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Monday, January 22, 2007
Intra-day Stock Ideas
NIFTY (4090) SUP 4064 RES 4116
BUY KTKBANK (159.20)
SL 155 T 166, 168
BUY OPTOCIRCUI (328.85)
SL 322 T 338, 342
BUY IVRCLINFRA (403.10)
SL 396 T 413, 415
SELL BOC (157.5)
@ 160 SL 163 T 151, 149
SELL PRAJIND (273.75)
@ 276 SL 280 T 266, 264
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
Cinemax India Ltd. (CIL) IPO Note
Cinemax India Ltd. (CIL) is an emerging brand in the entertainment sector with its prime focus on movie exhibition and gaming business with some limited interest in mall development. The company is one of the largest exhibition theatre chains in India operating 10 properties with 33 screens and 9,220 seats. It is also one of the largest owners of multiplex properties in India with 21 screens spread over approximately 146,000 square feet area. The company is a part of the Kanakia group which has an experience of 20 years in real estate development.
The Indian entertainment and media (E&M) industry has out performed the Indian economy and is one of the fastest growing sectors in the country. Historically the E&M industry grows at a faster pace when the economy is booming. India is a tremendous growth phase with real GDP growth likely to touch double digits in the years to come
Robust real GDP growth has translated into rising disposable income of Indians over the last few years. With an urge to improve the standard of living the marginal propensity to consume has also increased. People are now prepared to spend more on quality cinema viewing experience than in the past.
Considering H1 FY07 annualized FY07 earnings, the average P/E works out to be 29x. CIL, on post issue equity, trades will be available at 45.3x on lower price band of Rs135 and at 52x on upper band of Rs155. However, if we consider Market Capitalization to sales, the industry average works out to 11.1x, whereas on lower band of Rs135 the ratio for CIL is 7.6x and at upper band it is 8.8x. We feel that the industry is in a growing phase and with aggressive capex planned by CIL, it can see strong revenue and profitability growth in the years to come. Also by FY09 we believe that the company will attain a sustainable size. We recommend investors to Subscribe to the issue.
How Market Fared
Market likely to consolidate
Finally, profit booking was seen on the Dalal Street as the bulls decided to lock in some gains at the weekend, dragging the key indices lower today. Impressive performance from biggies like RIL, Ranbaxy, REL, Siemens powered the bulls forward. However, profit booking brought the markets lower higher from days high. However, a slight disappointment from Satyam brought the markets lower on Friday. Satyam Computers, REL, Cipla, Bajaj Auto and Tisco were the major losers among the 30 Sensex stocks. Finally, the BSE 30-share Sensex closed at 14183, lower by 35 points and NSE Nifty lost 19 points to close at 4090.
Oil and gas stocks were in momentum yet again after crude oil slipped 3.4% to $50.48 a barrel in New York yesterday. Futures earlier fell as low as $49.90, the lowest intraday price since May 25, 2005. February crude was trading at $50.34, down 14 cents from the New York close. HPCL was up by over 1% to Rs322, IOC was up 1% to Rs495.
FMCG stocks also recorded smart gains ahead of the announcements of the results of index heavyweights ITC and HLL. ITC rose 2% to Rs176
Frontline Technology stocks cooled off after recent gains. Satyam Computer dropped 5% to Rs489 after company announced its Q3 earnings with net sales at Rs15.95bn and profit at Rs3.43bn. Wipro was down by 3% to Rs620 and Infosys was down by 1% to Rs2202.
Cement stocks were up ion hopes of a increase in cement prices. ACC was up by 1% to Rs1109, Gujarat Ambuja Cement advanced by 2% to Rs149 and Grasim was up by 0.9% to Rs2891.
Market may remain cautious
The rebound in oil prices and expectation of decent third quarter results coupled with strong Asian markets in the present trades may open the market on a positive note. The Nifty could test higher levels at 4140 and may find supports at 4060, while the Sensex has a likely support at 14070 and may face resistance at 14325.
US indices traded mixed on Friday amid not so inspiring results from blue chips and rebound of oil prices. While the Dow Jones slipped by 2 points at 12566, the Nasdaq gained 8 points to close at 2451.
Indian floats largely had a mixed outing on the US bourses. MTNL was the major gainer and rose 5.47% while VSNL, Rediff, HDFC Bank andICICI Bank ended with around 1% gains each. Among the laggards Satyam Computers slumped 6.06% and Wipro tumbled 2.33% and Tata Moters slipped 0.82%.
Crude oil prices in the overseas market gained, with the Nymex light crude oil for February series added $1.51 to close at $51.99 a barrel. In the commodity space, the Comex gold for February delivery jumped by $8.30 to settle at $636.40 an ounce.
Stocks to watch
Maruti Udyog and Dr Reddy's Lab..
Market may move higher
The activity in the market is likely to be stock specific. Volatility may remain high ahead of the expiry of January 2007 futures contracts on Thursday (25 January 2007). According to a technical analyst with a domestic brokerage, the Sensex has strong resistance at 14,220, and may succumb to selling around this level. It needs to close above this level to resume the upward journey, he reckons. According to a dealer with a domestic brokerage, the market may see some minor technical corrections in bullish trend.
The major December 2006 quarter scheduled today are car major Maruti Udyog, Dr Reddy’s Lab, India Cements and National Aluminium Company.
FIIs have resumed buying after their heavy sales earlier during the month. Their net inflow was Rs 111.90 crore on Thursday (18 January). FIIs were net buyers in five out of six trading sessions, from 11 January to 18 January. As per provisional data, FIIs were net buyers to the tune of Rs 125 crore on Friday (19 January).
FIIs were net sellers to the tune of Rs 553 crore in index-based futures on 19 January. They were net sellers to the tune of Rs 91 crore in individual stock futures on that day.
Asian stocks edged higher on Monday following a recovery in oil and metal prices. Key benchmark indices in Hong Kong, Japan, Singapore and Taiwan were up between 0.2 - 1.8%
US stocks were mostly lower on Friday (19 January) as higher oil prices helped offset disappointing earnings. The Dow Jones industrial average slipped 2.40 points, or 0.02%, at 12,565.53 while the Standard & Poor's 500 Index rose 4.13 points, or 0.29%, at 1,430.50. The Nasdaq Composite Index advanced 8.10 points, or 0.33%, at 2,451.31.
Oil rose above $52 a barrel on Monday after falling temperatures in the US Northeast -- that drove up prices last week -- prompted investors to speculate that the colder weather would also hit Europe, boosting fuel demand. NYMEX crude for February delivery was up 56 cents, or more than 1%, at $52.55 a barrel.
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