Nifty & Sensex Levels Nifty / Sensex

Nifty & Sensex Levels

Nifty / Sensex	F & O Close Rate	R-1	R-2	S1	S2
NIFTY	5547.95	5589	5613	5525	5500
Sensex	18432	18558	18630	18366	18291

Sell Call Scrip Name

Sell Call

Scrip Name	F & O Close Rate	Target 1	Target 2	Stoploss
Cairn India	317.25	313	309	322
Power Grid	106.50	104.50	103	108
J. P. Associates	72.50	71	69.80	73.30
NTPC	180.50	177	175	183.20

Daily & Short Term Recommendations

Daily & Short Term Recommendations

Buy Call

Scrip Name	F & O Close Rate	Target 1	Target 2	Stoploss
HDFC Bank	502	508	512	495
Sesa Goa	288.90	296	296	284.50
Maruti	1216.75	1232	1240	1199
Ambuja Cement	131	133	134.60	129
Reliance Capital	588	596	602	580

 

Markets to open with negative note & fall further in first session  Later on short covering may lead to bounce back  Overall volatile session due to F&O Expiry today

L&T Finance Holdings Ltd (L&TFH) – Subscribe Price band Rs51-59

Diversified loan book; growth has been strong in the recent past

L&TFH through its subsidiaries L&T Finance and L&T Infra Finance offers a broad spectrum of financial products and services. The consolidated loan book of the company could be broken into infrastructure finance (40%), retail finance (37%), corporate finance (20%) and others (3%). Over the past two years, the consolidated loan book has witnessed 57% CAGR. More importantly, the book has become more diversified with the share of retail and corporate finance segments combined having declined from 69% in FY09 to 58% in FY11.

Wide pan-India presence; exploring opportunities to leverage it

As of May 2011, L&TFH had 837 points-of-presence spread across 23 states thereby enabling the company to cater to a large customer base (especially in rural and semi-urban areas). Company further plans to strengthen its reach through expansion in areas offering significant opportunities to increase revenue and giving competitive advantage. Such an extensive distribution network would be leveraged by the company to provide new products and services and also foray into new business segments. With an edge over competition in terms of reach, robust loan growth momentum is likely to continue.

Sanguine asset quality; however, some slippages may crop up              

Across segments, L&TFH’s asset quality has improved substantially in FY11 despite the robust growth registered over the past few years. For L&T Finance (comprising retail and corporate finance business), the Gross and Net NPAs stood at 1.4% and 0.8% respectively at end-FY11. In L&T Infra Finance, the Gross and Net NPAs stood at 0.7% and 0.5% respectively at end-FY11. More importantly, about 71%, 91% and 90% of the Corporate, Retail and Infra segment advances are secured thereby providing high level of comfort. However, given the current challenging credit environment, one could expect some slippage in NPL ratios.

Robust profitability reflected in high return ratios; ‘Subscribe’                        

RoA and RoE have improved materially in the past two years for L&T Finance driven by significant expansion in NIM and improvement in asset quality. End-FY11, RoA of the company stood at 2.5, remarkable in the light of the loan book mix. RoE was at 16% with the leverage at 5.3x. L&T Infra Finance’s RoA has been stable at 3.5% in the past two years. This is better than IDFC (like-to-like competitor) which has been earning around 3%. Further, RoE is impressive at 18%. With valuation reasonable at mean 2.5x P/BV (pre-IPO) we recommend subscribing to the IPO.  

सेन्सेक्स (18,432.25 ) - 85.97अंक गिरकर, नीफ़्टी (5,546.80%) -28.05 अंक गिरकर, बंद.

Our CALL SBI Aug Fut trading week

SBI Bank not looking good on charts ..

± RBI raised the repo rate for the 11th time, by 50 basis points to 8%. The reverse repo was raised by the same amount to 7%. (BS)

Result Update: Cairn India (Q1 FY12) – Market Performer

CMP Rs323, Target Rs293, Downside 9.3%

±  Net sales witness quantum jump as Mangala field achieves maintains its peak production rate of 125,000 barrels of oil per day (bopd)

±  Realization for Rajasthan crude continues to be at 10-15% discount to Brent much in line with company’s guidance

±  OPM jumps 852bps yoy on account of benefits of operating leverage

±  Company is holding a postal ballot of all the shareholders to consider the conditions imposed by the GoI such as royalty being made cost recoverable and ending the arbitration on cess

±  These steps will erode Rajasthan field NPV by Rs45/share. Maintain Market Performer rating with a revised 9-month target price of Rs293

Result Update: Maruti Suzuki (Q1 FY12) – Market Performer

CMP Rs1,178, Target Rs1,252, Upside 6.3%

±  Net sales rise 3.6%yoy driven by 4% yoy realization growth. Volumes were lower by 0.6% yoy and 18% on sequential basis owing to strike at Manesar plant

±  OPM at 9.5% (a fall of 8bps yoy and 46bps qoq) was better than our expectations owing to higher than expected realizations and lower other expenditure

±  Net profit jumped 18% yoy against expectation of a decline as other income surged 80% on yoy basis

±  Higher interest rates, rising competition and increasing input prices are major headwinds for near term earnings growth

±  Maintain Market Performer with a 9-month target price of Rs1,252

Result Update: Sterlite (Q1 FY12) – BUY

CMP Rs168, Target Rs210, Upside 24.9%

±  Q1 FY12 revenue jumped 65.2% yoy to Rs98.6bn, above our expectation of Rs94.7bn, aided by outperformance in international zinc division

±  Improved performance in copper business was aided by increase in sales of by-products

±  BALCO’s aluminium business EBIT decreased 18.4% qoq on account of rising input costs

±  Zinc domestic division EBIT outperformance was largely due to higher silver content in concentrate sales

±  Contribution from international zinc assets to the company’s consolidated EBIDTA increased from Rs4.4bn to 5.2bn

±  Power business EBIT margins were under pressure due to high coal costs; Power cost of production under SEL increased from Rs2.34/unit in Q4 FY11 to Rs2.86/unit

±  Zinc to drive earnings over the next two years, maintain BUY with a 9-month price target of Rs210  

Market Commentary

It's neither amusing nor interesting. It's a bit shocking. Some call the RBI's move a big leap of faith while many industries are moaning on their fate. Dr. D. Subbarao has upped the ante in the battle against inflation by jacking up rates by an aggressive 50 bps. What’s more, the central bank doesn’t seem to be lowering its guard either. It is ready to sacrifice a little bit of growth in the near term to improve long-term prospects. So, a further 25-50 bps hike is not ruled out. Let’s hope for some big relief on the inflation front.

We expect a better start today and hopefully an improved close. The SGX Nifty futures in Singapore is pointing to a steady opening. Asian markets are slightly in the red though. US stocks extended losses amid no sign of a compromise between the Obama regime and the GOP. European markets finished mixed.

Results will of course continue to pour in today as well. So, the action could largely be stock centric. Immediate support for the Nifty is seen at ~5550, below which selling pressure could aggravate and take it to ~5430.

सेन्सेक्स (%% ) - %अंक गिरकर, नीफ़्टी (%%) - %अंक गिरकर, बंद.

Nifty & Sensex Levels

Nifty / Sensex	F & O Close Rate	R-1	R-2	S1	S2
NIFTY	5690.65	5719	5772	5650	5608
Sensex	18871	18954	19110	18751	18625

Daily & Short Term Recommendations

Buy ON DIPS!~!!

Scrip Name	F & O Close Rate	Target 1	Target 2	Stoploss
Yes Bank	332.90	337	339.90	328
Sesa Goa	282	286	288	277
Tata Steel	591.80	600	604	583
Reliance	883.65	895	901	870
Punj Lloyd	76.65	77.80	78.50	75

Market Commentary ...

Problems may be aplenty but thankfully world markets appear to have decoupled from what’s happening in the US. We may see continuation of that trend today as well. The start is likely to be a positive one, as Asian markets are all in the green zone. European equities closed mixed with French stocks the worst hit among the top three markets. The Italian and Spanish markets were the worst performers in Europe.

The overall trend in the Indian market will be driven by the RBI action or perhaps lack of it. The market will be all ears to hints from the central bank Governor on the future course of action. Over the past few trading sessions, we have seen non-US markets displaying commendable resilience in the face of the ongoing drama surrounding the debt deal.

Another good tiding is decent buying support from institutions. But, the constant newsflow on the 2G scam is definitely not doing any good to the sentiment especially with the former telecom minister dragging the names of the prime minister and former finance minister.

Reliance Industries Ltd (Q1 FY12) – BUY

BUY AND HOLD :

CMP Rs883, Target Rs1,091, Upside 23.6%

±       Revenues at Rs810bn, higher by 39% yoy; better than our estimates

±       OPM falls 379bps yoy driven by fall in EBIT margins of petrochemical segment and lower contribution of the oil and gas segment

±       GRMs were at US$10.3/bbl v/s our expectations of US$10.5/bbl

±       Higher cash balance and better yields have resulted in 49% yoy jump in other income

±       PAT at Rs56.6bn was in line with our expectations

±       In the near term, key earnings driver for RIL would be further strength in GRMs and recovery in petrochemical spreads

±       We maintain our BUY rating with a 9-month price target of Rs1,091

सेन्सेक्स (18871.29) +148.99 अंक चढ्कर, नीफ़्टी (5680.30) +46.35अं क चढ्कर, बंद..

Sector Watch: Multi Brand Retail

MORNING CALL

Buy Amrutanjan Heal AT 884
TRADING ABOVE
TARGET AT 945++

Nifty & Sensex Levels

Nifty / Sensex	F & O Close Rate	R-1	R-2	S1	S2
NIFTY	5652	5728	5870	5600	5542
Sensex	18722	19007	19480	18550	18410

Daily & Short Term Recommendations

Buy Call

Scrip Name	F & O Close Rate	Target 1	Target 2	Stoploss
Tata Steel	584.90	595	609	574
M & M	724.60	746	761	710
Infosys	2827	2854	2885	2800
IDEA	86.10	89	93	82.50
GSPL	107.50	112	119	103

Sell Call

Scrip Name	F & O Close Rate	Target 1	Target 2	Stoploss
Tata Motors	997.40	978	962	1010
Orchid Chemical	229.70	220	212	235
Jet Air.	499.35	486	472	508

RIL results will be closely watched today.

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Market Commentary

It’s been a steady flow of news over the weekend and this week again promises to be action-packed. Policy initiatives seem to be on track. The Government cleared the RIL-BP deal and the Committee of Secretaries has given an in-principle nod for allowing up to 51% FDI in multi-brand retail. Some are circumspect as the Cabinet needs to accept the CoS proposal. 

During the week we will have the RBI monetary policy and F&O expiry. RIL results will be closely watched today. Besides a slew of global economic statistics like US reports on housing sector, consumer confidence and GDP, investors will keenly watch the corporate  results of companies like Maruti, Sterlite Industries, BHEL, Cairn India, JSW Steel, HCL Tech, HUL, ITC ONGC, Sun Pharma, PNB, Titan, ICICI Bank, Idea and PFC to mention a few. 

The Nifty may face some resistance between 5700 and 5800 while short-term support is expected around 5500. The real test will be the 200-DMA levels. FII flows will be crucial as well. The monsoon session of Parliament will be another key event to keep on one’s radar.