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."

--
Arvind Parekh
+ 91 98432 32381

Market Outlook 16th March 2010

derivatives EOD report on http://www.indiabulls.com/securities/mailermis/derivative-strategy/derivative-EOD-15-Mar-2010.htm

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)

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

	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. Lancôme 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)
Category	Date	Buy Value	Sell Value	Net Value
FII	12-Mar-2010	2651.76	2280.08	371.68

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	12-Mar-2010	1324.08	1414.89	-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