

Heidelberg Cement-Structural Shift 

BSE 500292; CMP Rs 50.15

Equity Rs 226 crore

Cash In Hand-Rs 498 crore as of December 2009

Cash per share: Rs 22

Effective Cost per share- around Rs 28

(CMP-Cash In Hand) 

Total Capacity Under Operation-3.01 Mn TPA

Capacity Utilisation-87 per cent

Capacity To Rise To-5.0 Mn TPA by March 2012, with little debt on books. 

Ownership-69 per cent Heidelberg, Germany

FII/DII-9 per cent

Public Float-22 per cent

Structural Shift

Cement demand to enter new growth trajectory:  

Driven by a structural shift in demand drivers, the cement industry is at an inflection point as growth trajectory is estimated to shift upwards from its historical average of 8% to 10-12% over 5 years.  

Higher cement consumption (~1.5x from 1.25x of real GDP growth) is expected in the next trillion dollar (NTD) phase of GDP. We believe all ingredients are in place for the cement industry to move from a cyclical to a secular growth story.

Capacity utilization will surprise positively…:  

With most of the capacity addition expected to be operational by FY11, we estimate the industry's capacity utilization will bottom out by 2HFY11. With strong demand growth, excess capacity is expected to be absorbed faster by FY12. This will lay a solid foundation for the next growth phase as no major capacity additions have been planned beyond FY12. We estimate capacity utilization will bottom-out at 75% in 2QFY11 against 71% in 2QFY02 (the previous cycle).

…leading to positive surprise on pricing, profitability…:  

Given strong volume growth (10-12% v/s flat in FY01) and higher consolidation (the top 5 groups control 56% of capacity v/s 48% in FY01) will result in better operating parameters than in previous cycles. Hence, we anticipate the return of pricing power to the industry by 2HFY12 for a longer period, supported by strong secular demand growth and higher consolidation in the industry. A decline in average cement prices will be lower and operating margins (26% in FY11 v/s 13% in FY03) will be higher than the trough of the previous cycle.

…driving sector re-rating:  

Strong secular growth, higher consolidation and a stronger balance sheet would act as a catalyst for re-rating of the cement sector. We estimate cement stocks will bottom-out at higher valuations (than pervious cycles) over the next 2-3 quarters as cement prices remain volatile due to the impact of new capacities.

However, a structural shift would be the key driver of premium valuations in the next

upcycle. Cement stock valuations are attractive and offer a good entry point for the next upcycle. We prefer companies offering strong volume growth, cost saving possibilities and a strong balance sheet. 

(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.)

GOI targets Milk Price; Liberalises Imports 

Foreseeing shortages in milk supplies to cities ahead of the summer season, the Centre has permitted duty-free imports of up to 30,000 tonnes of milk powder and 15,000 tonnes of butter oil. 

TRQ regime 

The imports are, however, subject to a tariff rate quota (TRQ) arrangement, allowing only certain designated agencies to bring in these goods at nil duty.

Milk powder imports ordinarily attract 60 per cent basic customs duty, while being 30 per cent for butter oil. 

Till now, the TRQ regime permitted milk powder imports of up to 10,000 tonnes at a concessional five per cent duty during any financial year (April-March). 

But through a recent tariff notification, the Central Board of Excise and Customs (CBEC) has liberalised the in-quota quantity, by trebling it to 30,000 tonnes and also slashing the duty on such imports from five to zero per cent. 

Butter oil so far was not covered under TRQ, with all imports uniformly assessable at 30 per cent. But now, even this commodity (which includes white butter and anhydrous milk fat) has been brought under TRQ, with an in-quota duty-free import quantity of 15,000 tonnes.

The CBEC notification, dated March 12, has, however, clarified that the duty-free imports in both cases are subject to "Condition No. 1". That restricts the imports to those holding TRQ allocation certificates issued by the Directorate General of Foreign Trade (DGFT). 

Elegible agencies 

In the case of milk powder, the only entities eligible for allocation by the DGFT are the National Dairy Development Board (NDDB) and parastatals including STC, MMTC, PEC and Nafed.

The DGFT has not yet specified the eligible agencies for butter oil, but indications are that here too, only NDDB and the State-owned enterprises would be granted TRQ allocations.

Business Line had incidentally, on February 18, reported the Centre's proposed move to allow duty-free imports of up to 30,000 tonnes of milk powder and 15,000 tonnes of butter oil through NDDB and various cooperative dairies – a decision that has now been formally notified. 

Shortfall in Milk procurement 

The Centre's latest action come in the wake of dairies, particularly in the North (including NDDB's own subsidiary, Mother Dairy), experiencing shortfalls in milk procurement. The impact of this would be really felt during summer, when animals produce less milk in the natural course. 

"They are looking to fill the gap through imported powder and butter oil that can be reconstituted into milk", sources noted. In other words, a significant proportion of the milk that consumers in and around Delhi would drink in the coming months might be reconstituted material, as opposed to fresh milk. 

NDDB is learned to have already contracted, in advance, large quantities of imports of powder and butter oil from New Zealand's Fonterra Dairy and the Irish Dairy Board. 

Comparable prices 

Imported skimmed milk powder is currently available at about $2,800 a tonne, which is on par with domestic prices of Rs 130-plus a kg. Butter oil is quoting at $4,000 a tonne, which works out lower, at around Rs 210 a kg, compared to the Rs 200-225 that dairies here are realising on ghee. 

NDDB had, earlier, sought a ban on export of all dairy products – including casein, which enjoys a nine per cent duty entitlement passbook benefit on top – with the matter even being discussed at a Cabinet meeting in January. 

But with the Agriculture Ministry said to have opposed the move, the Centre has finally opted for import liberalisation instead of export restrictions. 

(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	Date	Buy Value	Sell Value	Net Value
FII	17-Mar-2010	2562.73	1746.79	815.94

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	17-Mar-2010	1350.53	1648.25	-297.72

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

Market Outlook 17th Mar 2010

Corporate News Headline
•	Reliance Communications said that it was open to acquisitions in India as a part of its strategy to grow its presence in the domestic market and would do so at the right opportunity. (BS)
•	Tata Power is looking to help arrange coal supplies from Australia, Indonesia and Africa for small power producers amid a growing shortage of the resource in India. (BS)
•	Bharti Airtel, in talks to buy the African mobile operations of Kuwait's Zain for USD 9 bn, has issued a term sheet to banks to raise up to USD 8.5 bn in offshore loans to fund the deal, banking sources said. (BS)
Economic and Political Headline
•	Finance Minister Pranab Mukherjee exuded confidence that the economy will soon return to 9%-10% growth, but said that double-digit inflation and excessive borrowing were major challenges. (BS)
•	Housing starts in the US fell in February as record snowfall in parts of the country hampered construction, while fewer building permits signaled demand is stagnating. Builders broke ground on 575,000 homes at an annual rate last month, down 5.9% from January's revised 611,000 pace that was higher than initially estimated, Commerce Department figures showed in Washington. (Bloomberg)
•	Prices of goods imported into the US fell in February more than anticipated, a sign there is little inflation pressure coming from abroad. The import price index decreased 0.3%, the first decline in seven months, compared with a revised 1.3% January gain, Labor Department figures showed in Washington. (Bloomberg INDEX SPOT LEVELS TODAY    5198.10 ( 1.35 %) 69.20          1 2 3 Resistance 5229.67 5261.23   5313.22   Support 5146.12 5094.13 5062.57  17383.18 ( 1.27 %) 218.19         1 2 3 Resistance 17483.13 17583.09 17749.62 Support 17216.64 17050.11 16950.15

Strong & Weak Stocks

This is list of 10 strong stocks:  

Chennai Petro, Educomp, LITL, Sun TV, TCS, Hind Zinc, JSW Steel, Sesa Goa, Hero Honda & Indusind Bank. 

And this is list of 10 Weak Stocks: 

Bajaj Hind, Balrampur Chini, Dish TV, Nagarjuna Fertil, ICSA, Chambal Fert, KS Oils, Hind Uni Lvr, Tata Comm & BEML.

Nifty is in Up trend  

NIFTY FUTURES (F & O): 

Rally may continue up to 5228-5230 zone by non-stop. 

Support at 5186 & 5195 levels. Below these levels, expect profit booking up to 5150-5152 zone and thereafter slide may continue up to 5116-5118 zone by non-stop. 

Buy if touches 5082-5084 zone. Stop Loss at 5048-5050 zone. 

On Positive Side, cross above 5262-5264 zone can take it up to 5296-5298 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. 

We are trading near the target level. We should believe that, target level won't be crossed. If closes this level by 3 consecutive days then uptrend may continue up to 5334.40 level by non-stop.

Equity:

SBIN (NSE Cash) 

Yesterday's rally was surprising & Speculative buying too. Buying should continue today also. 

If rally continues, then it can touch 2046.45 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 1968.20 level and have caution.

ICICIBANK (NSE Cash) 

 Yesterday's rally was surprising & Speculative buying too. Buying should continue today also. 

If rally continues, then it can touch 959.60 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 912.20 level and have caution.

JSWSTEEL (NSE Cash) 

Rallied on yesterday & in line with expectations. Buying should continue today also & Buying should be considered as a speculative. 

If rally continues, then it can touch 1227.05 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 1179.75 level and have caution.

TATAMOTORS (NSE Cash) 

Rallied on yesterday & in line with expectations. Buying should continue today also & Buying should be considered as a speculative. 

If rally continues, then it can touch 806.60 level during intra-day trades. It should close this level for further uptrend. 

If profit booking starts, then expect a surprise fall up to 772.10 level and have caution.

OPTIONS (NSE):

NIFTY 5100 CALL OPTION 

Closed Positively on yesterday & that was a surprise. Uptrend should continue & Bulls should not get panic at lower levels. 

If rally continues, then it can zoom up to 137.85 level by non-stop. 

If profit booking starts, then it can tumble up to 71.50 level by non-stop and have caution.

RELIANCE 1000 CALL OPTION 

Closed Positively on yesterday & that was a surprise. Uptrend should continue & Bulls should not get panic at lower levels. 

If rally continues, then it can zoom up to 52.40 level by non-stop. 

If profit booking starts, then it can tumble up to 8.10 level by non-stop and have caution.

STOCK FUTURES (NSE):

POLARIS FUTURES 

Looks like speculative rally. Uptrend should continue today also. 

Buy with a Stop Loss of 160.35 level for Intra-Day Gains. Target at 182.55 level.

IDEA FUTURES (5 Trading Days Holding) 

Choppy Trading expected with Positive bias in next 5 trading days. Uptrend should continue today & Bulls should not get panic today. 

Buy with a Stop Loss of 59.85 level with a Target of 63.55 level today. It may zoom even up to 66.10 level in next 5 trading days. 

Stop Loss for next 5 trading days can be kept at 57.70 level.

INVESTMENT VIEW

Hitachi Home Goes For Volumes, Hi-End Consumer Backed By Hi-Tech Products!

Hitachi Home-MNC White Goods Play 

BSE 523398; CMP Rs 224.10 

At 10 times FY10 estimated EPS of Rs 22, Hitachi is perhaps the strongest MNC play in the white goods segment that taps into the inherent aspirational demand of Indian consumer, rising income and an upgradation to quality.

The Rs 600 crore Hitachi Home & Life Solutions (India) Limited (HHLI) has been engaged in the business of manufacturing and sales of range of air conditioners in Indian and selected markets outside India.

While the range of Room Air Conditioners and Packaged Air conditioners are being manufactured in India the company sources the higher end of air-conditioning systems like chillers and set free from its affiliated companies worldwide. It is also engaged in the business of trading for the Refrigerators and Washing Machines. 

Consumer Appliances

The Indian consumer durable industry is estimated to be in the range of Rs 250,000 Mn. The home appliances industry (products that your company deals in) is estimated to be around Rs 87,500 Mn. Refrigerators contribute to the largest share of this at around Rs 38,000 Mn. followed by Room Air Conditioners at around Rs 27,500 Mn. and Washing Machines at 14,000 Mn.

Air Conditioning

The Indian air-conditioning industry is witnessing a radical change. There is a significant trend of the growing demand for the branded products. This has resulted in to reduction of the share of the unorganized sector. The simplification of fiscal structure of duties has put up all the players on the equal platform.

Also there has been an increase in the awareness and need for more of value added features in the air conditioners. The air conditioner industry enjoys the highest growth as a category in the appliances and is expected to grow over 20% in the years to come.

The Ductable and the central airconditioning system (CAS) which contributes to over Rs. 9,000 Mn. has been buoyant in the recent years and the growth in this category has exceeded 20%. This can be mainly attributed to the sizable capex rise both in the manufacturing and service sector especially in the IT and ITES services.

 Room Air Conditioners

The category consists of both the Window AC and Split AC for the use in residential and commercial spaces. The increase in the affordability levels and high ambient temperatures experienced in the summer months are the key growth drivers for the AC market in India.

Growing aspiration levels, purchase power of consumers and easy availability of finance schemes are the factors which have resulted in the acceptance of air conditioners as the utility items rather than a luxury one in many households and are now one in many preference list of household items.

Hitachi has introduced a new product in Splits AC 'IOTA' at an aggressive price point to catch on the trend. This price point is still at approximately 50% premium over the market average price.

Commercial range of Air Conditioners

The commercial air-conditioning comprises of both the Ductable Split AC and Large sized chillers. These find usage in the entire commercial sector comprising restaurants, retail shops, banks, offices, malls, supermarkets. The market for this segment is expected to grow in the range of 20-25%. The gamut of usage for the segment has increased. 

The huge opportunity provided has seen a large number of global players entering this segment and the competition is going to heat up in near future. HHLI with its range of Microcool Ductable is committed to doing well in this sector.

HHLI has launched the 16.5 Tr Ductable Aircon. This is unique because first time in India Hitachi has launched a truly convertible Ductable Air conditioner. Convertible means that it can be suspended from ceiling or can be mounted on the floor. Hence this product not only caters to the consultant's specification but also adds to the architects delight.

In the chiller division your company has launched large capacity chillers. HHLI will be able to leverage its strength of technically sound exclusive dealers across India who share HHLI value system of delivering high level of customer satisfaction.

Refrigerators and Washing Machines

HHLI introduced 3- Door Refrigerators and Big Capacity Washing Machines last year. These are imported from Hitachi factory in Thailand. The concept of 3-Door and the top loading fully automatic washing machines in large capacities is gaining popularity in India.

While sales have stabilised, HHLI has strategically decided to operate in the premium range in this segment. HHLI is poised to grow in this segment.

 Product Wise Performance

HHLI is in the forefront in Indian Air-conditioning industry with many firsts to its credit. HHLI has always pioneered in technology and innovation. HHLI has always been far ahead than the competition in introducing newer concepts and features in the air-conditioning.

Hitachi was the first one to introduce products like Hi-Wall Split AC, Remote controlled ACs, ACs with Plus one Technology to name a few.

 The company has always been considered as a technology powerhouse rendering solutions for the Indian Homes. The consistent efforts of marketing and sales team to position our offerings as differentiated products in the market place has helped HHLI to become the major company in the "Mass Premium" category.

 In the room air conditioners, our company has introduced New IOTA Split AC. Atom+One and Quadricool TM together with IOTA have reaffirmed HHLI's place as the innovation leader in the minds of Indian consumer.

 Because of its strong focus on quality of products and standards which are stricter than the Indian standards, HHLI has become a brand of choice in the consumers' mind. Hitachi has been able to capture sizeable premium on it's products and also maintained it's market share.

 In the Ductable category, HHLI has repeated the trend of out performing the market and has grown at a rate of 27% over last year. The addition of new 16.5 Tr truly convertible Ductable Microcool air conditioner surely is going to help your company to repeat history this year also.

HHLI through its imported screw chillers and addition of roof tops and large capacity chillers is poised to grow in a segment which is set to grow at a tremendous pace. 

(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

Morgan Stanley Downgrades Hindustan UniLever To Underweight 

 

We remain UW due to: 1) potential earnings growth volatility; 2) potential increase in

Competitive pressures from P&G; 3) potential rise in input cost pressures; and 4) potential slowdown in revenue growth. We spoke with management and here are the key takeaways from our conversation:

No conclusive slowdown in consumption:  

Contrary to the sharp slowdown reported by AC Nielsen for the industry for October-09 (from 14.8% in H1F2010 to 5.9% in Oct-09); there are no signs of a significant slowdown at the ground level. However, consumer downtrading in categories such as laundry continues and sharp price rises are also causing consumer downtrading in tea.

Although there is no conclusive evidence of consumer demand slowdown yet, the company is closely monitoring the potential impact of high food inflation on FMCG consumption.

Soap brands relaunched, PP growth steady:  

HUL has relaunched all its soaps brands and has deployed its complete portfolio to improve its market share. Management is hopeful of improving market share and believes that the current signs may not be reflective of the potential underlying trend. 

Personal products segment growth remains steady for HUL, contrary to the

slowdown demonstrated by the AC Nielsen retail off take data.

 Ad spend likely to be under 12% in F2010:  

HUL's ad spend to sales ratio was around 13% in H1F2010. However, H2F2010 ad spend to sales ratio is likely to be lower and hence the F2010 ratio is likely to be under 12%. However, during the six months ended Mar-09, HUL's ad spend to sales ratio was 10%. Hence it is likely that the ad spend to sales ratio may witness an increase in H2F2010 yoy.

Tax rate likely to be at 23%:  

HUL's tax rate in H1F2010 was around 23.2%, it is likely that F2010 tax rate will be in a similar range. The tax rate during the six months ended Mar-09 was around 20% and it is likely that HUL may witness 300 bps rise in the tax rate in H2F2010. 

(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	Date	Buy Value	Sell Value	Net Value
FII	16-Mar-2010	2013.65	1635.81	377.84

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	16-Mar-2010	1010.94	1169.49	-158.55

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."

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Arvind Parekh
+ 91 98432 32381