PATNI COMPUTER SYSTEMS LTD
PRICE: RS.489 RECOMMENDATION: BUY
TARGET PRICE: RS.560 CY10E PE: 11.2X
Growth rates likely to pick up as company specific initiatives start
contributing and macro for the sector improves gradually. Improving news
on major business segments to likely reflect on demand with a lag
Outlook on business is materially better; velocity of business though is still
to pick up.
Tweak price target and estimates upwards to account for higher volumes,
starting Q1CY10E. Maintain BUY with target price of Rs.560 (Rs.520
earlier).
Consistent revenue performance, scale up of accounts and margin gains
required to increase the scope for a sustained stock re-rating. Target
multiple works out to 13x CY10E EPS, a 35-40% discount to larger players.
High proportion of net cash on the balance sheet - cRs.130 per share will
likely provide downside support.
Company specific initiatives and an improving macro likely to
see volume growth picking up
n The Patni stock has remained sideways for the last 3m despite posting a strong
out- performance CYTD. Stock returns of 4x over the last 9m can be attributed
to (i) improving outlook for IT spends as major user economies show signs of
revival, and (ii) a revamped management team's efforts to secure sustainable
longer term growth.
n The Patni stock now trades at 11x CY10E, a c45% discount to a larger peer like
Infosys. The discount while narrower than earlier reflects Patni's lower than
sector growth rates over the last two years.
n The company has suffered from client-specific issues with its top client
remaining weak and also certain meaningful clients (c10% of revenues in CY05)
ramping down to negligible contributions currently- impacted negatively by the
M&A activity on the client side.
n A favorable base post the ramp down of key clients, focused approach to
account management, and likely bottoming of billing rates given the company's
belief that the price re-negotiation cycle has likely ended are likely to ensure
volume growth and profitability from the current levels in our opinion. Also a
series of management changes hold out promise of growth, given good
execution.
n Going forward Patni intends to focus on its five to six key verticals and aims to
specialize in some sub verticals (e.g., billing systems in the telecom vertical,
industrial automation in product engineering). It is also working on
geographical diversification with the setting up of focused regional set ups in
the US, EMEA, APAC and SAARC geographies.
The market opened at an unchanged level but it failed to move higher in the later part of the day. We may call it as
a sideways correction that generally happens after the massive run up, which we came across on Wednesday.
As per intraday pattern of Indices we can say that the market is set to move higher but due to lack of "volume
strength" we may see a sideways activity in the first half of the trading session. In that case, the market may even
correct to the level 5150/17280 or 5110/17140. However, from there onwards, we may expect gradual rise in the
market. In the second half, in case the market sustains above the level 5200/17440 then the next target for the
market should be in the range 5260/5270 (17640/17670).
Our advice is to trade long on recoveries especially in index stocks.
Wednesday, December 30, 2009
Tuesday, December 29, 2009
report as on 30/12/2009
The market remained neutral through out the day possbily because of over retracement in the short term. However,
it closed near to day's low on profit taking in IT, Pharma and banking stocks.
For the day the level 5175/16370 may act as a major support initially and on the breach of the same we may expect
further slide to the level 5155/17270. Our advice is to accumulate Index stocks around these levels with a medium term
view or with an upside target of minimum 5270/17640. In case, the market opens higher, then one can trade long to
ride the rally max up to 5270/17640. Around these levels we may expect heavy profit taking from positional traders. In
fact, intraday traders can even buy at the money Put option of the current month with a short term view in mind
around 5270/17640 levels.
it closed near to day's low on profit taking in IT, Pharma and banking stocks.
For the day the level 5175/16370 may act as a major support initially and on the breach of the same we may expect
further slide to the level 5155/17270. Our advice is to accumulate Index stocks around these levels with a medium term
view or with an upside target of minimum 5270/17640. In case, the market opens higher, then one can trade long to
ride the rally max up to 5270/17640. Around these levels we may expect heavy profit taking from positional traders. In
fact, intraday traders can even buy at the money Put option of the current month with a short term view in mind
around 5270/17640 levels.
Monday, December 28, 2009
report as on 29/12/2009
The week past and expected
Technically speaking: In the last week the market opened lower but failed to break the multi support level 4930/16600
in spite weakness in Indian rupee. It sustained at 4930 level and on Wednesday it recovered sharply that has helped bulls
to surpass the major level 5180/17350 on Thursday on the last week.
The formation of one and half month for the market suggests us that the market is in rectangle consolidation between
the levels 4930/16600 and 5180/17350, which is a bullish formation in terms of upward break out. On Thursday the
market has broken upward range and closed near to the same with an increase in volumes that has lifted the "medium
term trend of the market into positive territory". It seems that the market will sustain above the upward boundary level
5180/17350. If it happens then the minimum upward target for the market we may expect between the range 5300 and
5330 (17900) and maximum between 5400 and 5430 (18400). The level of 5090/17050 and 5050/16940 will act as a major
support for the week.
For the day on the higher side the level of 5235/17540 may act as a major hurdle for the market as the rally seems to be
over retraced in the short term it may invite profit taking around the same. In case the market lowers at the beginning
then the level 5140/5100 (17225/17100) may act as a major support for the market and positional traders can create fresh
long positions with a medium term view in mind.
In the last week there was sideways consolidation in pharmaceutical, cement, telecom and sugar stocks. There was
outperformance in steel and Infra stocks. The performance of the auto and IT was not satisfactory but still they have
managed to close into positive territory with a positive bias for the coming week. The trend was mixed in other metal
stocks and we have seen recovery in banking stocks from lower levels due to their oversold nature of the previous week.
In the current week or for next few days we may expect outperformance in Index stocks especially Reliance, ICICI Bank,
ONGC and HLL. Sector specific, we may see the positive activity in Infra, Capital goods, Power and Real estate stocks. The
positive activity in pharmaceutical and auto stocks depend on how fast they can come out of the sideways consolidation. IT
stocks may do well but we may expect outperformance in second line IT stocks. The mixed activity in metal stocks will keep
the trend volatile or stock specific.
Market wide open interest is seen at Rs 1,24,756 cr. Nifty futures have
seen significant fresh addition in the Jan series with positions in the Dec
series seen on the higher side.
n Nifty resumed its up-trend at 4950 odd levels. On the higher side resistance
is expected at 5180 after which we expect the index to test 5350.
Dec turnaround is seen at 5067 above which buyers remain strong.
n Real Estate major HDIL remains strong above 332 for 380 on the higher
side. Century textiles is expected to test 515/545 on the higher side. For
the medium term we remain positive on Biocon and GAIL.
n IDFC remains strong above 147 for 173/195 on the higher side; we advice
maintaining long positions with a stop loss placed at 147. Metal majors
continue to trade with a positive bias led by Tata Steel for an initial target
of 650.
n OI concentration is seen at 5200 call and 5000 put options. Call writing is
seen at 5300 while put buying is seen at 5200 strike. In the Jan series,
some call writing is seen at 5200-5250 levels; OI remains on the lower side
as of now.
LIC HOUSING FINANCE LTD
PRICE: RS.792 RECOMMENDATION: BUY
TARGET PRICE: RS.925 FY11E P/E: 9.0X; P/ABV: 1.9X
q Traction in mortgaged book likely to continue; we expect a 30% advances
growth in FY10 and 25% in FY11
q Net margins likely to improve following re-pricing of high of cost borrowings
due to replacement during Q3FY10
q Superior return ratio support valuation; risk-reward ratio has turned favorable,
with 15% upside from current market price levels.
q We upgrade our stock recommendation to BUY from Accumulate earlier
and maintain our price target of Rs.925 for the stock
Strong traction in mortgaged loan book
n Improving macroeconomic scenario and revival in retail demand will led to
strong traction in the mortgage finance business. India has relatively lower
mortgage penetration at ~6% of GDP, thus provides a broader landscape for
mortgage finance players.
n LICHF reported a strong growth of 32% yoy in its mortgage loans during
H1FY10 to Rs. 318.9bn, in the backdrop of whopping 75% growth in disbursement.
We expect the healthy growth trend to continue for the H2FY10 following
improving demand for real estate from the retail segment.
Net margins likely to improve following re-pricing of high of
cost borrowings due to replacement during Q3FY10
n In the wake of improved liquidity and easing of interest rates, we opine that
with replacement of high cost borrowings with relatively cheaper funds during
Q3FY10 will support net margins. We maintain our NIM estimates of 2.9% over
FY10 and FY11.
n We expect strong growth in earnings for LICHF on the back of robust mortgage
loan growth coupled with likely improvement in net margins. We expect a net
profit growth of 35% yoy for FY10 to Rs. 7.2bn and 14% yoy in FY11 to Rs.
8.2bn. Additionally, our earnings growth estimates factor in the recent equity
dilution and gains on sale of stake in LIC Mutual Fund for Rs. 1.38bn.
Higher recoveries and stringent credit monitoring aided material
improvement in asset quality
n Stringent provisioning policies and higher impetus on aggressive recoveries
aided significant improvement in asset quality, with improvement in coverage
ratio to 81% and a Gross NPA of 1.07% and net NPA of 0.21% in FY09. The
material turnaround in the asset quality has facilitated premium valuation for
the stock.
n In the wake of improvement in overall operating scenario, further significant
slippages in the mortgaged book are less likely. On the contrary, we expect
LICHF's asset quality to remain healthy, given its continuous efforts to check delinquencies
and enhanced recoveries
Technically speaking: In the last week the market opened lower but failed to break the multi support level 4930/16600
in spite weakness in Indian rupee. It sustained at 4930 level and on Wednesday it recovered sharply that has helped bulls
to surpass the major level 5180/17350 on Thursday on the last week.
The formation of one and half month for the market suggests us that the market is in rectangle consolidation between
the levels 4930/16600 and 5180/17350, which is a bullish formation in terms of upward break out. On Thursday the
market has broken upward range and closed near to the same with an increase in volumes that has lifted the "medium
term trend of the market into positive territory". It seems that the market will sustain above the upward boundary level
5180/17350. If it happens then the minimum upward target for the market we may expect between the range 5300 and
5330 (17900) and maximum between 5400 and 5430 (18400). The level of 5090/17050 and 5050/16940 will act as a major
support for the week.
For the day on the higher side the level of 5235/17540 may act as a major hurdle for the market as the rally seems to be
over retraced in the short term it may invite profit taking around the same. In case the market lowers at the beginning
then the level 5140/5100 (17225/17100) may act as a major support for the market and positional traders can create fresh
long positions with a medium term view in mind.
In the last week there was sideways consolidation in pharmaceutical, cement, telecom and sugar stocks. There was
outperformance in steel and Infra stocks. The performance of the auto and IT was not satisfactory but still they have
managed to close into positive territory with a positive bias for the coming week. The trend was mixed in other metal
stocks and we have seen recovery in banking stocks from lower levels due to their oversold nature of the previous week.
In the current week or for next few days we may expect outperformance in Index stocks especially Reliance, ICICI Bank,
ONGC and HLL. Sector specific, we may see the positive activity in Infra, Capital goods, Power and Real estate stocks. The
positive activity in pharmaceutical and auto stocks depend on how fast they can come out of the sideways consolidation. IT
stocks may do well but we may expect outperformance in second line IT stocks. The mixed activity in metal stocks will keep
the trend volatile or stock specific.
Market wide open interest is seen at Rs 1,24,756 cr. Nifty futures have
seen significant fresh addition in the Jan series with positions in the Dec
series seen on the higher side.
n Nifty resumed its up-trend at 4950 odd levels. On the higher side resistance
is expected at 5180 after which we expect the index to test 5350.
Dec turnaround is seen at 5067 above which buyers remain strong.
n Real Estate major HDIL remains strong above 332 for 380 on the higher
side. Century textiles is expected to test 515/545 on the higher side. For
the medium term we remain positive on Biocon and GAIL.
n IDFC remains strong above 147 for 173/195 on the higher side; we advice
maintaining long positions with a stop loss placed at 147. Metal majors
continue to trade with a positive bias led by Tata Steel for an initial target
of 650.
n OI concentration is seen at 5200 call and 5000 put options. Call writing is
seen at 5300 while put buying is seen at 5200 strike. In the Jan series,
some call writing is seen at 5200-5250 levels; OI remains on the lower side
as of now.
LIC HOUSING FINANCE LTD
PRICE: RS.792 RECOMMENDATION: BUY
TARGET PRICE: RS.925 FY11E P/E: 9.0X; P/ABV: 1.9X
q Traction in mortgaged book likely to continue; we expect a 30% advances
growth in FY10 and 25% in FY11
q Net margins likely to improve following re-pricing of high of cost borrowings
due to replacement during Q3FY10
q Superior return ratio support valuation; risk-reward ratio has turned favorable,
with 15% upside from current market price levels.
q We upgrade our stock recommendation to BUY from Accumulate earlier
and maintain our price target of Rs.925 for the stock
Strong traction in mortgaged loan book
n Improving macroeconomic scenario and revival in retail demand will led to
strong traction in the mortgage finance business. India has relatively lower
mortgage penetration at ~6% of GDP, thus provides a broader landscape for
mortgage finance players.
n LICHF reported a strong growth of 32% yoy in its mortgage loans during
H1FY10 to Rs. 318.9bn, in the backdrop of whopping 75% growth in disbursement.
We expect the healthy growth trend to continue for the H2FY10 following
improving demand for real estate from the retail segment.
Net margins likely to improve following re-pricing of high of
cost borrowings due to replacement during Q3FY10
n In the wake of improved liquidity and easing of interest rates, we opine that
with replacement of high cost borrowings with relatively cheaper funds during
Q3FY10 will support net margins. We maintain our NIM estimates of 2.9% over
FY10 and FY11.
n We expect strong growth in earnings for LICHF on the back of robust mortgage
loan growth coupled with likely improvement in net margins. We expect a net
profit growth of 35% yoy for FY10 to Rs. 7.2bn and 14% yoy in FY11 to Rs.
8.2bn. Additionally, our earnings growth estimates factor in the recent equity
dilution and gains on sale of stake in LIC Mutual Fund for Rs. 1.38bn.
Higher recoveries and stringent credit monitoring aided material
improvement in asset quality
n Stringent provisioning policies and higher impetus on aggressive recoveries
aided significant improvement in asset quality, with improvement in coverage
ratio to 81% and a Gross NPA of 1.07% and net NPA of 0.21% in FY09. The
material turnaround in the asset quality has facilitated premium valuation for
the stock.
n In the wake of improvement in overall operating scenario, further significant
slippages in the mortgaged book are less likely. On the contrary, we expect
LICHF's asset quality to remain healthy, given its continuous efforts to check delinquencies
and enhanced recoveries
Wednesday, December 23, 2009
report as on 24/12/2009
The market opened at an unchanged level to previous closings but quickly established strong grip on frontline stocks
and has broken almost all the major barriers. It was difficult to surpass the level of 5090/17050 in a one successive
move but still the bull lobby has managed and closed the market into respected territory. However, the level of 5185
is still unconquered on closing basis and till the market remains below it we can not say that the market is out of
worries.
For the day we will focus on 5100/17100 and 5185/17365 levels. While looking at the recovery in the market on
Wednesday we can confidently say that the level of 5100 may act as a major support for the market and may invite
spectators to join the next move. However, on the higher side to break the level of 5185/17365 the market will require
some concrete reason. In case the market able to break the level 5185 then we may expect the level of 5230/17570 in
a short span of time. For the day our advice is to trade with levels and with patience.
and has broken almost all the major barriers. It was difficult to surpass the level of 5090/17050 in a one successive
move but still the bull lobby has managed and closed the market into respected territory. However, the level of 5185
is still unconquered on closing basis and till the market remains below it we can not say that the market is out of
worries.
For the day we will focus on 5100/17100 and 5185/17365 levels. While looking at the recovery in the market on
Wednesday we can confidently say that the level of 5100 may act as a major support for the market and may invite
spectators to join the next move. However, on the higher side to break the level of 5185/17365 the market will require
some concrete reason. In case the market able to break the level 5185 then we may expect the level of 5230/17570 in
a short span of time. For the day our advice is to trade with levels and with patience.
Tuesday, December 22, 2009
report as on 23/12/2009
On Tuesday the market opened higher along with world's positive cues but failed to breach an important resistance
level at 5000. On Intraday basis the market has formed double bottom at 4965 levels that may act as an immediate
support for the market. In case the market trades below the same then we may see the retesting the levels 4940/4930
(16535). As the level has played crucial role in past two months we feel that unless the market closes below these
levels we can not turn further more bearish in the near term. Any recovery from these levels will be an opportunity to
create fresh trading long position with an upside target 5035/5065.
In case the market opens higher then again the level of 5000 and 5005 (16750) may act as a major hurdle for the
market and sustenance above it will lift the market to 5035 (16870) levels. Be cautious at 5035/16870 levels as it may
attract profit taking level in the first half of the trading session.
Market wide open interest is seen at Rest. 1, 19,422 cr. Volumes in nifty
futures remained significantly low as the index tested 5000 on the higher
side.
n Nifty Dec turnaround is seen at 5067 below which we remain in negative
territory. Put writing support is seen at 4900-5000 levels. We expect the
index to consolidate in the current range for some more time. Selling at
higher levels can be expected for target placed at 4920-4930 levels.
n Private Banks have bounced from recent lows. ICICI and AXIS Bank are expected
to continue with gains. From the medium term perspective, SBIN
remains positive above 2050.From the telecom space, Bart is expected to
test 332 in the near term.
n Real Estate major HDIL remains strong above 332 for 380 on the higher
side. For the medium term we remain positive on Ranbaxy, Biocon and
GAIL; accumulation on declines is advised.
n Nifty options OI concentration is seen at 5000 call and 4900 put options.
Put options have seen significant profit booking at lower levels. Put writing
support is seen in the range of 4900-5000. IV's remain significant low
at an average of 20. This indicates that market participants are not expecting
any significant movement in the current series.
level at 5000. On Intraday basis the market has formed double bottom at 4965 levels that may act as an immediate
support for the market. In case the market trades below the same then we may see the retesting the levels 4940/4930
(16535). As the level has played crucial role in past two months we feel that unless the market closes below these
levels we can not turn further more bearish in the near term. Any recovery from these levels will be an opportunity to
create fresh trading long position with an upside target 5035/5065.
In case the market opens higher then again the level of 5000 and 5005 (16750) may act as a major hurdle for the
market and sustenance above it will lift the market to 5035 (16870) levels. Be cautious at 5035/16870 levels as it may
attract profit taking level in the first half of the trading session.
Market wide open interest is seen at Rest. 1, 19,422 cr. Volumes in nifty
futures remained significantly low as the index tested 5000 on the higher
side.
n Nifty Dec turnaround is seen at 5067 below which we remain in negative
territory. Put writing support is seen at 4900-5000 levels. We expect the
index to consolidate in the current range for some more time. Selling at
higher levels can be expected for target placed at 4920-4930 levels.
n Private Banks have bounced from recent lows. ICICI and AXIS Bank are expected
to continue with gains. From the medium term perspective, SBIN
remains positive above 2050.From the telecom space, Bart is expected to
test 332 in the near term.
n Real Estate major HDIL remains strong above 332 for 380 on the higher
side. For the medium term we remain positive on Ranbaxy, Biocon and
GAIL; accumulation on declines is advised.
n Nifty options OI concentration is seen at 5000 call and 4900 put options.
Put options have seen significant profit booking at lower levels. Put writing
support is seen in the range of 4900-5000. IV's remain significant low
at an average of 20. This indicates that market participants are not expecting
any significant movement in the current series.
Monday, December 21, 2009
report as on 22/12/2009
The market opened to an unchanged level but due to failure to breach psychological level 5000 it collapsed towards
the end.
Monday's closing was nearer to major support area 4935/4925 (16570/530). These levels have supported the market
several times in the month of October and November. From here, we can expect one bounceback on the back of
positive global cues and it may last up to maximum 5000/16750 level. In case the market sustains above it in the
second half of the trading session then we may even expect the level of 5035/16870.
However, due to medium term weakness we can not expect the market to trade beyond the same (5035/16750). Fresh
short sellers may emerge around these levels with a positional view in mind or old pending long positions may come
under liquidation.
Our advice is to trade cautiously if it opens up with a huge gap. In case the market starts trading below the level
4925/16530 and sustains below it in the second half of the trading session then the levels of 4860/16350 seems
achievable.
Market wide open interest is seen at Rs. 1,18,386 cr. Nifty futures have
seen marginal shed in open interest with volumes seen at recent lows.
n Nifty Dec turnaround is seen at 5067 below which we remain in negative
territory. 4950 remains a significant support for the index. A bounce back
can be expected from the mentioned levels for 5000-5050 on the higher
side. For traders unless nifty sustain 5070 remains extremely important
for the sentiment to change.
n Private Banks have bounced from recent lows. ICICI and AXIS Bank are expected
to continue with gains. From the medium term perspective, SBIN
remains positive above 2050.
n Real Estate major HDIL remains strong above 332 for 380 on the higher
side. Selling is expected to continue in Capital goods majors. For the medium
term we remain positive on Ranbaxy, Biocon and GAIL; accumulation
on declines is advised.
n Nifty options OI concentration is seen at 5000-5100-5200 call options. Put
options have seen significant profit booking at lower levels. Put writing
support is seen at 4950 levels. A bounce back from the mentioned levels
would indicate initiation of an up-tren
the end.
Monday's closing was nearer to major support area 4935/4925 (16570/530). These levels have supported the market
several times in the month of October and November. From here, we can expect one bounceback on the back of
positive global cues and it may last up to maximum 5000/16750 level. In case the market sustains above it in the
second half of the trading session then we may even expect the level of 5035/16870.
However, due to medium term weakness we can not expect the market to trade beyond the same (5035/16750). Fresh
short sellers may emerge around these levels with a positional view in mind or old pending long positions may come
under liquidation.
Our advice is to trade cautiously if it opens up with a huge gap. In case the market starts trading below the level
4925/16530 and sustains below it in the second half of the trading session then the levels of 4860/16350 seems
achievable.
Market wide open interest is seen at Rs. 1,18,386 cr. Nifty futures have
seen marginal shed in open interest with volumes seen at recent lows.
n Nifty Dec turnaround is seen at 5067 below which we remain in negative
territory. 4950 remains a significant support for the index. A bounce back
can be expected from the mentioned levels for 5000-5050 on the higher
side. For traders unless nifty sustain 5070 remains extremely important
for the sentiment to change.
n Private Banks have bounced from recent lows. ICICI and AXIS Bank are expected
to continue with gains. From the medium term perspective, SBIN
remains positive above 2050.
n Real Estate major HDIL remains strong above 332 for 380 on the higher
side. Selling is expected to continue in Capital goods majors. For the medium
term we remain positive on Ranbaxy, Biocon and GAIL; accumulation
on declines is advised.
n Nifty options OI concentration is seen at 5000-5100-5200 call options. Put
options have seen significant profit booking at lower levels. Put writing
support is seen at 4950 levels. A bounce back from the mentioned levels
would indicate initiation of an up-tren
Sunday, December 20, 2009
report as on 21/12/2009
The week past and expected
Technically speaking: In last week, the market remained in a consistent downtrend and has broken psychological
support 5000/17000 on Friday under the leadership of Reliance Industries. The market has even broken the strong rising
trend line at 16900/5030 on daily basis that may be the negative indication for the medium term trend of the market.
Now the next major support exists at 4930/16590 level, which is a 38.2% retracement level of the entire rally starting from
4540/15330. Since September, the level 4930/16590 has played excellent support for the market however, dismissal of the
same has also invited sharp sell off in the month of October and late November.
We feel that the current up-move may lose its momentum if it sustains below the level 4800/16200 for more than two
days. It does not mean that the level of 4930 is not important, it is also equally important and positional traders should be
cautious below the same on daily basis. If we go through the world markets, there also the trend is not strong and may
take time to reverse the current weakness.
On the higher side, the level 5030/16890 and 5090/17050 may act as a major hurdle for the market and to reverse the
current weakness the market has to chase these levels on daily closing basis.
In the last week, there was out performance in Pharmaceuticals, Technology, Auto and Steel stocks. There was substantial
under performance in Banks, Real Estate and Oil & Gas stocks. The trend was mixed in Infra, Cement and other
commodities (sugar, copper, aluminum and zinc).
In case the market survives at 4930 for the short pull back then we may expect first pull back in Bank stocks due to its
oversold activity on daily as well as on weekly charts. The cement and Auto may be the next best sector to improve the
sentiment. For the technology sector we can say that we have seen consistent out performance in last several months.
One should be cautious at least in frontline stocks while trading. Other than steel stocks the metal pack is looking weak
and may offer shorting opportunity at each resistance levels
Technically speaking: In last week, the market remained in a consistent downtrend and has broken psychological
support 5000/17000 on Friday under the leadership of Reliance Industries. The market has even broken the strong rising
trend line at 16900/5030 on daily basis that may be the negative indication for the medium term trend of the market.
Now the next major support exists at 4930/16590 level, which is a 38.2% retracement level of the entire rally starting from
4540/15330. Since September, the level 4930/16590 has played excellent support for the market however, dismissal of the
same has also invited sharp sell off in the month of October and late November.
We feel that the current up-move may lose its momentum if it sustains below the level 4800/16200 for more than two
days. It does not mean that the level of 4930 is not important, it is also equally important and positional traders should be
cautious below the same on daily basis. If we go through the world markets, there also the trend is not strong and may
take time to reverse the current weakness.
On the higher side, the level 5030/16890 and 5090/17050 may act as a major hurdle for the market and to reverse the
current weakness the market has to chase these levels on daily closing basis.
In the last week, there was out performance in Pharmaceuticals, Technology, Auto and Steel stocks. There was substantial
under performance in Banks, Real Estate and Oil & Gas stocks. The trend was mixed in Infra, Cement and other
commodities (sugar, copper, aluminum and zinc).
In case the market survives at 4930 for the short pull back then we may expect first pull back in Bank stocks due to its
oversold activity on daily as well as on weekly charts. The cement and Auto may be the next best sector to improve the
sentiment. For the technology sector we can say that we have seen consistent out performance in last several months.
One should be cautious at least in frontline stocks while trading. Other than steel stocks the metal pack is looking weak
and may offer shorting opportunity at each resistance levels
Thursday, December 17, 2009
report as on 18/12/2009
On Thursday the market remained range bound between the highs and lows of previous days. As it failed to recapture
the level of 5090/17050 we may confidently say that the market is still weak and may reach minimum level of 4976/
16660 or maximum 14925/16550 level in the near term. For the day our advice is to buy only on recoveries.
"Top Buy" with a medium term view - MONNET ISPAT: Cls: 372.00.
The said stock has spent nearly three months between the range of Rs.350 and Rs.410. However, as per current
formation along with volumes we can say that the stock is interpreting bullish consolidation and may break the range
on the higher side. Our advice is accumulate between the levels Rs.375 and Rs.365 with an upside target of Rs.410
and Rs.455. Positional traders can keep a stop loss at Rs.350 on a daily basis.
Market wide open interest is seen at Rs. 1,15,056 cr. Nifty witnessed significant
volatility within the range of 5000-5070.
n Nifty Dec turnaround is seen at 5070 below which we remain in negative
territory. Immediate support is seen at 5000. We advice low long aggression
below 5070 with stock specific focus. Breach of 5000 can push the
index to 4950 levels.
n Metal majors trade with a positive bias. Tata Steel remains positive above
540 for 600 on the higher side. JSW Steel remains positive above 960.
IDFC and IDBI remain positive above 150 and 124 respectively.
n Tech majors trade with a positive bias. TechM is expected to test 1050 as
it remains strong above 980 levels. Mphasis is expected to gain significantly
above 690.
n Nifty OI concentration is seen at 5000 put and 5100/5200 call options. Call
writing is seen at 5150-5200 levels while put writing is seen at 4950-5000
the level of 5090/17050 we may confidently say that the market is still weak and may reach minimum level of 4976/
16660 or maximum 14925/16550 level in the near term. For the day our advice is to buy only on recoveries.
"Top Buy" with a medium term view - MONNET ISPAT: Cls: 372.00.
The said stock has spent nearly three months between the range of Rs.350 and Rs.410. However, as per current
formation along with volumes we can say that the stock is interpreting bullish consolidation and may break the range
on the higher side. Our advice is accumulate between the levels Rs.375 and Rs.365 with an upside target of Rs.410
and Rs.455. Positional traders can keep a stop loss at Rs.350 on a daily basis.
Market wide open interest is seen at Rs. 1,15,056 cr. Nifty witnessed significant
volatility within the range of 5000-5070.
n Nifty Dec turnaround is seen at 5070 below which we remain in negative
territory. Immediate support is seen at 5000. We advice low long aggression
below 5070 with stock specific focus. Breach of 5000 can push the
index to 4950 levels.
n Metal majors trade with a positive bias. Tata Steel remains positive above
540 for 600 on the higher side. JSW Steel remains positive above 960.
IDFC and IDBI remain positive above 150 and 124 respectively.
n Tech majors trade with a positive bias. TechM is expected to test 1050 as
it remains strong above 980 levels. Mphasis is expected to gain significantly
above 690.
n Nifty OI concentration is seen at 5000 put and 5100/5200 call options. Call
writing is seen at 5150-5200 levels while put writing is seen at 4950-5000
Wednesday, December 16, 2009
report as on 17/12/2009
On Wednesday stocks seesawed through out the day before closing to neutral (unchanged) levels at 5042/16912.
Generally the market closes to almost unchanged levels before the major event (Fed Meet) that we observed on
Wednesday. However, it brings huge move on either side on the next day and so we have to be prepared for the same
on Thursday.
For the day we will focus on 5070/16995 and 5000/16770 levels to design our trading strategy. In case the market
sustains above or below these given levels in the second half then we may come across the significant move in the
same direction. Above the level 5070/16995 the market may jump up to 5125/17200 with a major hurdle at 5090/
17050. However, if it opens lower and sustains below the level 5000/16770 then it may fall to the level 4935/16580
with a major support at 4975/16660. Around 4935/16580 levels investors can invest in select outperforming sectors like
Pharmaceutical, Tech and FMCG. For the day our advice is to trade as per levels.
Market wide open interest is seen at Rs. 1,14,998 cr. Nifty witnessed significant
volatility within the range of 5000-5070. Selling was seen at
higher levels.
n Nifty remains in negative territory below 5075. Below 5125 expect the
index to test 4950-4970. In the near term nifty is expected to bounce to
5080-5100 levels from where selling is expected. Termination of this corrective
down-move is expected at 4950 levels.
n Reliance has significant support at 1050 levels; expect some consolidation
at current levels before resumption of uptrend. Cairn remains in up trend
above 255; correction should be used to accumulate in the cash segment.
GAIL remains in medium term up trend.
n Metal majors trade above major support levels. Tata Steel remains positive
above 540 on closing basis. SAIL remains positive above 200. Weakness
expected in Real estate majors led by DLF and HDIL. Further weakness
expected in banking stocks. PNB trades weak below 925.
n Nifty OI concentration is seen at 5000 put and 5200 call options. Call writing
is seen at 5150-5200 levels while in case of put options writing is seen
at 4950-5000 levels. Put options have seen significant profit booking in
the previous two trading sessions.
Generally the market closes to almost unchanged levels before the major event (Fed Meet) that we observed on
Wednesday. However, it brings huge move on either side on the next day and so we have to be prepared for the same
on Thursday.
For the day we will focus on 5070/16995 and 5000/16770 levels to design our trading strategy. In case the market
sustains above or below these given levels in the second half then we may come across the significant move in the
same direction. Above the level 5070/16995 the market may jump up to 5125/17200 with a major hurdle at 5090/
17050. However, if it opens lower and sustains below the level 5000/16770 then it may fall to the level 4935/16580
with a major support at 4975/16660. Around 4935/16580 levels investors can invest in select outperforming sectors like
Pharmaceutical, Tech and FMCG. For the day our advice is to trade as per levels.
Market wide open interest is seen at Rs. 1,14,998 cr. Nifty witnessed significant
volatility within the range of 5000-5070. Selling was seen at
higher levels.
n Nifty remains in negative territory below 5075. Below 5125 expect the
index to test 4950-4970. In the near term nifty is expected to bounce to
5080-5100 levels from where selling is expected. Termination of this corrective
down-move is expected at 4950 levels.
n Reliance has significant support at 1050 levels; expect some consolidation
at current levels before resumption of uptrend. Cairn remains in up trend
above 255; correction should be used to accumulate in the cash segment.
GAIL remains in medium term up trend.
n Metal majors trade above major support levels. Tata Steel remains positive
above 540 on closing basis. SAIL remains positive above 200. Weakness
expected in Real estate majors led by DLF and HDIL. Further weakness
expected in banking stocks. PNB trades weak below 925.
n Nifty OI concentration is seen at 5000 put and 5200 call options. Call writing
is seen at 5150-5200 levels while in case of put options writing is seen
at 4950-5000 levels. Put options have seen significant profit booking in
the previous two trading sessions.
Tuesday, December 15, 2009
report as on 15/12/2009
On Tuesday the market has broken an important support at 5080/17025 level that has triggered weakness in the
market and forced to close below the major support 5030/16920 level. This may lead one more round of weakness in
coming few days because it's a break down out of distribution zone, which was between 5080 and 5180 levels. The
next major support for the market exists at 4925/4935 (16580/16530) levels.
As per overall formation it seems that it will be tough for the market to recapture the levels of 5080/90 (17025/17060)
in the near term at least on the closing basis. If it happens then only we can say that the market has absorbed the
bearishness. Any pull back towards the level 5090/17060 will be an opportunity to sell short with a tight stop loss
above it. However, any steep sell off at the beginning to the levels 4935/4925 may offer short term traders an
opportunity to trade long with a tight stop loss below the level 4900 with a short term prospect.
Market wide open interest is seen at Rs. 1,17,316 cr. Futures trade at a
marginal discount as compared to previous trading sessions premium.
Marginal addition is seen in stock futures.
n Nifty remains in negative territory below 5075. Below 5125 expect the
index to test 4950-4970.
n Metal majors trade above major support levels. Tata Steel remains positive
above 540 on closing basis. SAIL remains positive above 200.
n Tech majors trade with a positive bias. Infosys has seen significant addition
in open interest at 2480. Sustain above the same can push the stock
to 2565. Mphasis and TECHM are expected to consolidate at current levels.
n Weakness expected in Real estate majors led by DLF and HDIL. Further
weakness expected in banking stocks. PNB trades weak below 925.
n Nifty options concentration seen at 5200 call and 5000 put options. Call
writing at 5150-5200 levels led to selling. In case of put options writing
seen at 4950-5000 levels though positions remain low as compared to call
options. IV's remain on the lower side.
market and forced to close below the major support 5030/16920 level. This may lead one more round of weakness in
coming few days because it's a break down out of distribution zone, which was between 5080 and 5180 levels. The
next major support for the market exists at 4925/4935 (16580/16530) levels.
As per overall formation it seems that it will be tough for the market to recapture the levels of 5080/90 (17025/17060)
in the near term at least on the closing basis. If it happens then only we can say that the market has absorbed the
bearishness. Any pull back towards the level 5090/17060 will be an opportunity to sell short with a tight stop loss
above it. However, any steep sell off at the beginning to the levels 4935/4925 may offer short term traders an
opportunity to trade long with a tight stop loss below the level 4900 with a short term prospect.
Market wide open interest is seen at Rs. 1,17,316 cr. Futures trade at a
marginal discount as compared to previous trading sessions premium.
Marginal addition is seen in stock futures.
n Nifty remains in negative territory below 5075. Below 5125 expect the
index to test 4950-4970.
n Metal majors trade above major support levels. Tata Steel remains positive
above 540 on closing basis. SAIL remains positive above 200.
n Tech majors trade with a positive bias. Infosys has seen significant addition
in open interest at 2480. Sustain above the same can push the stock
to 2565. Mphasis and TECHM are expected to consolidate at current levels.
n Weakness expected in Real estate majors led by DLF and HDIL. Further
weakness expected in banking stocks. PNB trades weak below 925.
n Nifty options concentration seen at 5200 call and 5000 put options. Call
writing at 5150-5200 levels led to selling. In case of put options writing
seen at 4950-5000 levels though positions remain low as compared to call
options. IV's remain on the lower side.
Monday, December 14, 2009
report as on 15/12/2009
Nifty opened the week on a positive note against global trends. It tested
the higher end of the range at 5150 levels but failed to sustain the same.
Selling pushed the index down to 5100 and finally closed around the same
levels.
n Market wide open interest is seen at Rs. 1,13,110 cr. Nifty futures have
seen marginal shed in open interest with volumes seen at recent average
levels.
n Nifty remains in corrective move below 5185 levels. On the downside support
is seen at 5100/5050 levels. Dec turnaround is seen at 5070 above
which the underlying sentiment remains positive. Caution is advised below
5070 levels.
n Selling is expected in select Banking stocks. ICICI has major resistance at
875 levels. SBIN remains weak below 2300-2325 levels and long positions
should be avoided in the same. Similarly PNB remains weak below 925.
n Real estate majors remain weak at current levels. IDFC has critical support
at 162 levels. A bounce from here is expected to push the stock to
fresh highs. Rel Infra remains positive above 1030 for 1130 on the higher
side.
n Nifty OI concentration is seen at 5200 call and 5000 put options. Call writing
is seen at 5150-5200 levels making it difficult for the index to sustain
above the same. In case of put options some support is seen at 4950-5000
levels.
OUTLOOK
n Nifty Dec turnaround is seen at 5075 above which it remains in positive
territory. We advice holding long positions above the same. Long aggression
should be avoided below the same. In the near term consolidation is
expected in the range of 5050-5200.
n GAIL traders with a positive bias above 407 for 425/250. We remain positive
on the pharma space in the medium term. Rel Infra and Rel Cap are
expected to trade with a positive bias in the near term. IDFC has critical
support around 162 levels; bounce from mentioned levels is expected to
initiate a fresh uptrend for the index
HDFC BANK
PRICE: RS.1757 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1840 FY11E P/E: 21.0X; P/ABV: 3.4X
We met with Mr. Paresh Sukhtankar (ED, HDFC Bank) to get an update on
the bank's strategy and future outlook.
CBoP retail is performing on the expected lines. Out of total CBoP retail
book, 2W (two wheelers) book has almost run off whereas personal loan
book would take another 10-12 months to completely run off.
Bank was able to maintain its margin even during Q3FY09 and Q4FY09,
when bulk deposit rate was hovering around 5-6% higher than the current
prevailing rate. So, we believe that it would be easier for the bank to
protect its margins.
We maintain the earning estimates for FY10E and FY11E and maintain
ACCUMULATE rating on the stock with a target price of Rs.1840 based on
P/ABV of 3.5x its FY11E adjusted book value and P/E of 22x its FY11E
earnings.
We like HDFC Bank, a leader among private sector banks with healthy
credit growth, one of the highest CASA, high and stable margins, high RoE,
cleaner asset quality and a large proporation of fees in total income.
Key Takeaways
We met with Mr. Paresh Sukhtankar (ED, HDFC Bank) to get an update on the
bank's strategy and future outlook. We returned positive to recognize its strategic
response to recent macro economic developments.
Loan growth is picking up
Management has been reiterating that the bank endeavors to grow 3-4% faster
than the system. In our view, banking system is likely to grow by 16-17% during
FY10. During the same period, we are factoring 20% growth for HDFC bank.
Management has also indicated that loan growth is picking-up. In retail segment,
mortgages and auto loans are driving the growth whereas bank is going slow on
credit cards and personal loans. During Q2FY10, when system grew by only 3.4%
(QoQ), HDFC bank managed to deliver 9.5% growth (QoQ) in its advances.
During Q2FY10, its retail book grew 7.3% YoY to Rs.626.5 bn, representing
~54.4% of gross advances. This has come mainly on the back of good traction in
the car loan segment (26.7%) despite decline visible during Q2FY10 in personal
loans and credit card segments. During Q2FY10, car loan book grew 6.2% (QoQ)
whereas personal loans and credit card loans declined by 1.2% and 1.3%.
Comfortable Capital Adequacy Ratio (CAR) after warrants conversion
by HDFC Ltd
HDFC Ltd has converted 26.2 mn warrants into equity shares @1530.13 by paying
Rs.36.1 bn (the balance 90% of the subscription amount) to HDFC Bank. HDFC Ltd
had subscribed to the preferential warrants issued by HDFC Bank in June 2008 to
ensure that post HDFC Bank and CBoP merger, its stake in HDFC Bank does not fall
below 20%.
Management has apprised us that this capital would be sufficient to fund the loan
growth for next 2-3 years.
The market is discounting all the positive news as it is clearly failing to surpass the level of 5185/17360 or to close
above 5150/17230 levels on a daily basis. This might lead to a sharp weakness if it starts trading below the level 5030/
16920.
For the day we will watch 5080/17025 level as an immediate support for the market. In case the market starts trading
below the same then we may expect gradual decline towards 5050/5030 (16945/16920) levels. The real weakness will
emerge if it starts trading below 5030/16920 level in the second half and if it closes below the same on a daily basis.
On a higher side, the level 5120/17160 may act as a major resistance initially and sustenance above it may help bulls to
move the market towards 5165/5185 (17290) levels without any extra efforts.
the higher end of the range at 5150 levels but failed to sustain the same.
Selling pushed the index down to 5100 and finally closed around the same
levels.
n Market wide open interest is seen at Rs. 1,13,110 cr. Nifty futures have
seen marginal shed in open interest with volumes seen at recent average
levels.
n Nifty remains in corrective move below 5185 levels. On the downside support
is seen at 5100/5050 levels. Dec turnaround is seen at 5070 above
which the underlying sentiment remains positive. Caution is advised below
5070 levels.
n Selling is expected in select Banking stocks. ICICI has major resistance at
875 levels. SBIN remains weak below 2300-2325 levels and long positions
should be avoided in the same. Similarly PNB remains weak below 925.
n Real estate majors remain weak at current levels. IDFC has critical support
at 162 levels. A bounce from here is expected to push the stock to
fresh highs. Rel Infra remains positive above 1030 for 1130 on the higher
side.
n Nifty OI concentration is seen at 5200 call and 5000 put options. Call writing
is seen at 5150-5200 levels making it difficult for the index to sustain
above the same. In case of put options some support is seen at 4950-5000
levels.
OUTLOOK
n Nifty Dec turnaround is seen at 5075 above which it remains in positive
territory. We advice holding long positions above the same. Long aggression
should be avoided below the same. In the near term consolidation is
expected in the range of 5050-5200.
n GAIL traders with a positive bias above 407 for 425/250. We remain positive
on the pharma space in the medium term. Rel Infra and Rel Cap are
expected to trade with a positive bias in the near term. IDFC has critical
support around 162 levels; bounce from mentioned levels is expected to
initiate a fresh uptrend for the index
HDFC BANK
PRICE: RS.1757 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1840 FY11E P/E: 21.0X; P/ABV: 3.4X
We met with Mr. Paresh Sukhtankar (ED, HDFC Bank) to get an update on
the bank's strategy and future outlook.
CBoP retail is performing on the expected lines. Out of total CBoP retail
book, 2W (two wheelers) book has almost run off whereas personal loan
book would take another 10-12 months to completely run off.
Bank was able to maintain its margin even during Q3FY09 and Q4FY09,
when bulk deposit rate was hovering around 5-6% higher than the current
prevailing rate. So, we believe that it would be easier for the bank to
protect its margins.
We maintain the earning estimates for FY10E and FY11E and maintain
ACCUMULATE rating on the stock with a target price of Rs.1840 based on
P/ABV of 3.5x its FY11E adjusted book value and P/E of 22x its FY11E
earnings.
We like HDFC Bank, a leader among private sector banks with healthy
credit growth, one of the highest CASA, high and stable margins, high RoE,
cleaner asset quality and a large proporation of fees in total income.
Key Takeaways
We met with Mr. Paresh Sukhtankar (ED, HDFC Bank) to get an update on the
bank's strategy and future outlook. We returned positive to recognize its strategic
response to recent macro economic developments.
Loan growth is picking up
Management has been reiterating that the bank endeavors to grow 3-4% faster
than the system. In our view, banking system is likely to grow by 16-17% during
FY10. During the same period, we are factoring 20% growth for HDFC bank.
Management has also indicated that loan growth is picking-up. In retail segment,
mortgages and auto loans are driving the growth whereas bank is going slow on
credit cards and personal loans. During Q2FY10, when system grew by only 3.4%
(QoQ), HDFC bank managed to deliver 9.5% growth (QoQ) in its advances.
During Q2FY10, its retail book grew 7.3% YoY to Rs.626.5 bn, representing
~54.4% of gross advances. This has come mainly on the back of good traction in
the car loan segment (26.7%) despite decline visible during Q2FY10 in personal
loans and credit card segments. During Q2FY10, car loan book grew 6.2% (QoQ)
whereas personal loans and credit card loans declined by 1.2% and 1.3%.
Comfortable Capital Adequacy Ratio (CAR) after warrants conversion
by HDFC Ltd
HDFC Ltd has converted 26.2 mn warrants into equity shares @1530.13 by paying
Rs.36.1 bn (the balance 90% of the subscription amount) to HDFC Bank. HDFC Ltd
had subscribed to the preferential warrants issued by HDFC Bank in June 2008 to
ensure that post HDFC Bank and CBoP merger, its stake in HDFC Bank does not fall
below 20%.
Management has apprised us that this capital would be sufficient to fund the loan
growth for next 2-3 years.
The market is discounting all the positive news as it is clearly failing to surpass the level of 5185/17360 or to close
above 5150/17230 levels on a daily basis. This might lead to a sharp weakness if it starts trading below the level 5030/
16920.
For the day we will watch 5080/17025 level as an immediate support for the market. In case the market starts trading
below the same then we may expect gradual decline towards 5050/5030 (16945/16920) levels. The real weakness will
emerge if it starts trading below 5030/16920 level in the second half and if it closes below the same on a daily basis.
On a higher side, the level 5120/17160 may act as a major resistance initially and sustenance above it may help bulls to
move the market towards 5165/5185 (17290) levels without any extra efforts.
Sunday, December 13, 2009
report as 14/12/2009
Nifty consolidated in the range of 5050-5150 for the entire week and finally
closed around 5100 levels. This expected consolidation is accompanied
by stock specific activity with focus in the cash segment.
n Market wide open interest is seen at Rs. 1,11,787 cr. Marginal shed in
seen in Nifty futures open interest with futures trading at a discount.
n Front line IT stocks are expected to witness action led by Infosys Tech and
TCS. Mid-cap IT space also trade with a positive bias. Profit booking is expected
in capital goods majors at higher levels; higher levels should be
used to initiated short positions in the same.
n We remain positive on the Pharma and Oil and Gas space from the medium
term. We advice accumulating Biocon at lower levels. GAIL remains
positive above 380 for 450 on the higher side.
n Nifty options OI concentration is seen at 5200 call and 5000 put options.
Call writing is seen at 5150-5200 levels while put writing is seen at 4900-
4950 levels. PCROI is seen at 1.36 with over all open interest in the options
segment at recent highs.
OUTLOOK
n Nifty Dec turnaround is seen at 5070 above which it remains in positive
territory. We advice holding long positions above the same. Long aggression
should be avoided below the same. In the near term consolidation is
expected in the range of 5050-5200.
n We remain positive in the IT space for the near term. Infosys is expected
to test 2500-2550 in the near term. Significant action is expected in the
mid-cap IT space. We remain positive on the pharma space for the medium
term and advice accumulating Biocon for higher levels.
closed around 5100 levels. This expected consolidation is accompanied
by stock specific activity with focus in the cash segment.
n Market wide open interest is seen at Rs. 1,11,787 cr. Marginal shed in
seen in Nifty futures open interest with futures trading at a discount.
n Front line IT stocks are expected to witness action led by Infosys Tech and
TCS. Mid-cap IT space also trade with a positive bias. Profit booking is expected
in capital goods majors at higher levels; higher levels should be
used to initiated short positions in the same.
n We remain positive on the Pharma and Oil and Gas space from the medium
term. We advice accumulating Biocon at lower levels. GAIL remains
positive above 380 for 450 on the higher side.
n Nifty options OI concentration is seen at 5200 call and 5000 put options.
Call writing is seen at 5150-5200 levels while put writing is seen at 4900-
4950 levels. PCROI is seen at 1.36 with over all open interest in the options
segment at recent highs.
OUTLOOK
n Nifty Dec turnaround is seen at 5070 above which it remains in positive
territory. We advice holding long positions above the same. Long aggression
should be avoided below the same. In the near term consolidation is
expected in the range of 5050-5200.
n We remain positive in the IT space for the near term. Infosys is expected
to test 2500-2550 in the near term. Significant action is expected in the
mid-cap IT space. We remain positive on the pharma space for the medium
term and advice accumulating Biocon for higher levels.
Thursday, December 10, 2009
REPORT AS ON 11/12/2009
Nifty continues to consolidate in the narrow range of 5050-5150. Volumes
remain on the lower side with stock specific action witnessed. Focus
has shifted to the cash segment.
n Market wide open interest is seen at Rs. 1,10,528 cr. Nifty futures trade
at a premium of 20 points with volumes seen on the lower side.
n Nifty Dec turnaround is seen at 5065 above which we remain in positive
territory. Range for the current series is seen at 4950-5250. Currently the
index remains in corrective movement hence the range bound movement.
Above 5070 we expect the index to test 5250 on the higher side.
n Pharma stocks are expected to do well in the near term led by Ranbaxy
and Biocon. GAIL remains in an uptrend for higher targets of 450.
n Nifty OI concentration is seen at 5000 put and 5200 call options. IV's remain
on the lower side as participants expect the range of 4950-5250 to
hold good for the near term.
OUTLOOK
n Nifty Dec turnaround is seen at 5065 levels; above the mentioned level
the index trades with a positive bias. On the higher side call writing at
5200 levels is indicative on limited upsides. We advice holding long positions
above 5060 for 5250.
n We remain positive on the IT and Pharma space in the near term. GAIL is
expected to test 450 levels in the near term. Mid-cap stocks are expected
to witness action with significant upsides
remain on the lower side with stock specific action witnessed. Focus
has shifted to the cash segment.
n Market wide open interest is seen at Rs. 1,10,528 cr. Nifty futures trade
at a premium of 20 points with volumes seen on the lower side.
n Nifty Dec turnaround is seen at 5065 above which we remain in positive
territory. Range for the current series is seen at 4950-5250. Currently the
index remains in corrective movement hence the range bound movement.
Above 5070 we expect the index to test 5250 on the higher side.
n Pharma stocks are expected to do well in the near term led by Ranbaxy
and Biocon. GAIL remains in an uptrend for higher targets of 450.
n Nifty OI concentration is seen at 5000 put and 5200 call options. IV's remain
on the lower side as participants expect the range of 4950-5250 to
hold good for the near term.
OUTLOOK
n Nifty Dec turnaround is seen at 5065 levels; above the mentioned level
the index trades with a positive bias. On the higher side call writing at
5200 levels is indicative on limited upsides. We advice holding long positions
above 5060 for 5250.
n We remain positive on the IT and Pharma space in the near term. GAIL is
expected to test 450 levels in the near term. Mid-cap stocks are expected
to witness action with significant upsides
REPORT AS ON 11/12/2009
The market remained in a range through out the day with thin volumes on both the sides. For the day, again we will
watch the level of 5155 and sustenance above the same will lift the market up to 5185. To break the level 5185, the
market will require some concrete positive trigger otherwise it will be difficult to breach the same in a normal course
of trading.
On the lower side the level of 5110 and 5080 may act as a support area for the day. A close above 5150 level will
confirm the bottoming formation that will lead to further up move in the coming week may be up to 5350/5400
levels. For the day, trade with levels without pre-empting break out or break down.
watch the level of 5155 and sustenance above the same will lift the market up to 5185. To break the level 5185, the
market will require some concrete positive trigger otherwise it will be difficult to breach the same in a normal course
of trading.
On the lower side the level of 5110 and 5080 may act as a support area for the day. A close above 5150 level will
confirm the bottoming formation that will lead to further up move in the coming week may be up to 5350/5400
levels. For the day, trade with levels without pre-empting break out or break down.
REPORT AS ON 11/12/2009
The market remained in a range through out the day with thin volumes on both the sides. For the day, again we will
watch the level of 5155 and sustenance above the same will lift the market up to 5185. To break the level 5185, the
market will require some concrete positive trigger otherwise it will be difficult to breach the same in a normal course
of trading.
On the lower side the level of 5110 and 5080 may act as a support area for the day. A close above 5150 level will
confirm the bottoming formation that will lead to further up move in the coming week may be up to 5350/5400
levels. For the day, trade with levels without pre-empting break out or break down.
watch the level of 5155 and sustenance above the same will lift the market up to 5185. To break the level 5185, the
market will require some concrete positive trigger otherwise it will be difficult to breach the same in a normal course
of trading.
On the lower side the level of 5110 and 5080 may act as a support area for the day. A close above 5150 level will
confirm the bottoming formation that will lead to further up move in the coming week may be up to 5350/5400
levels. For the day, trade with levels without pre-empting break out or break down.
Wednesday, December 9, 2009
REPORT AS ON 10/12/2009
After the huge volatile movement in last three days on Wednesday the market remained in a tight range with a stock
specific action. However, the market volumes were above daily averages that will lead to significant moves on either
side on Thursday.
The level of 5155/17240 will play an important resistance for the market and sustenance of the market above it will
push market to newer levels (5225/17600) with a minor hurdle at 5185/17360. On the lower side the level 5080/17025
will act as a major support for the market. Dismissal of the same will invite fresh sell-off that will pull the market to
5035/16900 levels. Our advice is to trade on break outs or break downs for the day.
For positional traders our advice is to follow stop losses strictly and be cautious at higher levels (around 5300/5400) as
these levels may attract huge profit taking.
"Top Buy" with a medium term view - BILCARE LTD.: Cls: 461.00.
The above mentioned stock seems to be bottomed out in the month of March 2009 at Rs.279. The second supporting
factor for the same and which is convincing us to recommend is that the stock is currently into triangular bullish
consolidation. The stock is also attracting volumes at each regular interval. If somebody really wants to take a long
term investment view then they can add 30%-40% of the total investment to any particular "stock" at current levels
and the balance amount one can add on declines at 440 and at 400. On the higher side the stock is having potential
to rally minimum up to 630/650 with a minor hurdle at 550. However, with a perspective of 18 months we may even
expect the levels of 840/860. Avoid trading in it and keep a final stop loss at 350 on closing basis for all the
investments.
Nifty opened on a flat note and consolidated for the entire trading session.
Frontline stocks witnessed consolidation while most of the activity
was seen in the mid-cap space.
n Market wide open interest is seen at Rs. 1,09,290 cr. Nifty futures trade
at premium of near 10 points while volumes remain at average levels.
n IT majors trade with a positive bias led by Infosys and TCS. Infosys is expected
to test 2500 levels in the near term. Midcap IT space is also expected
to witness significant action. Select Pharma stocks are expected to
do well in the near term. BIOCON remains positive above 280 levels.
n Banking majors remain under pressure at current levels. ICICI Bank remains
under pressure below 875. Similarly SBIN remains weak below
2325. Real Estate majors are expected to continue consolidation with selling
at higher levels.
n Nifty OI concentration is seen at 5000 put and 5200 call options. Call
writing is seen at 5200 levels while put writing is seen at 4900 levels. This
is broadly indicative of range bound movement in the entire series. IV's
remain on the lower side indicative of possible consolidation throughout
the series.
OUTLOOK
n Nifty Dec turnaround is seen at 5060 levels; above the mentioned level
the index trades with a positive bias. On the higher side call writing at
5200 levels is indicative on limited upsides. We advice holding long positions
above 5060.
n We remain positive on the IT and Pharma space in the near term. Banking
stocks remain under pressure in the near term. Mid-cap stocks are expected
to witness action with significant upsides.
specific action. However, the market volumes were above daily averages that will lead to significant moves on either
side on Thursday.
The level of 5155/17240 will play an important resistance for the market and sustenance of the market above it will
push market to newer levels (5225/17600) with a minor hurdle at 5185/17360. On the lower side the level 5080/17025
will act as a major support for the market. Dismissal of the same will invite fresh sell-off that will pull the market to
5035/16900 levels. Our advice is to trade on break outs or break downs for the day.
For positional traders our advice is to follow stop losses strictly and be cautious at higher levels (around 5300/5400) as
these levels may attract huge profit taking.
"Top Buy" with a medium term view - BILCARE LTD.: Cls: 461.00.
The above mentioned stock seems to be bottomed out in the month of March 2009 at Rs.279. The second supporting
factor for the same and which is convincing us to recommend is that the stock is currently into triangular bullish
consolidation. The stock is also attracting volumes at each regular interval. If somebody really wants to take a long
term investment view then they can add 30%-40% of the total investment to any particular "stock" at current levels
and the balance amount one can add on declines at 440 and at 400. On the higher side the stock is having potential
to rally minimum up to 630/650 with a minor hurdle at 550. However, with a perspective of 18 months we may even
expect the levels of 840/860. Avoid trading in it and keep a final stop loss at 350 on closing basis for all the
investments.
Nifty opened on a flat note and consolidated for the entire trading session.
Frontline stocks witnessed consolidation while most of the activity
was seen in the mid-cap space.
n Market wide open interest is seen at Rs. 1,09,290 cr. Nifty futures trade
at premium of near 10 points while volumes remain at average levels.
n IT majors trade with a positive bias led by Infosys and TCS. Infosys is expected
to test 2500 levels in the near term. Midcap IT space is also expected
to witness significant action. Select Pharma stocks are expected to
do well in the near term. BIOCON remains positive above 280 levels.
n Banking majors remain under pressure at current levels. ICICI Bank remains
under pressure below 875. Similarly SBIN remains weak below
2325. Real Estate majors are expected to continue consolidation with selling
at higher levels.
n Nifty OI concentration is seen at 5000 put and 5200 call options. Call
writing is seen at 5200 levels while put writing is seen at 4900 levels. This
is broadly indicative of range bound movement in the entire series. IV's
remain on the lower side indicative of possible consolidation throughout
the series.
OUTLOOK
n Nifty Dec turnaround is seen at 5060 levels; above the mentioned level
the index trades with a positive bias. On the higher side call writing at
5200 levels is indicative on limited upsides. We advice holding long positions
above 5060.
n We remain positive on the IT and Pharma space in the near term. Banking
stocks remain under pressure in the near term. Mid-cap stocks are expected
to witness action with significant upsides.
Tuesday, December 8, 2009
report as on 08/12/2009
INFOSYS TECHNOLOGIES LTD
PRICE: RS.2440 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.2472 FY11E P/E: 20X
Infosys held its Analyst Day recently, where it articulated its long term
strategy of providing services through new engagement models. The
company plans to increasingly move to these models to maintain
positioning and conquer competitive pressures. On its near term outlook,
the company painted an improving environment but at the same time
cautioned against exuberance. The company has indicated higher velocity
in decision - making by clients. It is investing significantly in its demandgeneration
initiatives and has also embarked on a move to reorient its
delivery organization. We tweak our FY11 EPS estimates to Rs.118 (Rs.115
earlier) and our price target to Rs.2472 (v/s Rs.2363 earlier). We remain
optimistic on the company's future prospects, led by a strong management
team and continue to recommend an ACCUMULATE.
Key takeaways of the Analyst Day
Aspirations for the long term
The management gave a glimpse of its aspirations for the long term. The
aspirations integrate the emerging business dynamics with Infosys' pursuit of
maintaining its client positioning and conquering competitive pressures.
Clear cut targets towards achieving revenues from new engagement models and
reducing geographical imbalances reflect the internal preparedness of Infosys.
While most companies are looking at these initiatives, Infosys has internally reorganised
itself to meet up to the new challenges, we opine.
Most of these initiatives have been going on for the past few quarters and have
been adequately formalized within Infosys now. With the traditional business
models likely to witness significant pricing pressure on being commoditised, Infosys
has formalized targets to move to more value - added services and newer
engagement models.
A) Higher contribution from new engagement models and nonlinear
initiatives:
Infosys has set targets to achieve equal proportion of revenues (1/3rd each) from :
1. Transformational projects
Infosys has been focusing on transformational projects over the past few quarters
now and plans to take the contribution of these services to about one third of total
revenues over the next few years. The company has been winning several deals
with 8 new deals won in 1HFY10 itself. Currently, the contribution to revenues is to
the tune of about 25%, we believe.
2. Operations - ADM, BPO, IMS, etc (traditional services based on global
delivery model)
These services while increasingly facing competitive pressures, are expected to
contribute about one third of the revenues over the next few years as against a
much higher share today. We understand that, there will always be demand for
these services either from new verticals or geographies
On Tuesday the market remained highly volatile in the first half between the range of 5110 and 5080 levels. However,
in the second half it recovered quickly from day's lower levels and managed to close above the major level 5110/
17140. It was an indication that the market has squeezed bears and now the real test will come at 5185/17360 levels
around which, the market spent time of more than one month.
Sustenance of the market above the level 5185/17360 will lift the market to 5230/17500 level without any major
hurdle. In case the market opens lower then it should not sustain below the level of 5110/17140 in the second half, as
this will lead to steep sell off towards the end. For the day our advice is to trade cautiously at upper and lower
boundaries (5185/5110). Break out or break down buying is advisable only on sustenance of the market with average
huge volumes.
PRICE: RS.2440 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.2472 FY11E P/E: 20X
Infosys held its Analyst Day recently, where it articulated its long term
strategy of providing services through new engagement models. The
company plans to increasingly move to these models to maintain
positioning and conquer competitive pressures. On its near term outlook,
the company painted an improving environment but at the same time
cautioned against exuberance. The company has indicated higher velocity
in decision - making by clients. It is investing significantly in its demandgeneration
initiatives and has also embarked on a move to reorient its
delivery organization. We tweak our FY11 EPS estimates to Rs.118 (Rs.115
earlier) and our price target to Rs.2472 (v/s Rs.2363 earlier). We remain
optimistic on the company's future prospects, led by a strong management
team and continue to recommend an ACCUMULATE.
Key takeaways of the Analyst Day
Aspirations for the long term
The management gave a glimpse of its aspirations for the long term. The
aspirations integrate the emerging business dynamics with Infosys' pursuit of
maintaining its client positioning and conquering competitive pressures.
Clear cut targets towards achieving revenues from new engagement models and
reducing geographical imbalances reflect the internal preparedness of Infosys.
While most companies are looking at these initiatives, Infosys has internally reorganised
itself to meet up to the new challenges, we opine.
Most of these initiatives have been going on for the past few quarters and have
been adequately formalized within Infosys now. With the traditional business
models likely to witness significant pricing pressure on being commoditised, Infosys
has formalized targets to move to more value - added services and newer
engagement models.
A) Higher contribution from new engagement models and nonlinear
initiatives:
Infosys has set targets to achieve equal proportion of revenues (1/3rd each) from :
1. Transformational projects
Infosys has been focusing on transformational projects over the past few quarters
now and plans to take the contribution of these services to about one third of total
revenues over the next few years. The company has been winning several deals
with 8 new deals won in 1HFY10 itself. Currently, the contribution to revenues is to
the tune of about 25%, we believe.
2. Operations - ADM, BPO, IMS, etc (traditional services based on global
delivery model)
These services while increasingly facing competitive pressures, are expected to
contribute about one third of the revenues over the next few years as against a
much higher share today. We understand that, there will always be demand for
these services either from new verticals or geographies
On Tuesday the market remained highly volatile in the first half between the range of 5110 and 5080 levels. However,
in the second half it recovered quickly from day's lower levels and managed to close above the major level 5110/
17140. It was an indication that the market has squeezed bears and now the real test will come at 5185/17360 levels
around which, the market spent time of more than one month.
Sustenance of the market above the level 5185/17360 will lift the market to 5230/17500 level without any major
hurdle. In case the market opens lower then it should not sustain below the level of 5110/17140 in the second half, as
this will lead to steep sell off towards the end. For the day our advice is to trade cautiously at upper and lower
boundaries (5185/5110). Break out or break down buying is advisable only on sustenance of the market with average
huge volumes.
Tuesday, December 1, 2009
calls & report as on 02/12/2009
For the day we may expect higher opening on the back of strong global cues that may retest either 5140 or 5185 level.
However, due to overretracement in the short term, we may expect initial pullback for the same. Traders should be
cautious at higher levels but at the same time they should be aggressive buyers on declines with an upside target
5300/5350 (17900/18000). For the day we may expect support between 5095/5075 (17050)
GATI LTD
PRICE: RS.58 RECOMMENDATION: BUY
TARGET PRICE: RS.70 CONS. FY11E P/E: 16.5X
q Pick up in economy - positive for high margin SCM business of GATI
q GATI enjoys high operating leverage in the Express distribution business
q Issue of warrants to promoter at Rs.81 (40% premium to current market
price)
q Maintain FY10E EPS of Rs.1.9
q Introduce FY11 earning estimates with EPS of Rs.3.5
q Due to 21% upside potential we upgrade GATI to BUY with increased
price target of Rs.70 (Rs.62 earlier)
We recently spoke with the management of GATI and following are our key
takeaways:
Issue of warrants to promoter @ Rs.81 (40% premium to current
market price)
n The board of directors of GATI have approved issue of 4.8 mn warrants to promoter
group entity i.e. Mahendra Investment Advisors Pvt. Ltd. The warrants
would carry an option of conversion into equal number of equity shares with
face value to Rs.2 and premium of Rs.79 per share within a period of 18
months from the date of allotment of warrant.
n The issue of warrants would entail cash inflow of 25% of the value for the
company. This is positive as the money would be used for the capex plan of the
company which would ultimately result in increased revenues and profitability
for GATI going forward.
n Also the conversion price is Rs.81 per share which is at a premium of 40% to
the current market price of Rs.58. This is positive as it shows the optimism of
the management in the various businesses of GATI.
Further issue of 5.36 mn warrants to promoter @Rs.58
The board of directors of GATI have also approved issue of 5.36 mn warrants to its
promoter i.e. Mahendra Kumar Agarwal. The warrants would carry an option of
conversion into equal number of equity shares with face value to Rs.2 and premium
of Rs.56 per share within a period of 18 months from the date of allotment of
warrant. The issue of warrants would entail cash inflow of 25% of the value for the
company.
Growth in Coast-to-coast shipping business
n With a fleet strength of six vessels and tonnage of 43581 DWT, GATI operates
in the niche coast to coast shipping business. It operates on the Chennai - Port
Blair - Yangon - Chennai route and direct container service from Penang, Malaysia
and Thailand. Since this is niche segment it is operating at optimal capacities.
n Going forward the management is looking to acquiring vessels to expand its
tonnage and the fleet gets younger. The modern, expanded and betterequipped
vessels will result in reliable services to its customers. The fleet will operate
and serve the routes - Bay of Bengal, Andaman Seas and Malacca Straits
However, due to overretracement in the short term, we may expect initial pullback for the same. Traders should be
cautious at higher levels but at the same time they should be aggressive buyers on declines with an upside target
5300/5350 (17900/18000). For the day we may expect support between 5095/5075 (17050)
GATI LTD
PRICE: RS.58 RECOMMENDATION: BUY
TARGET PRICE: RS.70 CONS. FY11E P/E: 16.5X
q Pick up in economy - positive for high margin SCM business of GATI
q GATI enjoys high operating leverage in the Express distribution business
q Issue of warrants to promoter at Rs.81 (40% premium to current market
price)
q Maintain FY10E EPS of Rs.1.9
q Introduce FY11 earning estimates with EPS of Rs.3.5
q Due to 21% upside potential we upgrade GATI to BUY with increased
price target of Rs.70 (Rs.62 earlier)
We recently spoke with the management of GATI and following are our key
takeaways:
Issue of warrants to promoter @ Rs.81 (40% premium to current
market price)
n The board of directors of GATI have approved issue of 4.8 mn warrants to promoter
group entity i.e. Mahendra Investment Advisors Pvt. Ltd. The warrants
would carry an option of conversion into equal number of equity shares with
face value to Rs.2 and premium of Rs.79 per share within a period of 18
months from the date of allotment of warrant.
n The issue of warrants would entail cash inflow of 25% of the value for the
company. This is positive as the money would be used for the capex plan of the
company which would ultimately result in increased revenues and profitability
for GATI going forward.
n Also the conversion price is Rs.81 per share which is at a premium of 40% to
the current market price of Rs.58. This is positive as it shows the optimism of
the management in the various businesses of GATI.
Further issue of 5.36 mn warrants to promoter @Rs.58
The board of directors of GATI have also approved issue of 5.36 mn warrants to its
promoter i.e. Mahendra Kumar Agarwal. The warrants would carry an option of
conversion into equal number of equity shares with face value to Rs.2 and premium
of Rs.56 per share within a period of 18 months from the date of allotment of
warrant. The issue of warrants would entail cash inflow of 25% of the value for the
company.
Growth in Coast-to-coast shipping business
n With a fleet strength of six vessels and tonnage of 43581 DWT, GATI operates
in the niche coast to coast shipping business. It operates on the Chennai - Port
Blair - Yangon - Chennai route and direct container service from Penang, Malaysia
and Thailand. Since this is niche segment it is operating at optimal capacities.
n Going forward the management is looking to acquiring vessels to expand its
tonnage and the fleet gets younger. The modern, expanded and betterequipped
vessels will result in reliable services to its customers. The fleet will operate
and serve the routes - Bay of Bengal, Andaman Seas and Malacca Straits
Monday, November 30, 2009
call & view as on 01/12/2009
short nifty @ 5068/- sl 5110/- tgt 5000/- & h
old our positional calllt short with 1645 sl
from dt -
The market opened higher on the back of positive global cues and remained strong on the announcement of GDP
numbers. The run up that we come across since Friday has been exciting in terms of nifty gains. However, stock
specific it was not at all exciting and that may be the worrying factor till the market remains below the level of 5140/
17290.
If we go through the chart of Nifty futures then one can clearly observe, that the gap down opening on Friday and
the gap up opening on Monday has formed "island reversal formation". Today may be the "testing day" for the
market as whether it holds the current gap up opening or not? If it holds the gap up opening level (4990) of the
Monday and closes above the level 5035/16930 then it will lift the market sentiment heavily that may lift the index
minimum up to 5225/15570 level. However, any gap down opening below the level 4985/16800 and sustenance below
the level 4965/16700 in the second half of the trading session will lead to sharp weakness for next few days.
For the day the level 4965/16700 and 5060/17025 may act as a major support and resistance for the market.
Sustenance of the market above the level 5060/17025 in the second half will lift the market to 5110/17170 by the end
of the day. Failure to hold above the level 4965/16700 may invite steep weakness in the near term. Our advice is,
"design trading strategy as per given levels for the day".
old our positional calllt short with 1645 sl
from dt -
The market opened higher on the back of positive global cues and remained strong on the announcement of GDP
numbers. The run up that we come across since Friday has been exciting in terms of nifty gains. However, stock
specific it was not at all exciting and that may be the worrying factor till the market remains below the level of 5140/
17290.
If we go through the chart of Nifty futures then one can clearly observe, that the gap down opening on Friday and
the gap up opening on Monday has formed "island reversal formation". Today may be the "testing day" for the
market as whether it holds the current gap up opening or not? If it holds the gap up opening level (4990) of the
Monday and closes above the level 5035/16930 then it will lift the market sentiment heavily that may lift the index
minimum up to 5225/15570 level. However, any gap down opening below the level 4985/16800 and sustenance below
the level 4965/16700 in the second half of the trading session will lead to sharp weakness for next few days.
For the day the level 4965/16700 and 5060/17025 may act as a major support and resistance for the market.
Sustenance of the market above the level 5060/17025 in the second half will lift the market to 5110/17170 by the end
of the day. Failure to hold above the level 4965/16700 may invite steep weakness in the near term. Our advice is,
"design trading strategy as per given levels for the day".
Sunday, November 29, 2009
report & delivery call as on 30/11/2009
The week past and expected
Technically speaking: On Friday the market opened in a red with significant losses on the back of negative global cues
and remained weak till the 1st session of the day, however, it recovered in the second half of the day due to oversold
activity in a short span of time. The losers were mainly high beta stocks like Aban Offshore, HDIL, Tech Mah, JP Asso and
Punj Lloyd. Gainers were mainly from pharma and Oil refineries like Ranbaxy, Cipla and BPCL.
For the day and for the week, the level of 16860 and 5005 will act as a major hurdle for the market and till it remains
below the same, will invite few more round of quick buying and selling. As the medium term trend is still negative we have
to be cautious below Friday's lowest levels 4800/16200. In case the Market breaks these lows, then the market may even
gradually fall to 4670/15800 levels. Sustenance of the market above 5005/16860 level will only lift the overall sentiment
for the market as it will try to negate negative divergence on weekly basis.
For the day we will watch on 5005/16860 and 4890/16510 level as the range to trade.
BRIEF OVERVIEW
n Nifty closed the week on a negative note as significant selling was seen
across global markets. Buying emerged at lower levels which led to a significant
recovery from the lows of the trading session.
n Market wide open interest is seen at Rs. 86,846 crs. Nifty futures witnessed
significant volumes with addition in open interest to the tune of
10 lakh shares. Futures trade at a premium as compared to the earlier
session's discount of 13 points.
n Nifty turnaround for Nov series is seen at 4985. Sustain above the same
would indicate the index continues to remain in an up trend for higher
levels of 5250. On the other hand failure to sustain above 4950-5000 levels
would further invite selling in the near term.
n We expect OIL and Gas stocks to do well in the medium term. Medium
term investors are advised to accumulate HPCL and BPCL at current levels.
GAIL remains in an up trend above 380 for 450/500 on the higher
side. Pharma stocks also remain positive at current levels led by Ranbaxy.
n Midcap banking can be bought on correction. Bank of Baroda, DENA Bank
and Vijaya bank remain our preferred picks for the medium term. Real
Estate majors are expected to consolidate with a negative bias in the
near term.
n Nifty OI concentration is seen at 5000 call and 4800 put options. Significant
addition is seen in 4800 put options as the index recovered from
lower levels.
OUTLOOK
n Nifty Dec turnaround is seen at 4995; if the index manages to sustain
above 4950-5000 the up-trend remains intact for higher levels of 5250/
5450. On the other hand below 4950-5000 we advice caution with stock
specific buying for the medium term.
n We remain positive on the Oil and Gas, Pharma and Midcap Banking
space in the medium term. Buying is advised in select stocks on corrections.
Bank of Baroda is expected to test 560 levels on sustain above 500.
Educomp remains positive above 700 for 800/850 on the higher side.
Technically speaking: On Friday the market opened in a red with significant losses on the back of negative global cues
and remained weak till the 1st session of the day, however, it recovered in the second half of the day due to oversold
activity in a short span of time. The losers were mainly high beta stocks like Aban Offshore, HDIL, Tech Mah, JP Asso and
Punj Lloyd. Gainers were mainly from pharma and Oil refineries like Ranbaxy, Cipla and BPCL.
For the day and for the week, the level of 16860 and 5005 will act as a major hurdle for the market and till it remains
below the same, will invite few more round of quick buying and selling. As the medium term trend is still negative we have
to be cautious below Friday's lowest levels 4800/16200. In case the Market breaks these lows, then the market may even
gradually fall to 4670/15800 levels. Sustenance of the market above 5005/16860 level will only lift the overall sentiment
for the market as it will try to negate negative divergence on weekly basis.
For the day we will watch on 5005/16860 and 4890/16510 level as the range to trade.
BRIEF OVERVIEW
n Nifty closed the week on a negative note as significant selling was seen
across global markets. Buying emerged at lower levels which led to a significant
recovery from the lows of the trading session.
n Market wide open interest is seen at Rs. 86,846 crs. Nifty futures witnessed
significant volumes with addition in open interest to the tune of
10 lakh shares. Futures trade at a premium as compared to the earlier
session's discount of 13 points.
n Nifty turnaround for Nov series is seen at 4985. Sustain above the same
would indicate the index continues to remain in an up trend for higher
levels of 5250. On the other hand failure to sustain above 4950-5000 levels
would further invite selling in the near term.
n We expect OIL and Gas stocks to do well in the medium term. Medium
term investors are advised to accumulate HPCL and BPCL at current levels.
GAIL remains in an up trend above 380 for 450/500 on the higher
side. Pharma stocks also remain positive at current levels led by Ranbaxy.
n Midcap banking can be bought on correction. Bank of Baroda, DENA Bank
and Vijaya bank remain our preferred picks for the medium term. Real
Estate majors are expected to consolidate with a negative bias in the
near term.
n Nifty OI concentration is seen at 5000 call and 4800 put options. Significant
addition is seen in 4800 put options as the index recovered from
lower levels.
OUTLOOK
n Nifty Dec turnaround is seen at 4995; if the index manages to sustain
above 4950-5000 the up-trend remains intact for higher levels of 5250/
5450. On the other hand below 4950-5000 we advice caution with stock
specific buying for the medium term.
n We remain positive on the Oil and Gas, Pharma and Midcap Banking
space in the medium term. Buying is advised in select stocks on corrections.
Bank of Baroda is expected to test 560 levels on sustain above 500.
Educomp remains positive above 700 for 800/850 on the higher side.
Wednesday, November 25, 2009
delivery call as on 26/11/2009 SREI INFRASTRUCTURES LTD
SREI INFRASTRUCTURE FINANCE
PRICE: RS.75 RECOMMENDATION: BUY
TARGET PRICE: RS.105 FY11E P/EX: 7.5X; P/ABV:0.7X
n Revising our earnings estimates following improved outlook for infrastructure development
business; advances growth to improve
n Increasing our valuation for Quippo Telecom for SREI Infrastructure to Rs. 16.5
per share for our SToP.
n Q2FY10 performance broadly in line with our expectation- margins improved sequentially,
asset quality expect to improve going forward.
n The stock is currently trading at compelling valuation of less than 1x its P/ABV.
Factoring in higher earnings growth, revising our estimates for its investments in
Quippo telecom and various projects, we have revised our price target for the
stock to Rs 105 (Rs. 95 earlier).
Revising our earnings estimates following improved outlook for
infrastructure development business; advances growth to improve
n In the backdrop higher government focus on infrastructure development in India
during the eleventh five year plan, we expect improved traction in SREI’s advances
growth.
n In the back drop of improved outlook we expect a (consolidated) 21% CAGR in
SREI’s advances book over FY2009-11. We expect a loan book of Rs. 23.7bn (on
a low base of Rs. 12.1bn) for FY10E and Rs 28.9bn for FY11E for the parent
company.
n Since SREI is operating in a niche segment, it has dexterously pricing the asset
risk at premium, concurrent with easing cost of funds, will help SREI in improving
net margins going forward.
n Following steady net margins and improve advances growth; we expect a net
profit growth of 25% yoy to Rs.1.0bn during FY10 and 20% yoy to Rs.1.2bn in
FY11.
n SREI holds investment amount to ~ Rs. 3bn in various projects, which includes
roads, ports and SEZs. SREI is looking forward to a suitable opportunity and
would monetize these investments going forward. We opine that this would be
materially ROE accretive going forward.
n SREI’s return ratios are expected to remain in the range of 11-12% during FY10-
11 following the JV formation with BNP Paribas. We opine that a steady increase
in the balance sheet gearing will support SREI return ratio in the long-term. We
have factored in a RoE of 15% in working to arrive at our price target of Rs. 105
n Given, challenging operating conditions prevailing during FY09, asset quality was
impacted. Further, during
Increasing our valuation for Quippo telecom for SREI Infra
n SREI infrastructure holds close to 17% in Quippo Infrastructure- which is an
equipment rental arm. Quippo telecom (a telecom infrastructure rental company)
is a 26% subsidiary of Quippo infrastructure. Post merger with Tatatele’s tower
business, SREI’s economic interest stood at 2% in the company.
n During Q2FY10 SREI has invested close to Rs.1bn in WTTIL for a 1% stake in the
company. This will increase SREI’s stake in the company to close to 3%.
n We are valuing Quippo telecom at Rs.16.5 per share for SREI Infrastructure, fac
nifty jan futs high 5640/- means wat ? any idea , we will touch 5640 in jan
PRICE: RS.75 RECOMMENDATION: BUY
TARGET PRICE: RS.105 FY11E P/EX: 7.5X; P/ABV:0.7X
n Revising our earnings estimates following improved outlook for infrastructure development
business; advances growth to improve
n Increasing our valuation for Quippo Telecom for SREI Infrastructure to Rs. 16.5
per share for our SToP.
n Q2FY10 performance broadly in line with our expectation- margins improved sequentially,
asset quality expect to improve going forward.
n The stock is currently trading at compelling valuation of less than 1x its P/ABV.
Factoring in higher earnings growth, revising our estimates for its investments in
Quippo telecom and various projects, we have revised our price target for the
stock to Rs 105 (Rs. 95 earlier).
Revising our earnings estimates following improved outlook for
infrastructure development business; advances growth to improve
n In the backdrop higher government focus on infrastructure development in India
during the eleventh five year plan, we expect improved traction in SREI’s advances
growth.
n In the back drop of improved outlook we expect a (consolidated) 21% CAGR in
SREI’s advances book over FY2009-11. We expect a loan book of Rs. 23.7bn (on
a low base of Rs. 12.1bn) for FY10E and Rs 28.9bn for FY11E for the parent
company.
n Since SREI is operating in a niche segment, it has dexterously pricing the asset
risk at premium, concurrent with easing cost of funds, will help SREI in improving
net margins going forward.
n Following steady net margins and improve advances growth; we expect a net
profit growth of 25% yoy to Rs.1.0bn during FY10 and 20% yoy to Rs.1.2bn in
FY11.
n SREI holds investment amount to ~ Rs. 3bn in various projects, which includes
roads, ports and SEZs. SREI is looking forward to a suitable opportunity and
would monetize these investments going forward. We opine that this would be
materially ROE accretive going forward.
n SREI’s return ratios are expected to remain in the range of 11-12% during FY10-
11 following the JV formation with BNP Paribas. We opine that a steady increase
in the balance sheet gearing will support SREI return ratio in the long-term. We
have factored in a RoE of 15% in working to arrive at our price target of Rs. 105
n Given, challenging operating conditions prevailing during FY09, asset quality was
impacted. Further, during
Increasing our valuation for Quippo telecom for SREI Infra
n SREI infrastructure holds close to 17% in Quippo Infrastructure- which is an
equipment rental arm. Quippo telecom (a telecom infrastructure rental company)
is a 26% subsidiary of Quippo infrastructure. Post merger with Tatatele’s tower
business, SREI’s economic interest stood at 2% in the company.
n During Q2FY10 SREI has invested close to Rs.1bn in WTTIL for a 1% stake in the
company. This will increase SREI’s stake in the company to close to 3%.
n We are valuing Quippo telecom at Rs.16.5 per share for SREI Infrastructure, fac
nifty jan futs high 5640/- means wat ? any idea , we will touch 5640 in jan
calls as on 25/10/2009
1}buy tatasteel @ 567/- sl 558/- tgt 585/- &
2}short mini nifty @ 5144/- sl 5175/- tgt 5080/-
for calls http://equitylevels.blogspot.com/ dt
for free calls add dhavalthakkar2004@yahoo.co.in
2}short mini nifty @ 5144/- sl 5175/- tgt 5080/-
for calls http://equitylevels.blogspot.com/ dt
for free calls add dhavalthakkar2004@yahoo.co.in
Tuesday, November 24, 2009
delivery call as on 25/11/2009 JPL, HT MEDIA , DCHL
JAGRAN PRAKASHAN LTD (JPL)
PRICE: RS.119 RECOMMENDATION: BUY
TARGET PRICE: RS.135 FY10E: EV/EBITDA: 13X; P/E:22X
HT MEDIA
PRICE: RS.140 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.153 FY10E – EV/EBITDA-12X, P/E-22X
DECCAN CHRONICLE HOLDINGS
PRICE: RS.150 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.158 FY10E EV/EBITDA: 7X, P/E:12X
IRS data- leadership remains unchanged; advertising environment & NP
prices to determine earnings trajectory. Stock gains look to have priced in
reasonable amount of good news and our optimism; accumulate on dips.
n IRS 2009 R2- no changes in leadership, ToI & DJ hold fort; business daily readership
dips
n Newsprint prices remain benign- positive for publishing companies- JPL, HT Media
and DCHL. We expect NP prices to rise marginally and stabilize at $600 plus
levels over FY11E.
n Macro for advertising environment has improved; we continue to expect a pick
up in advertising spends 2HFY10 onwards. We reiterate that traditional media
(print, TV broadcasting) will be the early beneficiaries of a pick-up.
n JPL- a strong regional franchise remains a preferred bet on our positive stance on
regional media markets. It is also better positioned than peers to lever margin
growth as newsprint prices ease, in our opinion. HT is to be accumulated, on
meaningful dips. DCHL remains cheapest stock in the peer set; reflecting competitive
concerns in new markets. Expect trading upsides on declines.
n Ratings and price targets are unchanged; we will continue to focus on advertising
revenue trends & NP prices, which we opine will remain earnings and share
catalysts over the medium term.
IRS 2009 R2- no changes in leadership, ToI & DJ hold fort
n According to data available, India’s Top 10 dailies have shown a marginal
growth in readership over the last six months. IRS 2009 Round 2 data also
showed that average issue readership of only two out of Top 10 dailies declined
over the period.
n In the English daily segment, ToI maintained its dominant position in both the
key markets- Mumbai & Delhi. ToI’s readership grew 3.9% over the period, primarily
driven by contribution from the Chennai edition that was launched prior to
IRS Round 2.
n Hindustan Times, the English daily of listed company HTML, declined 4% over
the period; other players retained their positioning in the segment with ‘The
Hindu’ at No.3 and ‘The Telegraph’ at No.4.
PRICE: RS.119 RECOMMENDATION: BUY
TARGET PRICE: RS.135 FY10E: EV/EBITDA: 13X; P/E:22X
HT MEDIA
PRICE: RS.140 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.153 FY10E – EV/EBITDA-12X, P/E-22X
DECCAN CHRONICLE HOLDINGS
PRICE: RS.150 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.158 FY10E EV/EBITDA: 7X, P/E:12X
IRS data- leadership remains unchanged; advertising environment & NP
prices to determine earnings trajectory. Stock gains look to have priced in
reasonable amount of good news and our optimism; accumulate on dips.
n IRS 2009 R2- no changes in leadership, ToI & DJ hold fort; business daily readership
dips
n Newsprint prices remain benign- positive for publishing companies- JPL, HT Media
and DCHL. We expect NP prices to rise marginally and stabilize at $600 plus
levels over FY11E.
n Macro for advertising environment has improved; we continue to expect a pick
up in advertising spends 2HFY10 onwards. We reiterate that traditional media
(print, TV broadcasting) will be the early beneficiaries of a pick-up.
n JPL- a strong regional franchise remains a preferred bet on our positive stance on
regional media markets. It is also better positioned than peers to lever margin
growth as newsprint prices ease, in our opinion. HT is to be accumulated, on
meaningful dips. DCHL remains cheapest stock in the peer set; reflecting competitive
concerns in new markets. Expect trading upsides on declines.
n Ratings and price targets are unchanged; we will continue to focus on advertising
revenue trends & NP prices, which we opine will remain earnings and share
catalysts over the medium term.
IRS 2009 R2- no changes in leadership, ToI & DJ hold fort
n According to data available, India’s Top 10 dailies have shown a marginal
growth in readership over the last six months. IRS 2009 Round 2 data also
showed that average issue readership of only two out of Top 10 dailies declined
over the period.
n In the English daily segment, ToI maintained its dominant position in both the
key markets- Mumbai & Delhi. ToI’s readership grew 3.9% over the period, primarily
driven by contribution from the Chennai edition that was launched prior to
IRS Round 2.
n Hindustan Times, the English daily of listed company HTML, declined 4% over
the period; other players retained their positioning in the segment with ‘The
Hindu’ at No.3 and ‘The Telegraph’ at No.4.
Monday, November 23, 2009
call & view as on 24/11/2009 suzlon short
SUZLON
PRICE: RS.73 RECOMMENDATION: REDUCE
TARGET PRICE: RS.65 FY11E P/E: 23X
Suzlon announces sale of 35% stake in subsidiary Hansen Transmission to
financial investors
Deal priced at the lower end of the recent trading range of Hansen.
Cash infusion could provide temporary reprieve, critical issue remains of
building order backlog.
Maintain Reduce with price target intact at Rs 65
Key Highlights
n Suzlon has announced that its wholly owned subsidiary AE Rotor Holding BV
have completed a secondary placement of 35% stake of the company in
Hansen Transmission to financial investors. The deal has been done at a price of
GBP 95 pence, thus valuing the entire deal at GBP 224 mn (USD 370 mn). Following
the part stake sale, the shareholding of Suzlon in Hansen stands reduced
to 26.1%.
n Deal valued at the lower end of the recent trading range of Hansen, indicating
possible lack of interest among of buyers at higher prices.
n The deal proceeds would be to the tune of Rs 17.3 bn, which would be mainly
utilized for meeting debt repayment obligations. The proceeds from the sale
along with further Rupee debt to be raised from domestic banks should enable
the company to meet its repayment obligations of acquisition loans taken for
Hansen and Repower.
n As of H1 FY10, the company had a gross debt of Rs 134.8 bn. Thus the proceeds
from the stake sale should form 13% of the gross debt of the company.
Short-term respite in our view as medium-term outlook remains
contingent on the company building order backlog
n Order book stands at 1489 MW, which is down 41% yoy. The company has
downgraded guidance for order booking in the current year. As against this,
the company has over the years upgraded its capacity to 5700 MW. As a result,
the significant underutilization of capacity and higher overheads and interest
charges has severely impaired the profitability of the company.
Commentary on CY2010 outlook by Vestas (Leading supplier
of wind turbine):
Expects to report flat revenues in CY10. Cites longer processing
time resulting in delayed conversion of orders. Headwind for
Suzlon
n Vestas is the premier supplier of wind energy systems. It expects to report flat
revenues in CY10 and has also maintained lower EBIT margin guidance of 10-
12%. The revenue range reflects the uncertainty caused by the credit crisis in
the short term while the slowing profitability improvement is due to the fact
that Vestas in the near term will have a certain excess capacity. In general,
Vestas expects that prices and conditions should likely remain largely unchanged
in 2010. At the moment, the US market is characterised by excess capacity,
which is resulting in unattractive realizations. The order intake during
2009 was lower than expectations due to longer processing times.
PRICE: RS.73 RECOMMENDATION: REDUCE
TARGET PRICE: RS.65 FY11E P/E: 23X
Suzlon announces sale of 35% stake in subsidiary Hansen Transmission to
financial investors
Deal priced at the lower end of the recent trading range of Hansen.
Cash infusion could provide temporary reprieve, critical issue remains of
building order backlog.
Maintain Reduce with price target intact at Rs 65
Key Highlights
n Suzlon has announced that its wholly owned subsidiary AE Rotor Holding BV
have completed a secondary placement of 35% stake of the company in
Hansen Transmission to financial investors. The deal has been done at a price of
GBP 95 pence, thus valuing the entire deal at GBP 224 mn (USD 370 mn). Following
the part stake sale, the shareholding of Suzlon in Hansen stands reduced
to 26.1%.
n Deal valued at the lower end of the recent trading range of Hansen, indicating
possible lack of interest among of buyers at higher prices.
n The deal proceeds would be to the tune of Rs 17.3 bn, which would be mainly
utilized for meeting debt repayment obligations. The proceeds from the sale
along with further Rupee debt to be raised from domestic banks should enable
the company to meet its repayment obligations of acquisition loans taken for
Hansen and Repower.
n As of H1 FY10, the company had a gross debt of Rs 134.8 bn. Thus the proceeds
from the stake sale should form 13% of the gross debt of the company.
Short-term respite in our view as medium-term outlook remains
contingent on the company building order backlog
n Order book stands at 1489 MW, which is down 41% yoy. The company has
downgraded guidance for order booking in the current year. As against this,
the company has over the years upgraded its capacity to 5700 MW. As a result,
the significant underutilization of capacity and higher overheads and interest
charges has severely impaired the profitability of the company.
Commentary on CY2010 outlook by Vestas (Leading supplier
of wind turbine):
Expects to report flat revenues in CY10. Cites longer processing
time resulting in delayed conversion of orders. Headwind for
Suzlon
n Vestas is the premier supplier of wind energy systems. It expects to report flat
revenues in CY10 and has also maintained lower EBIT margin guidance of 10-
12%. The revenue range reflects the uncertainty caused by the credit crisis in
the short term while the slowing profitability improvement is due to the fact
that Vestas in the near term will have a certain excess capacity. In general,
Vestas expects that prices and conditions should likely remain largely unchanged
in 2010. At the moment, the US market is characterised by excess capacity,
which is resulting in unattractive realizations. The order intake during
2009 was lower than expectations due to longer processing times.
Sunday, November 22, 2009
delivery call as on 21/11/2009 NIIT LTD
NIIT LTD (NIIT)
PRICE: RS.63 RECOMMENDATION: BUY
TARGET PRICE: RS.88 FY11E P/E: 8.3X
In our recent interaction, company indicated further improvement on the
macro side; increased business traction is yet to flow through to the
company, though. Enquiries have increased in ILS, significant activity is
seen on recruitment drives of private banks (new businesses) and pipeline
for Government schools contracts (SLS) in filling up fast. We expect steady
improvement in revenues growth rates through the next fiscal. Sustained
cost control and higher revenues should lead to margin improvement in
most businesses, leading to higher bottom-line growth. At about 8x FY11E
earnings, we believe valuations are attractive. NIIT remains a leader by far,
in India with a growing international presence. Re-iterate BUY with
unchanged FY11 EPS estimates of Rs.7.6 and unchanged PT of Rs.88.
The main takeaways from our management interaction are as under:
Individual learning business - macro improving
n The ILS business had reported a 7% YoY growth in revenues in 2QFY10, which
was a reversal from the earlier low growth rates clocked by the business.
Growth rates in ILS had been coming down over the past four quarters on the
back of slack demand and reduced growth in enrolments.
n The company has indicated that, the sentiments have continued to improve
over the past one quarter.
n More enquiries have started now coming in for enrolments and turnaround
time in decision making has also shortened. We see these as the initial signals
which can lead to actual enrolments in the future.
Growth in ILS revenues
1QFY09 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10
Revenues (Rs mns) 854.00 1224.00 870.36 1035.00 856.00 1311.00
YoY growth (%) 33.65 25.54 19.55 15.00 0.23 7.11
Source : Company, Kotak Securities - Private Client research
n Within verticals, the IMS stream continues to witness significant interest. The
international business is also scaling up with the African geography witnessing
higher growth.
n During the quarter, NIIT has further fortified its relationship with SAP and this
should start gaining traction over the next few quarters.
n NIIT has not affected any fee increases in this business during the current quarter.
n NIIT had a capacity utilization of about 62% in 1HFY10 and we expect this to
improve over the next fiscal (adjusted for seasonality).
n This should, in turn, result in margin improvement in FY11 over FY10.
n Thus, the macro factors are pointing to an improvement and we expect these to
translate into higher enrolments and revenues in due course.
n We understand that, the enrollments, which grew by 8% in 2QFY10, will start
growing faster in the future quarters. However, we will watch this enrollment
data closely.
PRICE: RS.63 RECOMMENDATION: BUY
TARGET PRICE: RS.88 FY11E P/E: 8.3X
In our recent interaction, company indicated further improvement on the
macro side; increased business traction is yet to flow through to the
company, though. Enquiries have increased in ILS, significant activity is
seen on recruitment drives of private banks (new businesses) and pipeline
for Government schools contracts (SLS) in filling up fast. We expect steady
improvement in revenues growth rates through the next fiscal. Sustained
cost control and higher revenues should lead to margin improvement in
most businesses, leading to higher bottom-line growth. At about 8x FY11E
earnings, we believe valuations are attractive. NIIT remains a leader by far,
in India with a growing international presence. Re-iterate BUY with
unchanged FY11 EPS estimates of Rs.7.6 and unchanged PT of Rs.88.
The main takeaways from our management interaction are as under:
Individual learning business - macro improving
n The ILS business had reported a 7% YoY growth in revenues in 2QFY10, which
was a reversal from the earlier low growth rates clocked by the business.
Growth rates in ILS had been coming down over the past four quarters on the
back of slack demand and reduced growth in enrolments.
n The company has indicated that, the sentiments have continued to improve
over the past one quarter.
n More enquiries have started now coming in for enrolments and turnaround
time in decision making has also shortened. We see these as the initial signals
which can lead to actual enrolments in the future.
Growth in ILS revenues
1QFY09 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10
Revenues (Rs mns) 854.00 1224.00 870.36 1035.00 856.00 1311.00
YoY growth (%) 33.65 25.54 19.55 15.00 0.23 7.11
Source : Company, Kotak Securities - Private Client research
n Within verticals, the IMS stream continues to witness significant interest. The
international business is also scaling up with the African geography witnessing
higher growth.
n During the quarter, NIIT has further fortified its relationship with SAP and this
should start gaining traction over the next few quarters.
n NIIT has not affected any fee increases in this business during the current quarter.
n NIIT had a capacity utilization of about 62% in 1HFY10 and we expect this to
improve over the next fiscal (adjusted for seasonality).
n This should, in turn, result in margin improvement in FY11 over FY10.
n Thus, the macro factors are pointing to an improvement and we expect these to
translate into higher enrolments and revenues in due course.
n We understand that, the enrollments, which grew by 8% in 2QFY10, will start
growing faster in the future quarters. However, we will watch this enrollment
data closely.
Thursday, November 19, 2009
nifty out look & BHARAT ELECTRONICS LTD delivery
Finally the market has broken all the major levels 5040, 5010 and tested the major level 4960/16710 towards the end.
It was due and needed to correct the current over retracement of the up move. However, we can not say that the
pain is over. We may see further weakness today if indices trade below 4960/16710 levels.
The next major support for the market exist at 4920/16600 level and in case if it sustains below 4920/16600 levels in
the second half of the trading session then the level of 4870/16420 is not ruled out. Around these levels search for
fresh trading/positional buy opportunity as well as investment opportunity with a medium view in mind.
On the higher side the level of 5010/16880 and 5055/17005 may act as major hurdle for the market for next few days.
PRICE: RS.1567 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1750 FY10E P/E: 13.1X
We recently spoke to the management of Bharat Electronics. Presented
here are a few highlights
q The company's order backlog has improved substantially in the current
fiscal to Rs.121 bn providing a revenue visibility of 28 months.
q Order intake has accelerated in H1 and the company expects momentum
to be maintained in the second half as well. Thus we project the company
to end the year with a healthy order backlog which would be
higher by 20%.
q The company has set an ambitious target of generating revenues of
Rs.100 bn by FY13, which implies a growth of 23% CAGR between FY10-
13.
q The stock has outperformed the market after the excellent first half
numbers. At the current price, the upside potential to our target price is
limited. Thus we downgrade the stock to ACCUMULATE with a price target
of Rs 1750 (Rs 1650 earlier).
Robust Order backlog
n BEL commenced the fiscal with an order backlog of Rs 101 bn. Following overall
improvement in the momentum of procurement of defence equipment, the order
book of the company has improved considerably. At the end of H1 FY10,
the order book stood at Rs 122 bn.
n The current order backlog translates into revenue visibility of 28 months.
n Apart from general defence electronics, the company is executing orders for
Akash Missles and radar systems.
n The Union Budget has increased the planned capex on defence in FY10 by 14%
over FY09, which is driving the order intake for the company.
n In general, it has been observed that actual spending during a year tends to lag
behind planned expenditure due to bureaucratic delays in approvals and procurement.
However, the procurement process can be hastened depending upon
the emerging geopolitical situation.
It was due and needed to correct the current over retracement of the up move. However, we can not say that the
pain is over. We may see further weakness today if indices trade below 4960/16710 levels.
The next major support for the market exist at 4920/16600 level and in case if it sustains below 4920/16600 levels in
the second half of the trading session then the level of 4870/16420 is not ruled out. Around these levels search for
fresh trading/positional buy opportunity as well as investment opportunity with a medium view in mind.
On the higher side the level of 5010/16880 and 5055/17005 may act as major hurdle for the market for next few days.
PRICE: RS.1567 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1750 FY10E P/E: 13.1X
We recently spoke to the management of Bharat Electronics. Presented
here are a few highlights
q The company's order backlog has improved substantially in the current
fiscal to Rs.121 bn providing a revenue visibility of 28 months.
q Order intake has accelerated in H1 and the company expects momentum
to be maintained in the second half as well. Thus we project the company
to end the year with a healthy order backlog which would be
higher by 20%.
q The company has set an ambitious target of generating revenues of
Rs.100 bn by FY13, which implies a growth of 23% CAGR between FY10-
13.
q The stock has outperformed the market after the excellent first half
numbers. At the current price, the upside potential to our target price is
limited. Thus we downgrade the stock to ACCUMULATE with a price target
of Rs 1750 (Rs 1650 earlier).
Robust Order backlog
n BEL commenced the fiscal with an order backlog of Rs 101 bn. Following overall
improvement in the momentum of procurement of defence equipment, the order
book of the company has improved considerably. At the end of H1 FY10,
the order book stood at Rs 122 bn.
n The current order backlog translates into revenue visibility of 28 months.
n Apart from general defence electronics, the company is executing orders for
Akash Missles and radar systems.
n The Union Budget has increased the planned capex on defence in FY10 by 14%
over FY09, which is driving the order intake for the company.
n In general, it has been observed that actual spending during a year tends to lag
behind planned expenditure due to bureaucratic delays in approvals and procurement.
However, the procurement process can be hastened depending upon
the emerging geopolitical situation.
Wednesday, November 18, 2009
nifty out look & mundra port delivery
Nifty consolidated in a narrow rage for the third consecutive trading session.
Stock specific action was seen with low volatility.
n Market wide open interest is seen at Rs. 1,14,081 cr. Fresh addition is
seen in the Dec series with futures trading at a marginal premium.
n Nifty is expected to continue to consolidate in the range of 5010-5080.
Any break out above 5080 is expected to push the index to 5150-5200
levels. Put writing is expected to provide support at lower levels.
n Capital goods stocks have under performed in the recent past. BHEL and
LT are expected to gain momentum in the near term. Metal majors are
expected to trade with a positive bias. Tata Steel remains positive above
527 on the higher side 575/600 is expected. Unitech and DLF continue to
consolidate in a narrow range; buying is advised at current levels with
recent lows as trend deciding levels.
n From the momentum space ABAN is expected to test 1600-1700 levels in
the medium term with buying expected at lower levels. IDFC remains in
an up-trend with a target of 200 as it remains positive above 160.
n Nifty options concentration is seen at 4800 put and 5100 call option. Put
writing is seen at 4800-4850 levels while insignificant damage is seen in
call options. Put call ratio at 1.75 levels indicates comfort by put writers.
OUTLOOK
n Nifty is expected to consolidate in a narrow range of 4950-5080. Medium
term trend remains positive for 5200-5200 on the higher side. Immediate
support is seen at 4950.
n Metal majors are expected to trade with a positive bias. Capital goods
have under performed in the recent past and are expected to gain momentum.
Realty majors are expected to consolidate in the near term with
buying expected at lower levels.
On Wednesday the market remained in a very narrow range and failed to breach 5075 or 5010 decisively on either
side. As the market has narrowed down the trading range, it will result into major activity on either side. While
looking at intraday charts we can say that it will favor bears in the short term.
For the day initially the level of 5040/16950 may act as a crucial support for the market failure to hold these levels will
push the market to 5010/16880 levels. Sustenance of the market below the same in the second half will extend the
short term weakness to the level 4960/16700. In the worst case the market may even fall up to 4870/16410 levels.
However, these levels will offer excellent fresh trading/positional buy opportunity in the market. On the higher side
the level of 5085/5075 may act as major hurdle area and sustenance above 5085/17110 will lift the market towards
5125/5130 (17250) levels.
Stock specific action was seen with low volatility.
n Market wide open interest is seen at Rs. 1,14,081 cr. Fresh addition is
seen in the Dec series with futures trading at a marginal premium.
n Nifty is expected to continue to consolidate in the range of 5010-5080.
Any break out above 5080 is expected to push the index to 5150-5200
levels. Put writing is expected to provide support at lower levels.
n Capital goods stocks have under performed in the recent past. BHEL and
LT are expected to gain momentum in the near term. Metal majors are
expected to trade with a positive bias. Tata Steel remains positive above
527 on the higher side 575/600 is expected. Unitech and DLF continue to
consolidate in a narrow range; buying is advised at current levels with
recent lows as trend deciding levels.
n From the momentum space ABAN is expected to test 1600-1700 levels in
the medium term with buying expected at lower levels. IDFC remains in
an up-trend with a target of 200 as it remains positive above 160.
n Nifty options concentration is seen at 4800 put and 5100 call option. Put
writing is seen at 4800-4850 levels while insignificant damage is seen in
call options. Put call ratio at 1.75 levels indicates comfort by put writers.
OUTLOOK
n Nifty is expected to consolidate in a narrow range of 4950-5080. Medium
term trend remains positive for 5200-5200 on the higher side. Immediate
support is seen at 4950.
n Metal majors are expected to trade with a positive bias. Capital goods
have under performed in the recent past and are expected to gain momentum.
Realty majors are expected to consolidate in the near term with
buying expected at lower levels.
On Wednesday the market remained in a very narrow range and failed to breach 5075 or 5010 decisively on either
side. As the market has narrowed down the trading range, it will result into major activity on either side. While
looking at intraday charts we can say that it will favor bears in the short term.
For the day initially the level of 5040/16950 may act as a crucial support for the market failure to hold these levels will
push the market to 5010/16880 levels. Sustenance of the market below the same in the second half will extend the
short term weakness to the level 4960/16700. In the worst case the market may even fall up to 4870/16410 levels.
However, these levels will offer excellent fresh trading/positional buy opportunity in the market. On the higher side
the level of 5085/5075 may act as major hurdle area and sustenance above 5085/17110 will lift the market towards
5125/5130 (17250) levels.
19/11/2009 nifty outlook delivery call mundraport
MUNDRA PORT & SEZ (MPSEZ)
PRICE: RS.534 RECOMMENDATION: BUY
TARGET PRICE: RS.650 CONS. FY10E P/E: 29.4X
q Traffic at Mundra port grew by 16.1% in H1FY10 while traffic at major
ports grew by just 2.4% in H1FY10
q Sale of SEZ land expected to pick up in H2FY10E
q We maintain FY10 earning estimates
q We remain positive on long term growth prospects
q Due to 22% upside potential from current levels we continue to
recommend BUY on MPSEZ with unchanged SOTP based price target of
Rs.650.
Traffic at Mundra port grew by 16.1% as against 2.4% at major
ports
n The twelve major ports of India handled 268 MMT of cargo in H1FY10 thereby
registering YoY growth of just 2.4% for the period April to September 2009.
n Mundra port which is one of the top 10 ports of India is actually considered as
non major port. While the traffic at major ports grew by just 2.4%, the traffic at
Mundra Port grew by an impressive 16.1% in H1FY10 to 20.0 MMT.
n Recently it is handling more of specialized food products, export of de-oiled
cakes and imports of wheat, sugar and edible oils. This clearly indicates the
ability of the company to attract more traffic by diversifying to other types of
cargo like car exports and handling of oversized cargo like metro coaches.
PRICE: RS.534 RECOMMENDATION: BUY
TARGET PRICE: RS.650 CONS. FY10E P/E: 29.4X
q Traffic at Mundra port grew by 16.1% in H1FY10 while traffic at major
ports grew by just 2.4% in H1FY10
q Sale of SEZ land expected to pick up in H2FY10E
q We maintain FY10 earning estimates
q We remain positive on long term growth prospects
q Due to 22% upside potential from current levels we continue to
recommend BUY on MPSEZ with unchanged SOTP based price target of
Rs.650.
Traffic at Mundra port grew by 16.1% as against 2.4% at major
ports
n The twelve major ports of India handled 268 MMT of cargo in H1FY10 thereby
registering YoY growth of just 2.4% for the period April to September 2009.
n Mundra port which is one of the top 10 ports of India is actually considered as
non major port. While the traffic at major ports grew by just 2.4%, the traffic at
Mundra Port grew by an impressive 16.1% in H1FY10 to 20.0 MMT.
n Recently it is handling more of specialized food products, export of de-oiled
cakes and imports of wheat, sugar and edible oils. This clearly indicates the
ability of the company to attract more traffic by diversifying to other types of
cargo like car exports and handling of oversized cargo like metro coaches.
Tuesday, November 17, 2009
HT MEDIA DELIAVERY CALL 18/11/2009
HT MEDIA
PRICE: RS.136 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.153 FY11E EV/EBITDA: 9X; P/E: 16X
q HT Media demerges its Hindi business into a 99.3% owned subsidiary;
consideration being the book value of Rs.1.49bn.
q Action aimed at bringing greater managerial focus and possibly aimed
at securing independent funding for the faster growing regional press
business.
q Expect advertising growth rates to pick up starting 2HFY10, as macro
environment picks up. Urban consumption/advertising pick up becomes
more important given HT's dependence on national media markets in its
English business.
q Progress of new investments (internet and radio) that have been a drag
on consolidated financials will be the key variable to monitor
q Maintain rating; any stock weakness can be used to ACCUMULATE as a
revival in national advertising markets, low NP prices and potential of
regional business (Hindustan) could lead to incremental earnings gains.
Price target is unchanged at Rs.153.
q Belied hopes of a recovery in corporate earnings and/or higher NP prices
remain key risks.
HT Media demerges 'Hindi business' into a subsidiary company
n HT Media has approved the sale/transfer of its "Hindi Business Undertaking" to
Hindustan Media Ventures Limited, a subsidiary company, of which 99.3% is
owned by the listed company- HTML. The transaction shall be effective from
December 1, 2009, according to the company.
n As part of this transaction, the 'Hindi business' of HTML comprising of
'Hindustan', the Hindi daily; Hindi magazines, 'Nandan' & 'Kadambini', and the
internet portals of these publications, including all assets, liabilities and
employees pertaining to this business, will be transferred to Hindustan Media
Ventures Limited on a 'slump sale' and 'going concern' basis, as per a company
release.
n In financial terms the 'Hindi' business has grown quickly for HT Media over the
last two years, and contributed close to 28% of Q2FY10 standalone revenues
(print and radio) & 32% of the quarters reported EBITDA.
n The company has also disclosed that the 'Hindi business' operating margins
were around the overall reported levels-20% (HT's OPM in Q2FY10 was
18.6%).
n In Q2 FY2010, the Hindi business reported revenues of Rs.1026 million,
operating profits of Rs.208 million translating to operating margins of 20%.
Overall (print + radio) HT reported revenues of Rs.3471 million, operating profits
of Rs.646 million translating to operating margins of 18.6%.
n We note that given its expansion into new geographies and the resilience in
regional markets; advertising growth for HT's Hindi segment has outstripped
the anemic growth exhibited by the national media markets over the last 4
quarters
PRICE: RS.136 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.153 FY11E EV/EBITDA: 9X; P/E: 16X
q HT Media demerges its Hindi business into a 99.3% owned subsidiary;
consideration being the book value of Rs.1.49bn.
q Action aimed at bringing greater managerial focus and possibly aimed
at securing independent funding for the faster growing regional press
business.
q Expect advertising growth rates to pick up starting 2HFY10, as macro
environment picks up. Urban consumption/advertising pick up becomes
more important given HT's dependence on national media markets in its
English business.
q Progress of new investments (internet and radio) that have been a drag
on consolidated financials will be the key variable to monitor
q Maintain rating; any stock weakness can be used to ACCUMULATE as a
revival in national advertising markets, low NP prices and potential of
regional business (Hindustan) could lead to incremental earnings gains.
Price target is unchanged at Rs.153.
q Belied hopes of a recovery in corporate earnings and/or higher NP prices
remain key risks.
HT Media demerges 'Hindi business' into a subsidiary company
n HT Media has approved the sale/transfer of its "Hindi Business Undertaking" to
Hindustan Media Ventures Limited, a subsidiary company, of which 99.3% is
owned by the listed company- HTML. The transaction shall be effective from
December 1, 2009, according to the company.
n As part of this transaction, the 'Hindi business' of HTML comprising of
'Hindustan', the Hindi daily; Hindi magazines, 'Nandan' & 'Kadambini', and the
internet portals of these publications, including all assets, liabilities and
employees pertaining to this business, will be transferred to Hindustan Media
Ventures Limited on a 'slump sale' and 'going concern' basis, as per a company
release.
n In financial terms the 'Hindi' business has grown quickly for HT Media over the
last two years, and contributed close to 28% of Q2FY10 standalone revenues
(print and radio) & 32% of the quarters reported EBITDA.
n The company has also disclosed that the 'Hindi business' operating margins
were around the overall reported levels-20% (HT's OPM in Q2FY10 was
18.6%).
n In Q2 FY2010, the Hindi business reported revenues of Rs.1026 million,
operating profits of Rs.208 million translating to operating margins of 20%.
Overall (print + radio) HT reported revenues of Rs.3471 million, operating profits
of Rs.646 million translating to operating margins of 18.6%.
n We note that given its expansion into new geographies and the resilience in
regional markets; advertising growth for HT's Hindi segment has outstripped
the anemic growth exhibited by the national media markets over the last 4
quarters
nifty as on 18/11/2009
During the course of the day it tested 5010 on the downside and finally
bounced back to close flat. Stock specific activity was seen throughout the
trading session
n Market wide open interest is seen at Rs. 1,11,625 cr. Nifty futures have
seen marginal shed in open interest in the current series on account of
rollover activity.
n Nifty remains in corrective mode below 5075. On the downside support is
seen at 4930/4950. Sustain above 5075 is expected to invite significant
short covering. Medium term trend for the index remains positive for
5200 on the higher side.
n Reliance remains weak below 2160 for 2060 on the downside. Cairn also
remains weak at current levels. Capital goods major remain BHEL weak
below 2300. Siemens is remains weak below 280.
n Metal majors are expected to test higher levels in the near term led by
Tata Steel and Hindalco. Tata Steel is expected to test 552 levels while
Hindalco is expected to test 141/151 on the higher side.
n Nifty OI concentration is seen at 5100 call and 4800 put options. Put writing
is seen at 4800 levels. In case of call options no significant writing is
seen. PCROI remains significantly higher at 1.75 indicating comfort by put
writers.
OUTLOOK
n Nifty is expected to test lower levels of 4950 in the near term. Consolidation
is expected with a negative bias. Medium term trend for the index
remains positive with near term target seen at 5200.
n Tata Steel and Hindalco are expected to test higher levels of 550 and 141
respectively. Capital goods majors are expected to consolidate with a
negative bias before resuming their up-trend. Realty majors remain in
consolidation with buying advised at current levels.
bounced back to close flat. Stock specific activity was seen throughout the
trading session
n Market wide open interest is seen at Rs. 1,11,625 cr. Nifty futures have
seen marginal shed in open interest in the current series on account of
rollover activity.
n Nifty remains in corrective mode below 5075. On the downside support is
seen at 4930/4950. Sustain above 5075 is expected to invite significant
short covering. Medium term trend for the index remains positive for
5200 on the higher side.
n Reliance remains weak below 2160 for 2060 on the downside. Cairn also
remains weak at current levels. Capital goods major remain BHEL weak
below 2300. Siemens is remains weak below 280.
n Metal majors are expected to test higher levels in the near term led by
Tata Steel and Hindalco. Tata Steel is expected to test 552 levels while
Hindalco is expected to test 141/151 on the higher side.
n Nifty OI concentration is seen at 5100 call and 4800 put options. Put writing
is seen at 4800 levels. In case of call options no significant writing is
seen. PCROI remains significantly higher at 1.75 indicating comfort by put
writers.
OUTLOOK
n Nifty is expected to test lower levels of 4950 in the near term. Consolidation
is expected with a negative bias. Medium term trend for the index
remains positive with near term target seen at 5200.
n Tata Steel and Hindalco are expected to test higher levels of 550 and 141
respectively. Capital goods majors are expected to consolidate with a
negative bias before resuming their up-trend. Realty majors remain in
consolidation with buying advised at current levels.
nifty as on 18/11/2009
On Tuesday the market opened around its previous closings and failed to register a new high. This triggered intra day
weakness. However, due to bulls' strength the market recovered back to the opening levels and closed at almost
unchanged levels as compared to previous closings. The said formation is very interesting and may invite major activity
on either side on Wednesday.
For further gains it is essential for the market to trade and sustain above 5075/17090 levels. Failure to do so may keep
the sentiment weak that may again push the market towards previous lows 5010/16880 or even up to 4960/16710
levels. In case the market sustains above 5075/17090 level then it may rally to 5125/17250 level. As the market is at
crucial levels with an intra day weakness on the chart, our advice is to trade with given levels without any specific bias
on either side.
weakness. However, due to bulls' strength the market recovered back to the opening levels and closed at almost
unchanged levels as compared to previous closings. The said formation is very interesting and may invite major activity
on either side on Wednesday.
For further gains it is essential for the market to trade and sustain above 5075/17090 levels. Failure to do so may keep
the sentiment weak that may again push the market towards previous lows 5010/16880 or even up to 4960/16710
levels. In case the market sustains above 5075/17090 level then it may rally to 5125/17250 level. As the market is at
crucial levels with an intra day weakness on the chart, our advice is to trade with given levels without any specific bias
on either side.
Monday, November 16, 2009
GRASIM INDUSTRIES & ULTRATECH CEMENTS
GRASIM INDUSTRIES
PRICE: RS.2337 RECOMMENDATION: REDUCE
TARGET PRICE: RS.2421 FY11E P/E: 9.1X
ULTRATECH CEMENTS
PRICE: RS.739 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.842 FY11E P/E: 10.7X
q Ultratech Cements has decided to merge Samruddhi Cements Ltd with
itself in a share swap deal.
q Samruddhi shareholders to receive 4 shares of Ultratech Cements for
every 7 shares held in Samruddhi. Thus, correspondingly Ultratech Cements
will issue 149.5mn shares to Samruddhi shareholders.
q Entire deal is valuing the cement business of Samruddhi Cements at
$106/tonne and would also result in re-rating of Ultratech Cements as a
key player with largest cement capacity in the cement industry.
q We believe that this restructuring of cement business is positive for
Ultratech Cements in the long run and we continue to maintain ACCUMULATE
rating on the stock with a revised price target of Rs 842 (Rs 892
earlier). We continue to maintain REDUCE on Grasim with price target of
Rs 2421 (Rs 2413 earlier) since we believe that Grasim would now get a
holding company discount for its holdings in the cement business.
Following are the key highlights
Merger Details
Ultratech Cement has approved the merger with Samruddhi Cements Ltd and
shareholders of Samruddhi Cements will receive 4 shares of Ultratech Cements for
every 7 shares held in Samruddhi. Ultratech Cements will correspondingly issue
149.5mn shares to Samruddhi shareholders and expanded equity capital of
Ultratech Cements would stand at Rs 2742 million as against our estimate of Rs
2490mn. Grasim's holding in the merged entity would then be 60.3%. Entire deal
is earnings accretive for Ultratech Cements since overall capacity of Ultratech would
increase from 23.1MT to 48.8MT and operating profit is also expected to jump
from Rs 17.9bn to Rs 37.8bn in FY11 for the merged entity.
PRICE: RS.2337 RECOMMENDATION: REDUCE
TARGET PRICE: RS.2421 FY11E P/E: 9.1X
ULTRATECH CEMENTS
PRICE: RS.739 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.842 FY11E P/E: 10.7X
q Ultratech Cements has decided to merge Samruddhi Cements Ltd with
itself in a share swap deal.
q Samruddhi shareholders to receive 4 shares of Ultratech Cements for
every 7 shares held in Samruddhi. Thus, correspondingly Ultratech Cements
will issue 149.5mn shares to Samruddhi shareholders.
q Entire deal is valuing the cement business of Samruddhi Cements at
$106/tonne and would also result in re-rating of Ultratech Cements as a
key player with largest cement capacity in the cement industry.
q We believe that this restructuring of cement business is positive for
Ultratech Cements in the long run and we continue to maintain ACCUMULATE
rating on the stock with a revised price target of Rs 842 (Rs 892
earlier). We continue to maintain REDUCE on Grasim with price target of
Rs 2421 (Rs 2413 earlier) since we believe that Grasim would now get a
holding company discount for its holdings in the cement business.
Following are the key highlights
Merger Details
Ultratech Cement has approved the merger with Samruddhi Cements Ltd and
shareholders of Samruddhi Cements will receive 4 shares of Ultratech Cements for
every 7 shares held in Samruddhi. Ultratech Cements will correspondingly issue
149.5mn shares to Samruddhi shareholders and expanded equity capital of
Ultratech Cements would stand at Rs 2742 million as against our estimate of Rs
2490mn. Grasim's holding in the merged entity would then be 60.3%. Entire deal
is earnings accretive for Ultratech Cements since overall capacity of Ultratech would
increase from 23.1MT to 48.8MT and operating profit is also expected to jump
from Rs 17.9bn to Rs 37.8bn in FY11 for the merged entity.
Sunday, November 15, 2009
calls as per 16/11/2009
BUY SBIN @ 2368/- SL 2335/- TGT 2410/-
positional call buy bharti @ 307.5/- sl 280/- tgt 360/-
positional call buy bharti @ 307.5/- sl 280/- tgt 360/-
16/11/2009 out look
Closed the previous week near 5000 levels; swift recovery was seen from
lower levels of 4600. On the higher side resistance was seen at 5020.
n Market wide open interest is seen at Rs. 1,08,469 cr. Nifty futures have
seen marginal addition in open interest with futures trading at a premium
of 4 points.
n Nifty remains in consolidation after the up-move seen from 4550-5000.
Consolidation with selling at higher levels in expected in the near term.
Medium term trend for the index remains positive.
n Metal major Tata Steel is expected to test 550 on the higher side.
Hindalco remains positive above 125 for 141/151.Cairn is expected to remain
weak with downside target of 260. Tech majors are expected to
trade with a positive bias. Infosys is expected to test 2400 with buying
advised on dips.
n Private Banks are expected to consolidate in the near term. SBIN is expected
to test 2400 on the higher side as it remains positive above 2250.
Real Estate stocks are expected to remains range bound with buying expected
at lower levels.
n Nifty OI concentration is seen at 5000 call and 4800 put options. Put writing
is seen at 4800 levels indicating significant support at the same. PCR
OI is seen at 1.74 (current series) indicating significant comfort by put
writers.
OUTLOOK
n Nifty is expected to witness selling at higher levels. 5050-5075 is a range
where we would expect selling pushing the index down to 4800-4850 levels.
Consolidation with a negative bias can be expected in the near term
as the index completed one impulse up-move from 4550 to 5000.
n Metal stocks are expected to trade with a positive bias. Banking major SBI
is expected to test 2400 as it remains positive above 2250. Cairn is expected
to remain weak in the near term.
lower levels of 4600. On the higher side resistance was seen at 5020.
n Market wide open interest is seen at Rs. 1,08,469 cr. Nifty futures have
seen marginal addition in open interest with futures trading at a premium
of 4 points.
n Nifty remains in consolidation after the up-move seen from 4550-5000.
Consolidation with selling at higher levels in expected in the near term.
Medium term trend for the index remains positive.
n Metal major Tata Steel is expected to test 550 on the higher side.
Hindalco remains positive above 125 for 141/151.Cairn is expected to remain
weak with downside target of 260. Tech majors are expected to
trade with a positive bias. Infosys is expected to test 2400 with buying
advised on dips.
n Private Banks are expected to consolidate in the near term. SBIN is expected
to test 2400 on the higher side as it remains positive above 2250.
Real Estate stocks are expected to remains range bound with buying expected
at lower levels.
n Nifty OI concentration is seen at 5000 call and 4800 put options. Put writing
is seen at 4800 levels indicating significant support at the same. PCR
OI is seen at 1.74 (current series) indicating significant comfort by put
writers.
OUTLOOK
n Nifty is expected to witness selling at higher levels. 5050-5075 is a range
where we would expect selling pushing the index down to 4800-4850 levels.
Consolidation with a negative bias can be expected in the near term
as the index completed one impulse up-move from 4550 to 5000.
n Metal stocks are expected to trade with a positive bias. Banking major SBI
is expected to test 2400 as it remains positive above 2250. Cairn is expected
to remain weak in the near term.
calls as per 16/11/2009 sbin
STATE BANK OF INDIA
PRICE: RS.2300 RECOMMENDATION: BUY
TARGET PRICE: RS.2550 FY11E PE: 13.3; P/ABV: 2.2X
State Bank of India (SBI) with assets worth ~$210 bn and 16-17% market
share in banking business is the largest commercial bank in India. Its high
quality liability franchise visible in terms of CASA mix (40.96% at the end of
Q2FY10, one of the highest in the industry) has helped over the years to
have one of the lowest cost of deposits.
Its inherent strength lies in brand value, unparallel geographical presence
and strong customer franchise. SBI, being the largest banking
conglomerate, would be the biggest beneficiary of improvement in the
credit cycle, in our view.
In past two years, it has aggressively leveraged its vast network to increase
its market share in banking business (loans and deposits). The excess
liquidity in the B/S led by strong growth in the deposits vis-à-vis loan
growth has kept NIM under pressure. However, margin is likely to
recuperate led by retiring of high cost bulk deposits, improving funding
mix and pick-up in loan growth. We are expecting margins to improve to
2.58% and 2.68%, respectively for FY10E and FY11E as against the present
NIM at 2.43% for H1FY10. However, on a YoY basis, NIM is likely to come
down by 35 bps in FY10.
SBI along with its non-banking affiliates and subsidiaries are true proxy to
Indian economy. The six banking subsidiaries are in good shape and the
merger, if any, would add value to the SBI group.
We initiate our coverage on SBI with a 'BUY' rating and target price of
Rs.2550 based on SOTP. At the target price, the stock will trade at 1.8x its
FY011E adjusted book value after stripping the value of its subsidiaries
(Rs.664). The stock may remain range-bound till there is more clarity on
RBI’s proposed changes in provision coverage norms.
Key Investment Rationale
q High quality deposit franchise: SBI has used its pan India presence and
strong brand image to build a high quality deposit franchise which is visible in
terms of CASA mix. At the end of Q2FY10, low cost deposits (CASA) stood at
41% of domestic deposits, one of the highest in the industry.
At the end of Q2FY10, its CASA mix improved by 126 bps (YoY) led by strong
growth in low cost deposits (29.2%) along with retiring of high cost bulk
deposits (came down to 3.6% at the end of Q2FY10 as compared to 16.8% at
the end of Q2FY09).
q Healthy core fee income: SBI is one of the few PSU banks whose non-interest
income has grown 37.0% CAGR during FY07-09. Its core fee income
(commission, exchange & brokerage plus forex income) has grown at 30.9%
CAGR during FY07-09 in line with its asset growth of 30.5% during the same
period.
It has a healthy core fee income base, compared to other PSU banks, due to its
large government related businesses and extensive franchise covering large and
mid-sized corporate, SME and retail customers.
In FY09, bank benefited from volatility in interest rate by trading in the bond
market. This led to increase in its share of treasury profit to net revenue (NII +
non-interest income) from 2.6% in FY06 to 7.6% in FY09. We are building in
lower share of treasury profit to net revenue at 5.6% and 3.9% during FY10E &
FY11E, respectively
PRICE: RS.2300 RECOMMENDATION: BUY
TARGET PRICE: RS.2550 FY11E PE: 13.3; P/ABV: 2.2X
State Bank of India (SBI) with assets worth ~$210 bn and 16-17% market
share in banking business is the largest commercial bank in India. Its high
quality liability franchise visible in terms of CASA mix (40.96% at the end of
Q2FY10, one of the highest in the industry) has helped over the years to
have one of the lowest cost of deposits.
Its inherent strength lies in brand value, unparallel geographical presence
and strong customer franchise. SBI, being the largest banking
conglomerate, would be the biggest beneficiary of improvement in the
credit cycle, in our view.
In past two years, it has aggressively leveraged its vast network to increase
its market share in banking business (loans and deposits). The excess
liquidity in the B/S led by strong growth in the deposits vis-à-vis loan
growth has kept NIM under pressure. However, margin is likely to
recuperate led by retiring of high cost bulk deposits, improving funding
mix and pick-up in loan growth. We are expecting margins to improve to
2.58% and 2.68%, respectively for FY10E and FY11E as against the present
NIM at 2.43% for H1FY10. However, on a YoY basis, NIM is likely to come
down by 35 bps in FY10.
SBI along with its non-banking affiliates and subsidiaries are true proxy to
Indian economy. The six banking subsidiaries are in good shape and the
merger, if any, would add value to the SBI group.
We initiate our coverage on SBI with a 'BUY' rating and target price of
Rs.2550 based on SOTP. At the target price, the stock will trade at 1.8x its
FY011E adjusted book value after stripping the value of its subsidiaries
(Rs.664). The stock may remain range-bound till there is more clarity on
RBI’s proposed changes in provision coverage norms.
Key Investment Rationale
q High quality deposit franchise: SBI has used its pan India presence and
strong brand image to build a high quality deposit franchise which is visible in
terms of CASA mix. At the end of Q2FY10, low cost deposits (CASA) stood at
41% of domestic deposits, one of the highest in the industry.
At the end of Q2FY10, its CASA mix improved by 126 bps (YoY) led by strong
growth in low cost deposits (29.2%) along with retiring of high cost bulk
deposits (came down to 3.6% at the end of Q2FY10 as compared to 16.8% at
the end of Q2FY09).
q Healthy core fee income: SBI is one of the few PSU banks whose non-interest
income has grown 37.0% CAGR during FY07-09. Its core fee income
(commission, exchange & brokerage plus forex income) has grown at 30.9%
CAGR during FY07-09 in line with its asset growth of 30.5% during the same
period.
It has a healthy core fee income base, compared to other PSU banks, due to its
large government related businesses and extensive franchise covering large and
mid-sized corporate, SME and retail customers.
In FY09, bank benefited from volatility in interest rate by trading in the bond
market. This led to increase in its share of treasury profit to net revenue (NII +
non-interest income) from 2.6% in FY06 to 7.6% in FY09. We are building in
lower share of treasury profit to net revenue at 5.6% and 3.9% during FY10E &
FY11E, respectively
Thursday, November 12, 2009
13/11/2009 NIFTY TREND FINANCIAL TECH
The market remained in a tight range through out the day. However, it closed at day's lowest level under the
leadership of banking stocks.
For the day we will consider Thursday's highest and lowest level as the major support and resistance to trade. In case
the market sustains below 4920/16600 level in the second half of the trading session then it may fall to 4850/4835
(16300) levels. On the higher side the level of 5015 and 5035 may again act as a crucial resistance levels. In case the
market sustains above 5035/17000 level then it will certainly attract fresh buying.
For investors our advice is to be ready to invest partial funds around 4850/16300 level in index stocks with a medium
to long term view in mind. For traders our advice is to buy only on sharp recovery from these levels.
"Top Buy" with a medium term view - Financial Technology: Cls: 1387.00
The stock has shown fastest recovery in the current run up with an expansion in volumes. The stock even entered into
uptrend without any major hurdle that suggests that stock is in strong hands and may offer decent returns on
investments at current and on declines. The stock is having strong support between 1365 and 1335. Accumulate
between these levels with a final stop loss at 1270 on a closing basis. On the higher side the stock has next major
hurdle at 1440 and weekly closing above it will trigger fresh bullish sentiment. In that case the level of 1550 is not
ruled out. Long term target on the same should be in the range 1660-1700 (based on technical analysis).
leadership of banking stocks.
For the day we will consider Thursday's highest and lowest level as the major support and resistance to trade. In case
the market sustains below 4920/16600 level in the second half of the trading session then it may fall to 4850/4835
(16300) levels. On the higher side the level of 5015 and 5035 may again act as a crucial resistance levels. In case the
market sustains above 5035/17000 level then it will certainly attract fresh buying.
For investors our advice is to be ready to invest partial funds around 4850/16300 level in index stocks with a medium
to long term view in mind. For traders our advice is to buy only on sharp recovery from these levels.
"Top Buy" with a medium term view - Financial Technology: Cls: 1387.00
The stock has shown fastest recovery in the current run up with an expansion in volumes. The stock even entered into
uptrend without any major hurdle that suggests that stock is in strong hands and may offer decent returns on
investments at current and on declines. The stock is having strong support between 1365 and 1335. Accumulate
between these levels with a final stop loss at 1270 on a closing basis. On the higher side the stock has next major
hurdle at 1440 and weekly closing above it will trigger fresh bullish sentiment. In that case the level of 1550 is not
ruled out. Long term target on the same should be in the range 1660-1700 (based on technical analysis).
13/11/2009 NIFTY OUT LOOK
Nifty opened on a flat note after having gained significantly in the previous
trading session. It failed to cross previous trading sessions high consolidated
in a narrow range for most of the trading session. It witnessed selling
pressure in the last hour of trading.
n Market wide open interest is seen at Rs. 1,05,811 cr. Nifty futures have
seen marginal shed in open interest with futures trading at par.
n Nifty has gained significantly since the it's recent low of 4540. It is now expected
to enter into a corrective move with selling expected at higher
levels. Stock specific activity may continue but the index is expected to
trade with a negative bias.
n Reliance Industries is expected to witness selling at higher levels. Cairn is
expected to test 250 on the downside with selling expected at higher levels.
Tech majors are expected to trade with a positive bias. Infosys is expected
to test 2400. Wipro remains positive above 600 for 700 on the
higher side.
n From the momentum space WelGuj is expected to witness significant selling
as the stock remains weak below 289; on the downside the stock can
test 255 levels. Educomp is expected to test 836/874 on the higher side.
n Nifty OI concentration is seen at 4700 put and 5000 call options. No significant
writing is seen in options inspite of significant build up in positions
(in terms of price damage). Implied remain below 30 levels; this is happening
after many expiries. There remains high possibility of the index
remaining in the range of 4600-5000 in the current series.
OUTLOOK
n Nifty turnaround is seen at 4815 above which it remains in positive territory.
Currently the index is expected to enter consolidation/corrective
phase. On the downside support is expected at 4900 before any bounce
back is seen.
n Tech majors are expected to test higher levels led by Infuses and TCS.
Weakness is expected in Reliance and Cairn. SBI is expected to test 2400
above 2250. WelGuj remains weak below 290 for 255 on the downside.
Metal majors are expected to trade with a positive bias in the near term.
trading session. It failed to cross previous trading sessions high consolidated
in a narrow range for most of the trading session. It witnessed selling
pressure in the last hour of trading.
n Market wide open interest is seen at Rs. 1,05,811 cr. Nifty futures have
seen marginal shed in open interest with futures trading at par.
n Nifty has gained significantly since the it's recent low of 4540. It is now expected
to enter into a corrective move with selling expected at higher
levels. Stock specific activity may continue but the index is expected to
trade with a negative bias.
n Reliance Industries is expected to witness selling at higher levels. Cairn is
expected to test 250 on the downside with selling expected at higher levels.
Tech majors are expected to trade with a positive bias. Infosys is expected
to test 2400. Wipro remains positive above 600 for 700 on the
higher side.
n From the momentum space WelGuj is expected to witness significant selling
as the stock remains weak below 289; on the downside the stock can
test 255 levels. Educomp is expected to test 836/874 on the higher side.
n Nifty OI concentration is seen at 4700 put and 5000 call options. No significant
writing is seen in options inspite of significant build up in positions
(in terms of price damage). Implied remain below 30 levels; this is happening
after many expiries. There remains high possibility of the index
remaining in the range of 4600-5000 in the current series.
OUTLOOK
n Nifty turnaround is seen at 4815 above which it remains in positive territory.
Currently the index is expected to enter consolidation/corrective
phase. On the downside support is expected at 4900 before any bounce
back is seen.
n Tech majors are expected to test higher levels led by Infuses and TCS.
Weakness is expected in Reliance and Cairn. SBI is expected to test 2400
above 2250. WelGuj remains weak below 290 for 255 on the downside.
Metal majors are expected to trade with a positive bias in the near term.
13/11/2009 IIP DATA
SEPTEMBER IIP ROSE 9.1%
q The index of industrial production (IIP) for September 2009 rose 9.1% on
back strong growth in all the three major segments - manufacturing,
mining and electricity which grew at 9.3%, 8.6% and 7.9%, respectively.
q As per use-based classification, basic goods, capital goods and intermediate
goods delivered strong growth at 6.7%, 12.8% and 10.8%, respectively.
Consumer durables have also delivered strong growth in last
three months by growing more than 20% levels.
q Recovery in basic goods as well as intermediate goods indicates that
economic recovery is underway. We would be optimistically waiting for
more positive surprises in the future to get a clear signal about the pace
of recovery.
q Strong September 2009 number has come on the back of festive season
buying, continued stimulus measures, increase in purchasing power of
government staff due to release of wage arrears etc. We would be more
watchful on the future IIP numbers as the above mentioned effects
wear out.
q On policy front, we opine that, we need to see continued and sustained
trend in the economic indicators before RBI shifts its gear to tighter
monetary policy stance.
The CSO has released a quick estimate of index of industrial production (IIP) for
September 2009, which rose 9.1% on back strong growth in all the three major
segments - manufacturing, mining and electricity which grew at 9.3%, 8.6% and
7.9%, respectively. The strong IIP for September 2009 has come on the back of
festive season buying, continued stimulus measures, increase in purchasing power
of government staffs due to release of wage arrears etc.
The cumulative growth for the period April-September FY10 stands at 6.5% over
the corresponding period of the previous year.
Key highlights
n The manufacturing sector witnessed 9.3% growth during September 2009,
leading to 6.3% cumulative growth during April-September FY10 as compared
to 5.3% growth in April-September FY09.
n The mining sector rose 8.6% YoY during September 2009, leading to 8.2% cumulative
growth during April-September FY10 as compared to 3.8% growth in
April-September FY09.
n The electricity sector also delivered robust growth of 7.9% during September
2009 as compared to 4.4% during the same period last year. This segment continues
to show better performance and the cumulative growth during April-
September FY10 stands at 6.8% as compared to 2.5% growth in April-September
FY09.
n In terms of industries, 12 out of 17 industry groups in the manufacturing sector
have recorded positive growth during this month as compared to the corresponding
month of the last year.
n The industry groups that have shown the highest growth in this month are…
l Other Manufacturing Industries: 24.5%
l Basic chemicals & chemical products (except products of petroleum & coal):
20.1%
l Machinery and Equipment other than Transport Equipment: 16.5%
ECONOMY UPDATE
Saday Sinha
saday.sinha@kotak.com
+91 22 6621 6312
Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 3
MORNING INSIGHT November 13, 2009
n The sectoral growth (use-based classification) has been as under:
l Basic goods: 6.7% l Capital goods: 12.8%
l Intermediate goods: 10.8% l Consumer goods: 8.2%
n In September 09, consumer durables recorded strong growth of 22.2%
whereas consumer non-durables showed moderate growth of 2.6%.
n Apart from this, the IIP for August 2009 has been revised upward to 11.0%
from the previously reported growth of 10.4%.
q The index of industrial production (IIP) for September 2009 rose 9.1% on
back strong growth in all the three major segments - manufacturing,
mining and electricity which grew at 9.3%, 8.6% and 7.9%, respectively.
q As per use-based classification, basic goods, capital goods and intermediate
goods delivered strong growth at 6.7%, 12.8% and 10.8%, respectively.
Consumer durables have also delivered strong growth in last
three months by growing more than 20% levels.
q Recovery in basic goods as well as intermediate goods indicates that
economic recovery is underway. We would be optimistically waiting for
more positive surprises in the future to get a clear signal about the pace
of recovery.
q Strong September 2009 number has come on the back of festive season
buying, continued stimulus measures, increase in purchasing power of
government staff due to release of wage arrears etc. We would be more
watchful on the future IIP numbers as the above mentioned effects
wear out.
q On policy front, we opine that, we need to see continued and sustained
trend in the economic indicators before RBI shifts its gear to tighter
monetary policy stance.
The CSO has released a quick estimate of index of industrial production (IIP) for
September 2009, which rose 9.1% on back strong growth in all the three major
segments - manufacturing, mining and electricity which grew at 9.3%, 8.6% and
7.9%, respectively. The strong IIP for September 2009 has come on the back of
festive season buying, continued stimulus measures, increase in purchasing power
of government staffs due to release of wage arrears etc.
The cumulative growth for the period April-September FY10 stands at 6.5% over
the corresponding period of the previous year.
Key highlights
n The manufacturing sector witnessed 9.3% growth during September 2009,
leading to 6.3% cumulative growth during April-September FY10 as compared
to 5.3% growth in April-September FY09.
n The mining sector rose 8.6% YoY during September 2009, leading to 8.2% cumulative
growth during April-September FY10 as compared to 3.8% growth in
April-September FY09.
n The electricity sector also delivered robust growth of 7.9% during September
2009 as compared to 4.4% during the same period last year. This segment continues
to show better performance and the cumulative growth during April-
September FY10 stands at 6.8% as compared to 2.5% growth in April-September
FY09.
n In terms of industries, 12 out of 17 industry groups in the manufacturing sector
have recorded positive growth during this month as compared to the corresponding
month of the last year.
n The industry groups that have shown the highest growth in this month are…
l Other Manufacturing Industries: 24.5%
l Basic chemicals & chemical products (except products of petroleum & coal):
20.1%
l Machinery and Equipment other than Transport Equipment: 16.5%
ECONOMY UPDATE
Saday Sinha
saday.sinha@kotak.com
+91 22 6621 6312
Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 3
MORNING INSIGHT November 13, 2009
n The sectoral growth (use-based classification) has been as under:
l Basic goods: 6.7% l Capital goods: 12.8%
l Intermediate goods: 10.8% l Consumer goods: 8.2%
n In September 09, consumer durables recorded strong growth of 22.2%
whereas consumer non-durables showed moderate growth of 2.6%.
n Apart from this, the IIP for August 2009 has been revised upward to 11.0%
from the previously reported growth of 10.4%.
Wednesday, November 11, 2009
calls as per 12/11/2009
1}sbin buy above 2348/- sl 2320/- tgt 2400/- above 2348/- cmp 2331/-
2} buy relinf above1150/- sl 1135/- tgt 1175/- above 1150/- cmp 1142/-
2} buy relinf above1150/- sl 1135/- tgt 1175/- above 1150/- cmp 1142/-
SUNIL HI TECH ENGINEERS
SUNIL HI TECH ENGINEERS LTD
PRICE: RS.182 RECOMMENDATION: BUY
TARGET PRICE: RS.250 FY11E P/E: 5.3X
q We recently spoke with the management of SHEL to understand the current
trend in the power sector and its impact on SHEL
q The company is looking at large BOP orders
q Revise FY10E EPS to Rs.28.6 (Rs.30.0 earlier)
q Incorporate FY11 earning estimates with EPS of Rs.35.0
q Stock attractively valued at 5.3x FY10E EPS of Rs.35.0
q We reiterate our long term positive outlook on its growth prospects
q We continue to recommend BUY on SHEL with increased price target of
Rs.250 (Rs.200 earlier).
Power sector to continue to grow
n India`s per capita consumption of power is low at 704 kWh versus 2150 kWh of
China. As per industry sources, in a developing economy, the rate of growth of
demand for power is about 50% more then the rate of economic growth. Thus
going forward we expect the demand for power to continue to remain strong.
n The peak power deficit has been rising steadily form 11% in FY04 to ~16% in
FY09 thereby indicating a significant shortfall in power generations. In fact in
certain states the energy shortage is as high as 25%. This would lead to continuous
addition of power capacities in India.
n India's current power generating capacity is 147,806 MW and it ranks sixth globally
in terms of electricity generation. This capacity is likely to grow to more
then 300000 MW by the end of 12th five year plan ending 2017.
Rising peak power deficit (%)
Source: CEA
Opportunity for SHEL
n The National Electricity Policy envisages "Power for all by 2012" and per capita
availability of power to be increased to over 1,000 units by 2011-12. To achieve
this, a total capacity addition of about 100,000 MW is required during 10th and
11th Plan period. Considering 21180 MW being actual achievement during X
Plan, the XI Plan target envisages to add 78,700 MW. Out of this 76% is expected
to be thermal 20% Hydro and balance 4% on nuclear power.
PRICE: RS.182 RECOMMENDATION: BUY
TARGET PRICE: RS.250 FY11E P/E: 5.3X
q We recently spoke with the management of SHEL to understand the current
trend in the power sector and its impact on SHEL
q The company is looking at large BOP orders
q Revise FY10E EPS to Rs.28.6 (Rs.30.0 earlier)
q Incorporate FY11 earning estimates with EPS of Rs.35.0
q Stock attractively valued at 5.3x FY10E EPS of Rs.35.0
q We reiterate our long term positive outlook on its growth prospects
q We continue to recommend BUY on SHEL with increased price target of
Rs.250 (Rs.200 earlier).
Power sector to continue to grow
n India`s per capita consumption of power is low at 704 kWh versus 2150 kWh of
China. As per industry sources, in a developing economy, the rate of growth of
demand for power is about 50% more then the rate of economic growth. Thus
going forward we expect the demand for power to continue to remain strong.
n The peak power deficit has been rising steadily form 11% in FY04 to ~16% in
FY09 thereby indicating a significant shortfall in power generations. In fact in
certain states the energy shortage is as high as 25%. This would lead to continuous
addition of power capacities in India.
n India's current power generating capacity is 147,806 MW and it ranks sixth globally
in terms of electricity generation. This capacity is likely to grow to more
then 300000 MW by the end of 12th five year plan ending 2017.
Rising peak power deficit (%)
Source: CEA
Opportunity for SHEL
n The National Electricity Policy envisages "Power for all by 2012" and per capita
availability of power to be increased to over 1,000 units by 2011-12. To achieve
this, a total capacity addition of about 100,000 MW is required during 10th and
11th Plan period. Considering 21180 MW being actual achievement during X
Plan, the XI Plan target envisages to add 78,700 MW. Out of this 76% is expected
to be thermal 20% Hydro and balance 4% on nuclear power.
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