weekly news letter & stock picks - jan 23-29 2011

8/6/2019 Weekly News Letter & Stock Picks - JAN 23-29 2011

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Credence Capital Weekly Newsletter & Stock Picks 23rd Jan 29th Jan 2011

W

Weekly Newsletter &Stock Picks23rd Jan 29th Jan ,2011

Foul cankering rust the hidden treasure frets,

But gold that's put to use more gold begets.

~William Shakespeare, Venus and Adonis, 1593

Weekly Commentary and Analysis ofIndian Equity Market

Global Markets

Derivative Market

Rate and Credit Market

Macroeconomic data

Stock Picks

23 Jan,

2011

Abhisake |Abhishek | Aravind | Prashant | Rahul | Saurabh | Vaibhav

Manish | Navin | Rahul | Ravi | Vijay


2/9


I. INDIAN EQUITY MARKETSUMMARY

BSE & NSE

The 30-scrip sensitive index (Sensex) of theBombay Stock Exchange (BSE), ended the week at19,007.53 points, up 0.78 percent or 147.09 pointsfrom the previous week close of 18,860.44 points.

The key indices were largely range-bound duringthe week as investors remained cautious ahead ofthe RBI's monetary policy review.

The Reserve Bank of India (RBI) is scheduled toannounce third quarter review of monetary policy

Jan 25. Most analysts expect the apex bank wouldraise policy rates as inflation remains much abovethe comfort zone.

The benchmark Sensex closed 39.01 points or 0.2percent lower at 19,007.53 points in a lacklustresession Friday, the last trading day of the week.

The 50-scrip S&P CNX Nifty of the NationalStock Exchange closed at 5696.5 on 21st Jan,marginally higher than its previous week closure at5654.

On last trading day of week, NIFTY closed 15.1points or 0.26 percent lower at 5,696.5 pointsFriday.

HIGHLIGHTS

Insurance watchdog IRDA on Friday said theguidelines for public float of life insurancecompanies will be ready this fiscal, while the non-life may take more time. In October last year,market regulator Sebi had approved life insurancecompanies to issue IPOs.

Omkar Speciality Chemicals' initial public offer(IPO), through which it expects to mop-up overRs 79 crore, will open for subscription on January24.

0.78%

-0.44% -0.53%

1

Sensex BSE Mid-Cap BSE Small-Cap

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

IT

TECk

HC

METAL

FMCG

POWER

CG

OIL&GA

SPSU

AUTO

BANKE

XCD

-53.7

176.4

-208

-834.3-1000

-800

-600

-400

-200

0

200

400

17-Jan 18-Jan 19-Jan 20-Jan


3/9


The follow-on public offer (FPO) of Tata Steel garnered a smart response from the investors, withthe issue getting over-subscribed 5.97 times on the final day. Tata Steel FPO received bids worth29.06 crore shares against 4.8 crore equities on offer, thereby, generating demand worth a whoppingRs 17,726.6 crore.

SEBI has strengthened the reporting process related to offshore derivative instrument andparticipatory note activity. In a circular issued on Monday, the market regulator said that FIIs issuingoffshore derivative instrument (ODI) and participatory note (PN) were required to provide trade-

wise details of their activities in India by the 10 of every month with a six- month lag (April data byOctober 10). The regulator sought data related to all underlying assets, debt, equity and derivativesalong with the respective AUMs.

FII and DII Trading Activity on NSE and BSE between January 17 and

January 21, 2010:

Category Date Buy Value Sell Value Net Value

FII 21-Jan-11 2461.85 2829.85 -368.00

DII 21-Jan-11 1061.92 838.78 223.14

FII 20-Jan-11 2723.52 3667.43 -943.91

DII 20-Jan-11 1432.83 1176.51 256.32

FII 19-Jan-11 3167.71 3438.09 -270.38

DII 19-Jan-11 1540.76 1052.23 488.53

FII 18-Jan-11 2699.71 2627.17 72.54

DII 18-Jan-11 1149.84 1176.04 -26.20

FII 17-Jan-11 2569.50 2742.50 -173.00

DII 17-Jan-11 1067.54 707.72 359.82

II. GLOBAL MARKETS The US GDP rose at a 3.5%, up from a 2.6% rate in the previous three months,

according to the estimates. It has been indicated that consumer spending increased the

most in the last 4 years.

The above indicate that capital and investments spending will be healthy in the nextquarter.

The US 30 year bond yields rose to an eight-month high(4.63% on January 20) afterEuropean officials pledged to support the struggling European countries and a record

sale of U.S. inflation- linked bonds found lower than average demand(which was

surprising, we had indicated a demand for such bonds in our previous newsletter). The

10 year benchmark also rose by 6 bps to 3.47%.

Euro continued its rally against USD and closed at 1.36 USD on Friday after news ofbusiness sentiments in Germanyat a record high.

We believe that the problems of Euro zone are not yet over and the strengthening ofEuro has been primarily due to a short-covering rally and may not sustain for long.

U.K. mortgage approvals declined to 21-month low as housing market weakened. Chinese short term rates surged up because of cash shortage as the Peoples Bank of

China had raised the reserve ratio by another 50 bps during the previous week.
http://topics.bloomberg.com/germany/http://topics.bloomberg.com/germany/


4/9


Chinas GDP increased to 9.80% in the fourth quarter, with the economy expanding10.30% in 2010, the fastest in three years.

III. DERIVATIVE MARKETSFUTURES

NIFTY was quite range bound but extremely volatile during the week. It opened at 5654on Monday and closed the week at 5696.

In the previous weeks newsletter we had indicated a range of 5600-5800. It could beobserved that the market, most of the time during the week traded within 5650-5750

levels.

The coming week is going to be crucial because of two reasons: RBI monetary policy willbe declared on January 25 and the January contract expiry will happen on January 27.

The technicals dont show a major upside in the next week. But if NIFTY manages totrade above 5680 consistently and there is a 25 bps repo rate hike by RBI then we can see

some positive movement in the coming week.

Open interests in NIFTY futures during the week did not change much and the totalvolume traded was significantly lower as compared to the previous two weeks. It appears

that many of the players are waiting for the events to unfold in this week after which we

can see some strong movement going forward.

FIIs selling continued during the week, although the net volumes were less this week.Despite this the market held to its 200 day moving average which indicates that it can go

anyway from here. If the RBI shows a strong hawkish stance then 5600 will be a key level

to watch in the next week which if breached decisively may fuel a sharp fall in the

coming week.

It will be interesting to watch what happens on Tuesday and then take a trading callbased on that.

OPTIONS: OI in 5600 strike January put option remain high indicating a strong support for NIFTY

around 5600 levels.

The call options do not give any confident indication for the next weeks market. OpenInterest in 5700 and 5800 strike January calls didnt change much during the week

remained significantly high. This indicates that the call writers still hold their positions.

An increase in 5600 strike January put on Friday indicates that 5600 becomes the nexttechnical support level to look for on the initial two days of the coming week.

We see 5800 as an immediate resistance and 5600 as a support for the NIFTY. But itwould not be difficult to breach 5600 if the FII selling continues and as long as traders

initiate short positions at every decisive level.


5/9


6/9


Movement in % on Year to year basis

Cereals 0.23

Pulses 14.92

Milk 13.27Fruits 15.19

Rice 2.86

Veg 65.39

Potato 2.94

Wheat 6.11

Onion 98.15

Egg,meat & fish 12.94

FDI-Inflow: Service sector stands tall

Foreign direct investmentfor the current year hasbeen USD 19,002 million.Service sector being themost attractive sector hasseen a 21% of the totalFDI inflow in the country

so far. Mauritius remains atthe top with a contributionof 42 % of the total FDIinflow. Mumbai being themost attractive destinationfor FDI inflows (35%)

8

10

12

14

16

18

20

Food - Inflation

21%

8%

8%

8%

7%5%4%

3%3%

2%2%

2%

2%

2%

5%

19%

SERVICES SECTOR

COMPUTER SOFTWARE & HARDWARE

TELECOMMUNICATIONS

HOUSING & REAL ESTATE

CONSTRUCTION ACTIVITIES

POWER

AUTOMOBILE INDUSTRY

METALLURGICAL INDUSTRIES

PETROLEUM

CHEMICALS

TRADINGHOTEL & TOURISM

ELECTRICAL EQUIPMENTS

INFORMATION & BROADCASTING

MISCELLANEOUS

Other

0

5000

10000

15000

20000

25000

30000

35000

40000

AmountUS$million

*upto Nov'2010

FDI Inflow

Source: Deptt of Industrial Policy & Production


7/9


OPEC: Rising Oil Prices

The OPEC reference basket,

ORBs price has observed a

rise in its price to the level of

92.95 USD/barrel till 04th

Jan.

Reason for the rise being

increase in US fuel

consumption. Total deliveries

of petroleum products, a

measure of demand stands at

19.2 million barrels a day

which is highest in last six

year. However, the prices

declined by $1.04 per barellon 21st jan amidst concern

that china may further hike its

interest rate leading to

reduction in demand.

VI. STOCK PICKS FOR THE WEEK

Company analysis

One of the oldest business conglomerates in India A group comprising of 25 companies Turnover over INR 280 Billion (~USD 6 Billion, at INR 46 per USD) Also has interests in Engineering & Projects, High Masts, Turnkey Lighting Projects,

Transmission Line Towers, Rural Electrification and Wind

Bajaj Appliances: sales INR 4,640 million; As a % of total sales 26 %

Bajaj Electrical & Projects : Sales: INR 5,230 mn ; As a % of total sales: 30% Bajaj Fans: Sales: INR 2,950 mn; As a % of total sales: 16%

89

90

91

92

93

94

95

Price(USD/barrel)

OPEC Crude oil basket prices in

USD

Company Name Bajaj Electricals

Industry Electricals Goods

CMP 217

Target 275+

Stop Loss 205

Time Horizon 2 month


8/9


Bajaj Luminaires : Sales: INR 2,820 mn; As a % of total sales: 16% Bajaj Lighting : Sales: INR 2,090 mn; As a % of total sales: 12%

Technical

Technical indicators of the company are giving bullish signals. Both EMA and SMA for 30 days is higher than that for 90 days which indicates that the

momentum is not reversed and though the stock has seen a small correction, uptrend is still

intact and ready to bounce back.

Stock is still trading in Bollinger band , sharp correction that we witnessed should be lookedat as buying opportunity for a sharp immediate reaction

If we look at the MACD chart , the stock is at make or break zone that calls for a strict stoploss maintenance

Company analysis

L&T delivers world-class design to build EPC solutions in the Oil & Gas, Petrochemicals,Fertilizer, Power and Water technology sectors.

The Engineering arm has qualified and experienced engineering talent, in-house engineeringcenters

A large Modular Fabrication Yard at Kattupalli near Chennai is at an advanced stage ofdevelopment to cater to the strategic market segments, both domestic East Coast andoverseas South East Asia and Australian requirements

L&T successfully commissioned complex projects including the onshore gas processingterminal at Kakinada.This is reputed to be one of the worlds largest insulated pipelines.

The domestic economy has regained momentum and has shown positive signs of recovery interms of industrial growth

India is emerging as a global refining hub thanks to the cost competencies over othercountries.

Technical

Company Name L & T

Industry Capital Goods

CMP 1649

Target 1890

Stop Loss 1595

Time Horizon 2 months


9/9


Stock has not moved out of Bollinger band yet and the stock is trading at major supportzone

Although RSI index shows little jitter but that is largely due to its oversold territory Again stop loss should be strict as breakdown from here will lead to reversal of pattern

and the stock would likely to correct more.

The stock is ready for something like 1890 -1940 in medium term with a sharp technicalbounce back in short term.

Disclaimer

Team Credence has prepared the information given and opinions expressed in this report. The information

contained has been obtained from sources believed to be reliable and in good faith, but which may not be

verified independently. While utmost care has been taken in preparing the above report, Team Credencemake no guarantee, representation or warranty, whether express or implied and accepts no responsibility or

liability as to its accuracy or completeness of the data being provided. All investment information and

opinion are subject to change without notice.

This document is for private circulation and information purposes only. It does not and should not be

construed as an offer to buy or sell securities mentioned herein. Team Credence shall not be liable for any

direct or indirect losses arising from the use thereof and the investors are expected to use the information

contained herein at their own risk. Team Credence may own or have positions in any investment mentioned

herein or any investment related thereto and from time to time add to or dispose of any such investment.

The investments discussed or recommended in this report may not be suitable for all investors. Investors

must make their own investment decisions based on their specific investment objectives and financial position and using such independent advisors, as they believe necessary. Income from investments may

fluctuate. The price or value of the investments, to which this report relates, either directly or indirectly, may

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weekly news letter & stock picks - jan 23-29 2011

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