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Monday, January 22, 2007

STRATEGY INPUTS FOR THE DAY


Markets to roll cautiously

There is no reason to do anything other than a rollover. The market is functioning and oil is plentiful.

It's that time of the month again when traders and investors would look to either square up their F&O positions or roll them over to the next month. Given the positive undertone, the players would be more inclined to do the latter. Some jitters are sure expected as the market appears directionless for the moment. For the day, we expect a cautious to higher opening and a choppy day.

The results so far have been quite good, barring an odd surprise like Satyam. A lot more earnings are due in the next few days. They may have a bearing on the market. Though FII inflows have slowed in recent times, reports say India could see investment worth $10bn this year. That should cheer up the bulls.

Global cues are mixed. In the US, major indices closed mixed. In Asia, key markets in Tokyo and Hang Seng are up sharply this morning. Benchmarks in Europe and in emerging markets such as Brazil and Russia finished higher. However, oil prices have rebounded from a 20-month low.

This being the settlement week on the derivative side, we will witness a lot of volatility. Also, we have only four trading days this week due to the Republic Day holiday on Friday. Hence, the market could remain sideways.

The spurt in inflation above the 6% mark has increased the bets of another rate hike by the RBI at its month-end meeting. Rising inflation and hardening interest rates could prove to be a dampener for both India Inc as well as for the markets.

Select small- and mid-cap stocks will gain in line with the trend in the past couple of weeks. Action will be centered on specific news based stocks.

One may look at Deepak Fertilizers as it is likely to spin off its real estate business into a separate company. Jyoti Structures may win a large order from Reliance Energy. One can look at the power equipment makers for long-term investment as the power sector is witnessing frenetic activity. Cement scrips will remain in the spotlight amid reports of another round of price hike.

Reliance Industries may build on its recent advance. A financial daily reports that the company may hive off its KG basin assets into a separate entity and offer a minority stake to foreign partner Chevron. Rajesh Exports and Uttam Galva might attract some attention on news they both of them are scouting for acquisitions.

ICICI Bank has come out with stellar set of numbers. Jet Airways could rise as the company has returned to profits. Dr. Reddy's will remain in the limelight as it is expected to announce strong numbers. Tata Motors may gain as it has started construction on the controversial 'one-lakh car' project at Singur, in West Bengal.

FIIs were net buyers of Rs1.26bn (provisional) in the cash segment on Friday. In the F&O space, they were net sellers of Rs4.14bn. On Thursday, foreign funds pumped in Rs1.12bn in the cash segment. Mutual Funds were net buyers of Rs589.5mn on the same day.

Major Bulk Deals:
Reliance Capital has bought Everest Industries from ACC; UBS has picked up Ion Exchange; Reliance Capital has also purchased MTNL; Morgan Stanley has picked up Murudeshwar Ceramics.

Results Today:
Bank of India, Cadila, Colgate, Indotech Transformers, Kotak Bank, NALCO, Voltas, Yes Bank, Castrol India, Bhushan Steel, India Cement, IDBI, J&K Bank, Jyoti Structures, Kewal Kiran, Maruti, Merck, Polaris, UB, Shaw Wallace and Zee Telefilms.

Market Volumes:
The turnover on NSE was down by 11% to Rs90.54bn. BSE It Index was the biggest loser and fell by 1.86%. BSE Capital Good Index (down 1.09%), BSE Pharma (down 1.27%) and BSE Metal (down 1.06%) were among the other major losers. However, BSE FMCG index added 0.81%.

Volume Toppers:
IFCI, Satyam, JP Hydro, MTNL, ITC, Tele Data Informatics, SAIL, R COM, 3i Infotech, Prism Cement, DCB, India Cements, Dena Bank, Dabur India, HLL and Hindalco.

Upper Circuit Filters:
Geodesic Info, Goldiam, HOV Services, Nirlon, Suven Life and Tele Data Informatics.

Delivery Delight:
3i Infotech, Arvind Mills, ACC, India Cements, India Infoline, ING Vysya Bank, ITC, IVRCL Infrastructures, Kernex Microsystems, MTNL, Opto Circuits, Prism Cement, Punj Lloyd, Reliance Industries, Sterlite Industries, Titan Industries and Zee Telefilms.

Brokers Recommendations:
Reliance Industries – Buy from Merrill Lynch with target of Rs1474
NIIT Tech – Buy from Emkay with target of Rs488

Long Term Investment:
MTNL

Major News Headlines:
ICICI Bank Q3 profit at Rs9.1bn (up 42%), revenues at Rs78.05bn (up 60%)
Satyam Q3 profit at Rs3.43bn (up 7%) and sales at Rs17.82bn (up 11%)
BILT Q2 profit at Rs621.5mn (up 31%), sales at Rs6.04bn (up 22.5%)
Marico Q3 profit at Rs284mn (up 30%), sales at Rs4.09bn (up 36%)
Marico to pay Rs1.7 a share interim dividend
Dabur Q3 profit at Rs717.3mn (up 24%), sales at Rs5.09bn (up 26%)
Dena Bank Q3 profit at Rs705.3m (down 15%), total income at Rs6.93bn (up 15%)
HCC Q3 profit at Rs219.9mn (down 3%) and income at Rs5.36bn (up 26%)
Jet registers profit of Rs400.4mn (down 34%) for the quarter ended Dec 31, 2006
Nucleus Software bags order from Japan
Aban Offshore ends talks to buy stake in Apexindo Pratama Duta
Tata Motors sets up assembly plant in Karachi