Morning Calls 05.01.2010

Top 5 stock picks of the day | Mid-term picks


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Daily Call - Jan 5 2010

Daily Trading - Jan 5 2010

Daily Newsletter - Jan 5 2010

Src: ET and DP Blo

Technicals for the Week Starting Jan 4, 2010

Volumes, volatility should rise

The market registered new 18-month highs as it closed out the last settlement of 2009 with small net gains. The Nifty closed at 5,201.05 for a gain of 0.4 per cent. The Sensex closed at 17,464 for a gain of 0.6 per cent. The Defty was up 0.65 per cent as the rupee strengthened.

Breadth was decent in terms of a wide variety of shares being traded. Advances outnumbered declines comfortably. The FIIs were net buyers while domestic institutions were net sellers. However, volumes were down except on settlement day though that can be explained by the holiday spirit. The BSE 500 and the Midcaps were both up by about 0.6 per cent.

Outlook: The intermediate trend looks bullish but the short-term trend is difficult to diagnose. The market may be range bound between 5,100-5,250 in the early sessions of next week. The bullish intermediate trend suggests that the next target would be about 5,300. Expect intra-day volatility and volumes to rise regardless of market direction.

Rationale: Last week saw thin trading and tightly range-bound movement between 5,150-5,220. A movement beyond 5,225 and a close beyond that would reinforce earlier target projections of 5,300. On the downside, the intermediate trend will only be threatened if the market moves below 4,950.

Counter-view: Early January sometimes sees a continued absence of volumes, particularly until FIIs have established their attitude for the new fiscal. If volumes don't pick up, the market could drift downwards. Also the breadth of trading suggests that there is speculative retail participation and that sometimes comes right before a major correction.

Bulls & Bears: The IT index was the only underperformer last week, perhaps due to the rupee strengthening. Sector-wise, there was some selling in pharma. The rest of the market registered net gains but as mentioned above, on generally low volumes and with very little volatility. One sector-wise "long" possibility is PSUs since there appears to be selective buying across several PSU majors.

As such, it is difficult to target shorts and in most stocks, the trader should wait and watch for clear trends to be established before making large commitments. Stick to the highly liquid stocks in the F&O segment rather than dabble in smaller scrips that are retail-backed or operator-driven. In the absence of institutional participation, smaller scrips are more vulnerable to sell-offs.

MICRO TECHNICALS

NTPC
Current Price: Rs 235.65
Target Price: Rs 245

The stock has made a recent surge on high volumes. It has cleared severe resistance at Rs 230 and appears to have a minimum target of Rs 245-250 and it may run till Rs 260. Keep a stop at Rs 230 and go long. Consider booking partial profits at Rs 245 and reset the stop to Rs 240 and the target to Rs 255.

SBI
Current Price: Rs 2,269
Target Price: Rs 2,375

The stock has recovered from recent lows of Rs 2,135 aided by short-covering. It is capable of moving up till around Rs 2,350-2,375 before it hits heavy selling pressure. Keep a stop at Rs 2,240 and go long. Start booking profits above the Rs 2,350-mark.

PRAJ INDUSTRIES
Current Price: Rs 105.7
Target Price: Rs 110

The stock appears to have completed a bullish formation. It should have a target in the range of Rs 115-120 but there is strong resistance at Rs 110. Go long with an initial stop at Rs 101. Above Rs 109, you can exit. Or else, book partial profits at Rs 110, reset the stop loss to Rs 107 and reset the target to Rs 115.

DLF
Current Price: Rs 361.2
Target Price: Rs 385

The stock is consolidating and trading in a wide range between Rs 350-390. It could move up till the Rs 385-390 level if it develops a little volume. Keep a stop at Rs 355 and go long. Increase the position beyond Rs 370 and book profits beyond Rs 385.

NATIONAL ALUMINIUM
Current Price: Rs 417.9
Target Price: Rs 440

A recent burst of buying has pushed the stock up past resistance at Rs 405. The target would be something like Rs 440. Keep a trailing stop at Rs 405 and go long. Book partial profits at Rs 430 and reset the stop loss to Rs 425.

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Smart Portfolios ends 2009 on a high 04-JAN-10 Although Smart Portfolios kicked off on September 1, 2009, it feels good to end the calendar year on a cheerful note.

Markets at a glance 04-JAN-10 The prime minister’s assuring words about the robust economic growth and a firm close of European and Asian indices helped consolidate gains in a truncated week on account of Muharram and New Year.

A decade of good returns 04-JAN-10 Even the most practiced soothsayer will struggle to make any detailed predictions for the next 10 years.

Exploit low volatility in range-trading market 04-JAN-10 The December settlement concluded with very little volatility and a fair amount of carryover.

Volumes, volatility should rise 04-JAN-10 The market registered new 18-month highs as it closed out the last settlement of 2009 with small net gains.

Eyeing acquisitions 04-JAN-10 Strong brands, value for money strategy and focus on new markets and products will help Godrej Consumer sustain high growth rates.

Analysts' corner 04-JAN-10 The government has re-introduced a 5 per cent export tax on iron ore fines and doubled the duty on iron ore lumps to 10 per cent.

'Gold is my favourite currency' 04-JAN-10 Marc Faber, the legendary investor and the author of Gloom, Boom & Doom report shares his outlook on various asset classes including gold, agri-commodities and equities.

Insuring the future 04-JAN-10 To fund the expansion plans of its insurance and healthcare arms, Max India is issuing compulsorily convertible debentures and convertible warrants to Goldman Sachs and the promoters, respectively.

Bullish signals for 2010 04-JAN-10 The markets were on a roller coaster over the last two years which made it difficult to predict the road ahead.

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SESA GOA
Reco price: Rs 404
Current market price: Rs 410.95
Target price: Rs 344
Downside: 16.3%
Brokerage: Angel Broking


he government has re-introduced a 5 per cent export tax on iron ore fines and doubled the duty on iron ore lumps to 10 per cent. Last year, it had withdrawn the duties on iron ore fines on account of the sharp dip in iron ore prices; however, it had retained a 5 per cent levy on lumps. A pick-up in iron ore exports (up 21 per cent year-on-year to 53.2 million tonnes in April-October 2009) and improved export realisations (by over 70 per cent since April) prompted the government to raise the iron ore duties.

Sesa exports 90-95 per cent of its iron ore output. The brokerage expects Sesa’s 2009-10 and 2010-11 EPS to be negatively impacted by 3.3 per cent and 8.5 per cent, respectively. It has introduced 2011-12 estimates for Sesa and expects iron ore realisations to increase by 21.5 per cent (earlier 10 per cent) in 2010-11 and by 10 per cent in 2011-12, on the back of strong Chinese demand. Iron ore pricing negotiations are expected to start early next year (reports suggest a 20-30 per cent hike). But, considering what happened last year, it is difficult to predict whether China will accept the price hike.

At Rs 404, the stock is trading at 6.7 times 2011-12 estimated EV/EBITDA. The brokerage has recommended a ‘sell’ on the stock. At its target price of Rs 304, it will trade at 6 times 2011-12 estimated EV/EBITDA, which is at the higher end of its historic trading range.

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INDIABULLS REAL ESTATE
Reco price: Rs 218
Current market price: Rs 220.20
Target price: Rs 259
Upside: 17.6%
Brokerage: ICICI Securities

The developments in Indiabulls Property Investment Trust (IPIT) and new project launches look inspiring. Total saleable area of IPIT has increased from 5 million square feet (MSF) to 6.3 MSF owing to change in FSI. It has 2 MSF of constructed office space, of which 0.9 MSF has been leased and another 0.3 MSF is expected to be leased in March 2010 quarter. The management expects new leases to be done at Rs 185-190 per square feet, up from Rs 175 earlier.

The brokerage believes that IPIT is undervalued and estimates its equity value at Rs 6,000 crore or Singapore dollar $0.50 per unit (currently trading at $0.26). In 2009-10, Indiabulls Real Estate (IBREL) launched about 20 MSF of residential projects, including in Mumbai (9 MSF). Of the total, 2 MSF has already been sold (including 0.5 MSF in IPIT). IBREL recently raised Rs 2,700 crore through a QIP, which is yet to be deployed. The company is looking at strategic, big-ticket land-banks, particularly in Navi Mumbai, Dharavi and Mantralaya projects.

Since the stocks’ downgrade by the brokerage on July 31, 2009, it has underperformed the broader markets by 25 per cent. However, given the increase in saleable area at IPIT, pick-up in residential sales and bottoming of commercial lease rentals, it is upgrading the stock to ‘buy’ with target price of Rs 259 per share.

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TRANSPORT CORPORATION OF INDIA
Reco price: Rs 90
Current market price: Rs 89.75
Target price: Rs 100
Upside: 11.4%
Brokerage: Kotak Securities

Transport Corporation of India (TCI) has formed a strategy to cross sell its services through its five divisions. Each division would cross market services and provide single point logistics solutions to its clients. This is expected to increase business for TCI, going ahead. Based on its JV experience with Mitsui (Transystem Logistics International), TCI has been able to replicate the model and deliver efficient supply chain solutions (SCS) to industries like FMCG, retail and automobiles.

SCS is expected to grow at 30-35 per cent and the segment’s profitability is better than the overall business. TCI plans to increase its warehouse space from 8 MSF currently to 10 MSF by March 2011. About 15 per cent of the warehouse space is owned by TCI and rest is leased. In the real estate business, it is looking at jointly developing properties (at Delhi, Chennai, Bangalore, etc) for construction of residential and commercial space.

The implementation of GST could also bring in additional business through higher outsourcing of logistics activities to the third party logistics players like TCI. At Rs 90, the stock is trading at 1.7 times book value, 12.8 times earnings and 7.3 times cash earnings based on 2010-11 estimated numbers earnings. Maintain ‘accumulate’.

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HSIL
Reco price: Rs 61.25
Current market price: Rs 72.10
Target price: Rs 74
Upside: 2.6%
Brokerage: HDFC Securities

HSIL, earlier known as Hindustan Sanitaryware & Industries, enjoys a 40 per cent market share in the organised sanitary-ware industry. HSIL has increased its portfolio by adding more products in its bathroom and kitchen appliances products; it launched around 150 new products last year, of which, 60 per cent was in the premium category. Further, it has also started to venture into marketing and distribution of imported products to capitalise on its existing brand and distribution network. Besides, HSIL plans to increase its existing capacity by installing another kiln at its Bahadurgarh plant at a cost of about Rs 15-20 crore.

HSIL is expected to deliver revenue growth of 20.2 per cent and 23.7 per cent in 2009-10 and 2010-11, respectively on the back of enhanced product portfolio, increased demand and capacity utilisation. Its EBIDTA margins could stabilise in the 17-18 per cent range. However, higher depreciation and interest costs could be an over-hang. In 2009-10, HSIL’s PAT is expected to remain flat while in 2010-11, the same could increase by 29.1 per cent. Being an industry leader, HSIL is well positioned in the north as well as south to tap potential demand and is expected to grow faster than the industry. At Rs 61.25, the stock is trading at 8.2 times its 2010-11 EPS of Rs 7.5.

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OM METALS INFRAPROJECTS
Reco price: Rs 30
Current market price: Rs 31.50
Target price: Rs 39
Upside: 23.8%
Brokerage: SBICAP Securities

Om Metals Infraprojects is the largest hydro-mechanical equipment supplier in India with a market share of over 60 per cent. The company presently has an order book of Rs 636 crore, which is 3.5 times first half 2009-10 annualised sales and is expected to be completed in next 3 years. This provides substantial medium-term revenue visibility. In addition, the company has submitted bids for more projects, which are expected to take the total order book to over Rs 800 crore by 2009-10.

The company has recently forayed into the infrastructure segment by winning two contracts for the development of a port and a multi-product SEZ, both in Pondicherry. The SEZ project is spread over 860 acres and the company has a 20 per cent stake in it. It has a 50 per cent stake in the port project, which is to be developed in next 5-6 years. Both projects are expected to be developed through separate SPV's.

Further, there is potential to unlock value from its saleable land-bank (1.5 MSF) situated at Hyderabad, Jaipur, Mumbai, Faridabad and Kota. The stock is trading at 5.3 times its core 2010-11 estimated earnings. Maintain ‘buy’.

Current market prices as on December 30

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Top 5 stock picks of the day | Mid-term picks

Stocks that witnessed wild swings in last 3 months

Analyst's Pick: LARGE CAP: Anand Rathi Financial Services
3 Jan 2010, 0154 hrs IST

We are optimistic about M&M’s volume growth in the rest of FY10 and expect residual growth of 11 per cent in tractors and 20 per cent in UVs.

Analyst's Pick: LARGE CAP: Anand Rathi Financial Services
3 Jan 2010, 0153 hrs IST

We expect volume growth of 17.1 per cent in FY10, fuelled mainly by the Nano and the CV segment.

Analyst's Pick: MID CAP: Angel Broking
3 Jan 2010, 0148 hrs IST

The company is expected to clock around a 2.7 per cent y-o-y and 9.9 per cent yoy growth in net sales for FY2010E and FY2011E respectively.

Analyst's Pick: MID CAP: Angel Broking
3 Jan 2010, 0146 hrs IST

MSSL’s consolidated net sales is expercted to register substantial growth in FY2010E. On the margin front, we estimate the company to register a contraction owing to the increasing contribution of outside India sales.

Analyst's Pick: SMALL CAP: ICICI Securities
3 Jan 2010, 0143 hrs IST

Automotive Axle derives major revenues from the top two commercial vehicle makers Ashok Leyland and Tata Motors. They have reported strong growth in the past few months, indicating the revival of the segment.

Heard on the Street
1 Jan 2010, 0505 hrs IST

The New Year, with lots of multi-starrer and multibanner releases, has given investors in stocks of film producers and exhibitors a reason to rejoice.

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2010 Stock Picks Strategy

Results Preview - 3QFY2010

Morning Call - Jan 4 2010

Src: Economictimes, Business-Standard, DP Blog and etc

Stock Reports and Mkt analysis from Leading Sources

Mutual Funds Investment Picks - 2010

Weekly Newsletter - Jan 2 2010

Markets likely to test new highs

Weekly Newsletter - Jan 3 2010

ValueGuide 2010

Sobha Developers

Mutual Funds Analysis

Royal Orchid Hotels

Daily Newsletter - Jan 4 2010

Top Stock Picks - 2010

2010 Yearly Stock Picks

Hindalco Industries

Blackstone - 2010 will be a difficult year

IVRCL Infrastructure

Navneet Publications

Everest Kanto

Jet Airways, Wipro, Moser Baer, Sesa Goa, Voltas

Reliance Infrastructure

Elecon Engineering

MOre @ http://www.deadpresident.blogspot.com/


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TECHNICAL ANALYSIS: Index Outlook: Optimism reigns supreme
Indian equities bid a fitting adieu to 2009 with the Sensex waving merrily from its 52-week high. The New Year will begin on an irritating note for market intermediaries as trading begins an hour early from Monday. But then, as the ancient ...

STOCK MARKETS: Sensex outlook for 2010
If 2008 was a year of unprecedented decline in the equity market, 2009 will go down as the year of astounding rebound. In the Outlook for 2009 published on December 28, 2008, we had expected one leg of the bear market to end in the first ...

STOCKS: Orchid Chemicals & Pharmaceuticals: Sell
Shareholders can consider paring their exposure to the stock of Orchid Chemicals & Pharmaceuticals, which recently sold its antibiotic injectables business to the US-based Hospira Inc for $400 million (about Rs ...

STOCKS: Bombay Rayon Fashions: Buy
Investors with a long-term perspective can buy the stock of small-cap textile player Bombay Rayon Fashions (BRFL), manufacturer of fabric and apparel. At Rs 189, the stock trades at 10.6 times its trailing 12-month per share earnings. Though ...

STOCKS: India Cements: Book Profit
Investors in the stock of India Cements can consider booking profits at this point and entering the stock at a later date. Oversupply worries in the Southern region and the resultant pressure on prices in this region may curtail the ...

MUTUAL FUNDS: Tata Dividend Yield Fund: Hold
Investors can retain units of Tata Dividend Yield Fund (Tata Dividend), considering its steady returns track record over the long term. The fund seeks to invest in stocks that yield dividends higher than that of ...

INVESTMENTS: Investment ideas for 2010
The year 2009 started off on a subdued note for equity investors but by year-end both the BSE Sensex and Nifty were trading 80 per cent higher. With the markets trading at a price-earning multiple of well over 21 times from 11 times at the ...

STOCK MARKETS: Sensex in 2010
Global backdrop. Despite the strong gains recorded by equities across the world, most global benchmarks are still some way away from their previous peaks. The MSCI World index is positioned exactly half-way up the decline that ensued after the ...

TECHNICAL ANALYSIS: Index Strategy: Bull call spread on Nifty
Overall market sentiments as we move into a new trading year appear no less than bullish given the healthy rollovers seen in December derivative contracts. Traders can consider playing this uptrend in the market by setting a bull call spread ...

TECHNICAL ANALYSIS: Stock Strategy: Short strangle on Tata Power
Tata Power (1,382): The stock has been moving in narrow range for sometime. It closed last week above the crucial level of Rs 1,350. The outlook appears bullish as long as it stays above this level. The stock finds its next resistance at ...

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Wkly Tech Analysis: Old highs may be tested

The year 2009 ended on a high note, with benchmark (BSE & NSE) indices registering best yearly gains in the last two decades and touching fresh 19-month peaks. The year, however, will be most remembered for the Sensex and the Nifty hitting the upper circuit for the first time.

In the week under review, the markets surprisingly moved in an extremely narrow band despite the two holidays and the derivatives expiry. The BSE benchmark index, the Sensex, moved in a narrow range of 200-odd points. The index touched a high of 17,531 and settled with a gain of 104 points at 17,465.

Among index stocks, Reliance Infrastructure surged over 4 per cent. NTPC, Grasim, Bharti Airtel, SBI, Hindalco and Jaiprakash Associates were the other major gainers. Sun Pharma dropped 3.6 per cent. DLF, Wipro and ITC were some of the other prominent losers.

Lack of momentum on the upside suggests the up move may halt temporarily. The Sensex needs to sustain above 17,550 for further gains, while on the downside, the index may seek support at 17,385-17,335, below which the bears are likely to have the upper hand.

The longer-term picture, since we are at the start of the New Year, looks quite promising. Chances are that we may re-test the 21,000-mark this calendar year, while there are multiple strong supports for the index on the downside. The bias will remain bullish as long as the index remains above 13,840 this year. There is a further deeper support around 11,590 in case of extreme bearishness. On the positive front, the Sensex is first likely to target 19,550, followed by 21,090, in 2010.

The Nifty moved in a range of 62 points and ended with a gain of 23 points at 5,201. Last week, I had mentioned that the Nifty needed to sustain above 5,210 for fresh bullishness. As we see, the index was unable to close above 5,210 on any single day. Currently, the chart suggests that the Nifty needs to close above 5,237 for fresh bullishness. The Nifty may face resistance around 5,225-5,240 and find support around 5,177-5,163. A dip below 5,163 could see the index fall to 5,100 and then further lower to 5,010.

Unlike the Sensex, the yearly Nifty chart reveals that it will be difficult for the index to attain its 2008 peak (6,357) this year. In fact, the index has strong resistance around 6,225. The first significant target for the index is 5,790. On the downside, the index is likely to find considerable support around 4,600 and further lower at 4,175.

Src: BusinessLine and DP Blog, Business-Standard and Etc