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Thread: Trading calls of the day : 07.07.2009

  1. #1

    Trading calls of the day : 07.07.2009

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  2. #2
    VK Sharma,Technical Analyst

    Markets will stage an attempt to recover from yesterday’s big slump. Any such recovery may buoyed by short covering may last for a while but eventually falter. It will be important to see where markets find support when that round of selling starts, but for now we can look forward to some chirpiness in the morning

    Reversal patterns on charts

    Markets will stage an attempt to recover from yesterday’s big slump. Any such recovery may buoyed by short covering may last for a while but eventually falter. It will be important to see where markets find support when that round of selling starts, but for now we can look forward to some chirpiness in the morning.

    If indices were to break yesterday’s low and close below levels of 13960 in sen*** or 4150 in nifty, we must brace ourselves for a bungee jump. Nifty index, Banking and cement stocks have seen short buildup and traders must be careful here.

  3. #3
    Ashwani Gujral,Technical Analyst

    Market may have flat to positive opening today. Nifty has major supports at 4050-4100 and resistances are at 4200-4250. A bounce back is expected.

    Market may have flat to positive opening today. Nifty has major supports at 4050-4100 and resistances are at 4200-4250. A bounce back is expected.

  4. #4


    Hitendra Vasudeo,stockmechanics.com

    Traders can trade long but keep a stop loss of last week’s low of 14016 for the Sen***, 5451 for BSE Small Cap Index and 4787 for the BSE Mid Cap Index. A fall below the stop loss levels can get into an extended form of correction. A breakout above 15600 for the Sen***, 6650 for BSE Small Cap Index and 5542 for BSE Mid Cap Index will add further momentum on the upside.

    Sen*** band: 14016-15600

    By Hitendra Vasudeo

    Last week, the Sen*** opened at 14815.90 attained a low at 14913.05 and moved up to a high of 14955.55 before it closed the week at 14913.05 and thereby showed a net rise of 148 points on a week-to-week basis. In last week’s update, we had indicated that a breakout and close above 15600 was necessary. Since it has not been witnessed, the same view holds for this week as well. Failure to cross 15600 and a lower top formation could pose a threat to the continuation of the rally for the near-term and the short-term.

    The recent high was at Sen*** 15600 and the low was placed at 14016. The 61.8%, 75% and 87.5% retracement levels are placed at 14995, 15203 and 15401 respectively. The recovery from the lower level was witnessed in last week’s higher close. As a result of such a move, we could find prices moving higher to test the retracement levels of 14995, 15203 and 15401. But ultimately, a breakout and close above 15600 is required together with a follow-up rise. Failure to sustain at 14995, 15203 and 15401 followed by a violation below 14016 will pose a big threat for the near-term. If that happens, then expect a correction of the rise from 8047 to 15600. The retracement levels of the rise from 8047 to 15600 are placed at 12717, 11825 and 10932. In short, a fall and close below 14000 can invite a slide down to 12717-11825-10932 levels.

    On the immediate front, a rise towards 14995-15203-15401 is likely. Signs of lower tops will be confirmed on fall and close below 14000 but some signs based of candlestick patterns could be witnessed. A fall and close below 14000 will also confirm a head and shoulder pattern which has bearish implications and could lead to a correction towards 12717, 11825 and 10932 levels.

    Last month’s low is now 14016 and the last month’s (June 2009) volume was the largest ever on the Sen***. Hence 14016 has great importance. For the last 4 months, the monthly low and high has been higher. The month of July 2009 has the higher low till date but it needs to be seen if it crosses last month’s high of 15600 and closes above it as well.

    A breakout and close above 15600 will continue with the rise. In case of a breakout and close above 15600, expect a rise towards 16197, 17980 and 19555. Each of the levels will be put to test depending on the market momentum.

    Sen*** Wave Analysis

    Count I-

    Wave I-2594 to 3758

    Wave II-3758 to 2904

    Wave III-2904 to 12671

    Internals are as follows:

    Wave 1- 2904 to 6249

    Wave 2-6249 to 4227

    Wave 3-4227 to 12671

    Wave IV- 12671 to 8799

    Wave V- 8799 to 21206

    Wave W-X-Y structure has developed

    Wave W- 21206 to 8047

    Wave A-21206 to 14677

    Wave B-14677 to 17735

    Wave C-17735 to 8047

    Wave X- 8047 to 15600 (current ongoing move)

    Wave a-8047 to 15600

    Wave b-15600 to 14016 (current ongoing move)

    A 3-leg structure in Wave X is the a-b-c internals, which is still in progress. We are in the process of termination of Wave b now, which is a retracement of the rise from 8047 to 15600. Once Wave b is complete, Wave c will move up again to move higher.

    The Broad Market

    BSE Mid Cap held above the support range of 4813-4787. Resistance of 5400-5550 range will be put to test this week. A breakout above 5550 can exhibit a rally towards 6397.

    BSE Small Cap support also held well but looks weak in comparison to the BSE Mid Cap index. Support is at 5656-5451. If support is violated, then correction can be faster in BSE Small Cap index as the rise from the support of 5451 has been slow. Resistance of 6073-6650 could be under test. Only a breakout and close above 6650 can witness a rally. Take profit and exit long positions on rise to 6073 or above and keep an overall stop loss of 5450 to sense the weakness in small cap stocks.

    Conclusion

    Support of Sen*** 14016 is the most important support level. In the same way, a breakout above Sen*** 15600 on a weekly basis is a must as well.

    Strategy for the week

    Traders can trade long but keep a stop loss of last week’s low of 14016 for the Sen***, 5451 for BSE Small Cap Index and 4787 for the BSE Mid Cap Index. A fall below the stop loss levels can get into an extended form of correction. A breakout above 15600 for the Sen***, 6650 for BSE Small Cap Index and 5542 for BSE Mid Cap Index will add further momentum on the upside. Immediate trading moves can test the breakout points. During the week, traders need to wait for breakouts and consolidate on the rise from the short-term trading perspective. Traders can look for a rise towards the recent peaks to book profit and exit long positions and re-enter above the breakout points.

  5. #5
    Asian mkts trading mostly up; Hang Seng gained 0.87%, Taiwan Weighted gained 1.11%

    Asian markets were trading mostly up in the morning session on Tuesday. Hong Kong's Hang Seng gained 0.87% or 156.58 points at 18,135.99. Singapore's Straits Times advanced 1.06% or 23.95 points at 2,290.04. South Korea's Seoul Composite rose 0.24% or 3.41 points at 1,432.35. Taiwan's Taiwan Weighted gained 1.11% or 74.02 points at 6,723.93.
    However, China's Shanghai Composite was down 0.62% or 19.49 points at 3,105.17 and Japan's Nikkei was down 0.22% or 20.94 points at 9,659.93.


  6. #6
    India Infoline Picks,

    Hindustan Zinc : BSE ID : 500188 NSE ID : HINDZINC Reco Price Rs. 604.75 CMP: Rs.564.15 (Loss 6.71%)

    Hindustan Zinc Ltd (HZL) is set to become the world’s largest integrated zinc-lead producer by FY11E. We expect volumes to witness 23.1% CAGR over the period FY09-11. While the volume growth in FY10E would be achieved by the recent de-bottlenecking process, in FY11E it would come from the expansion of production capacity to 1mtpa (by mid-2010).

    Hindustan Zinc
    Upgrading zinc and lead price estimates:
    Zinc prices during the month rose to a high of $ 1,700/ton, levels last seen trading in September ’08. Zinc prices have been moving higher since it formed a base around the $ 1,000-1,100/ton levels at the start of the year. The stronger than expected resilience shown by the Chinese economy, implementation of huge production cuts and buying by the Chinese Strategic Reserve Bureau (SRB) led to a surge in imports. China imported 0.4mn tons of zinc metal YTD, higher than that imported in the full year of 2008. With the zinc market remaining in depression much longer than most of the other base metals, production cuts (< 1mn tons) have been quite steep.
    Zinc prices at eight month high, up ~38% YTD:
    We believe that prices would stay higher than the bottom formed on account of an increase in demand from the steel industry. Idle capacities globally will continue to remain an overhang and keep a check on prices. We upgrade our zinc price estimate to $ 1,300 for FY10E and $ 1,500 for FY11E.
    Markets are moving towards a balanced state due to huge production cuts implemented in the past six months.
    Volumes to witness 21.4% CAGR over FY09-11E:
    Hindustan Zinc Ltd (HZL) is set to become the world’s largest integrated zinc-lead producer by FY11E. We expect volumes to witness 23.1% CAGR over the period FY09-11. While the volume growth in FY10E would be achieved by the recent de-bottlenecking process, in FY11E it would come from the expansion of production capacity to 1mtpa (by mid-2010). On our revised metal price assumption, we upgrade HZL’s topline by 17.2% in FY10E and 17.1% in FY11E.
    Financials:
    Y/e 31 Mar (Rs m) FY08A FY09E FY10E FY11E
    Revenues 78778 58220 60318 78772
    yoy growth (%) -8 -26.1 3.6 30.6
    Operating Profit 53784 28759 30119 41347
    OPM (%) 68.3 49.4 49.9 52.5
    Reported PAT 43961 27273 26809 34185
    yoy growth (%) -1 -38 -1.7 27.5
    EPS (Rs) 104 64.5 63.4 80.9
    P/E (x) 5.8 9.4 9.5 7.5

    (Source: Company, India Infoline Research)
    Shareholding pattern:
    March '09 (%)
    Promoters 64.9
    Foreign & institutions 32.9
    Non promoter corp hold 0.7
    Public & others 1.5

    (Source: Company, India Infoline Research)
    Upgrade to BUY with a target price of Rs 776:
    HZL falls in the lower quartile of the global cost curve. Even in an environment of high input costs like coal in FY09, the company managed to keep its costs at FY08 levels. With HZL’s ability to contain input costs and a scenario of rising price realisations, we expect OPM to expand 309bps over the next two years. We upgrade our previous earnings by 16.2% to Rs 26.8 billion in FY10E and by 8.7% to Rs 34.2 billion. We expect net cash per share to rise from Rs 236 at the end of FY09 to Rs 290 by FY11. We upgrade our target price to Rs 776/share and change our rating to BUY from Market Performer. Net of cash, the stock is currently trading at 3.9x P/E on our estimated FY11E EPS of Rs 80.9.
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  7. #7
    PN Vijay, Investment Advisor

    Hindustan Zinc : BSE ID : 500188 NSE ID : HINDZINC Reco Price Rs. 604.45 CMP: Rs.564.15 (Loss 6.67%)

    With zinc prices trading at their lows and earnings expected to be depressed, the company should command a multiple premium over its historic average.

    Hindustan Zinc
    Company profile:
    Hindustan Zinc is India’s sole integrated zinc producer with more than 80% of the market share. The company is currently the second largest integrated zinc-lead producer in the world. It is in the process of expansion after which it will become the largest integrated zinc-lead producer globally, surpassing mining major Xstrata. However, in terms of pure smelting it will be the third largest after Nyrstar (1,030Ktpa) and Korea Zinc (940Ktpa). Post expansion, its Rampura Agucha mine will also be the largest zinc-lead mine in the world with a capacity of 6mtpa of ore, surpassing the Red Dog mine in North America.
    Currently, HZL operates four mines, two of which are open pit –Rampura Agucha and Sindesar Khurd. In FY08, the company mined nearly 5.8 million tonnes of ore, of which 4.1 million tonnes came from RAM. RAM is not just one of the largest mines in the world, it is also one of the lowest cost producers. With an average zinc grade of 13.9%, it is the second richest after Red Dogwhich has a zinc grade of 18.2%.
    Financial Position:
    The net revenues of the company declined by 28% from Rs 78,778 crore in FY08 to Rs 56,753 crore in FY09. The company has net cash of $ 1.9 billion, or Rs 236/sh (35% of market cap). It is on course to become the largest integrated zinc company, with a 50% increase in capacity expected by mid-2010 at an estimated capex of $ 750 million. We estimate that cash levels will reach Rs 375/sh by 2012 despite this capex.
    While FY10 earnings are likely to be subdued due to low zinc prices, the situation is expected to take a turn for the better in FY11. We expect an earnings CAGR of 4.8% over the next two years. EBITDA margin will be under pressure at 47% in FY10 before returning to the normal levels of 50% in FY11. The tax rate is likely to be favourable even in FY10 due to the export oriented status of its new smelter. This tax benefit can continue even further but we have not considered any benefit beyond FY10.
    Investment Positives:
    On the cost front, power & fuel takes up 20–25% of the total cost, a bulk of which is towards coal purchased to fire captive power plants. This cost is expected to come down substantially as coal prices have declined and the company’s captive coal mine is expected to start operations in a few years.
    After touching a low in December ’08, zinc prices have staged a smart recovery and the worst seems to be behind us, even though a full recovery may be protracted.
    Positive news expected on government stake buyout. Though HZL’s parent company has not exercised its call option on a 29.5% stake held by the government, we expect a decision on the issue to be taken as soon as the new fiscally challenged government gets down to task.
    Key concerns:
    Shrinkage in overseas demand:
    About 25–30% of HZL’s output is exported. With the current meltdown in overseas demand, the company may be looking to divert some of its output to the domestic market. But HZL already commands more than 80% of domestic market share, making it harder to push extra volumes. Recently, the company has been selling concentrates rather than metal in the overseas market, indicating that it is easier to push concentrate to custom smelters with higher Tc/Rc rather than sell the ingots directly.
    Rupee appreciation:
    HZL’s final products (zinc, lead) are priced in dollar terms, whereas its costs are in rupee terms. Over the past year the company has benefited from a depreciating rupee, but with a strengthening local currency, profits may be hit. According to our estimates, every 1% rupee appreciation from our base case (Rs 48.5/US$) will lead to an EPS decline of 1%.
    Increase in royalty rates:
    Currently, the company pays 6.6% of the prevailing market price for metal contained in the ore mined. At the current price of zinc, this amounts to US$ 96/t or 15% of total cost of production. The government may consider revising these rates under various circumstances such as the local government asking for a bigger share of royalty proceeds. This would lead to an increase in costs and decline in margins for HZL.
    Valuation:
    In our view, Hindustan Zinc is one of the least risky stocks, with low-cost operations, strong growth and a cash-rich balance sheet. HZL’s price multiples have historically been inversely related to zinc prices. With zinc prices trading at their lows and earnings expected to be depressed, we feel the company should command a multiple premium over its historic average. We have therefore valued HZL at 8x FY10E EV/EBITDA. At our target price of Rs 800, the stock will trade at 12x FY10E EPS and 2x BV. We recommend HZL as a Buy and the safest exposure to base metals.
    Disclaimer : The share finds a place in the Portfolios of several PMS clients of P.N.Vijay Financial Services P Ltd of which P.N.Vijay is the Managing Director. It is also a part of his personal holdings.

  8. #8
    S.P.Tulsian, Investment Advisor

    JMC Projects : BSE ID : 522263 NSE ID : JMCPROJECT Reco Price Rs. 157.05 CMP: Rs.166.10 (Gain 5.76%)

    At the current price of Rs 157.05, the stock is a prime pick with an eye on the future. Given the thrust on infra, the stock holds immense potential and can give excellent returns over the next 12-15 months.

    JMC Projects
    Today, anything even remotely connected to infrastructure is a hot pick on the bourses. So if there is a company which is into construction of highways, power projects, urban and rural infrastructure, airports, ports, railway terminals and has also posted a good performance, would surely have investors flocking to the stock like hot cakes. And rightly so. JMC Projects has been on a hot trail since the day it announced its financial performance for the year and quarter ended 31st March 2009.
    For the fourth quarter ended 31st March 2009, the net sales rose 18.22% to Rs 366.28 crore on a YoY. Net profit jumped up by a smart 70% at Rs 16.30 crore. For FY09, the company posted a 44% rise in net sales at Rs 1319.29 crore. Net profit was up 20% at Rs 36.76 crore.
    The biggest strength of the company is that it is a subsidiary of Kalpataru Power which holds 53% stake. This has given major synergistic advantages to the company. It is expected that given the impetus to power, both the companies would be jointly bidding for the power transmission projects on BOT model.
    JMC’s strength is civil construction and with already having bagged Govt orders, it is expected to benefit from the forthcoming Budget where allocations for urban infra is expected to go up further. JMC is planning to enter the BOT space especially the roads segment and this is also expected to add on hugely to the bottomlines in the coming years.
    Another unique strength of the company is that is procures all its raw material from its 100% subsidiary - JMC Mining and Quarrying which makes raw material required by the construction industry. This in-house procurement saves the company from untoward cost escalations. Business for JMC is growing is expanding rapidly which is evident from the plans to expand the capacity of the subsidiary by 50%.
    The company had on 29 January 2009 said it would raise Rs 40 crore through issue of equity shares on rights basis. The ratio and the issue price will be decided before the opening of the issue.
    The stock hit a 52-week high of Rs 234 on 5th June 2008 and a 52-week low of Rs 45 on 27th January 2009. A month ago, the stock was languishing at Rs 78 and after the UPA Government got elected and the frenzy for infra stocks begun, this stock has surged over two times and based on the expected performance in FY10, a lot more steam seems to be left in the stock.
    Promoter’s stake is 55.64%, institutional holding is 14.60% and bodies corporate hold 4.42%, leaving a floating stock of 25.34%. The company's current equity is Rs 18.14 crore. Face value per share is Rs 10. EPS for FY09 is at a very healthy Rs 20.26, giving a reasonable PE of 9.
    At the current price of Rs 157.05, the stock is a prime pick with an eye on the future. Given the thrust on infra, the stock holds immense potential and can give excellent returns over the next 12-15 months.
    Disclaimer: The writer may be deemed to be concerned or interested in the recommendation as he and his clients are invested in this scrip.

  9. #9
    Two sectors that were particularly in need of some medical attention after the assault of the market were education and textiles.
    While the broader markets fell slightly above 5%, stocks from these sectors have fallen twice that much.



    Affected more by expectations than specific negatives in the Budget, they were among the worst performing one in the market on Monday.
    Arvind Ltd fell by 10.54% to close at Rs 25.90 while S Kumars fell 10.71%, closing at Rs 41.25. Alok Industries was down 11.80% while Bengal Tea and Fabrics went down 12.80% to close at Rs 20.55 and Rs 19.75 respectively.



    Textile stocks showed a cumulative erosion of Rs 2,053.41 crore in market capitalisation. Of the 243 companies which have an exposure to the textile sector, 176 ended in the red.



    "Textile was looking for relief on the exports front and easy access to finance. The sector, along with education, have been beaten down as there was nothing specific in the Budget to address the concerns of these two sectors," said Devesh Kumar, MD at Centrum Broking.
    In education, NIITlost 16.28% to end at Rs 59.15, Everonn Systems was down 14.81% at Rs 370.35, Educomp Solutions was down 11.89% to Rs 3912.50, Jetking fell 11.56% to Rs 187.50 while Aptech lost 11.46% to close at Rs 156.05.



    "There were too many expectations... It was hoped that there would be more layout for primary and basic education and more subsidies for the sector," said Nischal Maheshwari, head of research at Edelweiss Securities.



    One plus was the increase in allocation to information and communication technology from Rs 500 crore to Rs.900 crore. But this is not seen as too much of a positive because it mainly affects those engaged in supply of hardware, a low-margin business.



    Some believe the sectors might still have some way to go on the downside. "The correction seems warranted...valuations still do not leave much on the table for the investor," said Sameer Narayan, head of equities at Fortis Investment Management.

  10. #10
    Equities were lacklustre Tuesday as traders were cautious before taking positions after the sharp fall in previous session. The budget presented by the finance minister Pranab Mukherjee disappointed the street which had a lot of expectations from the government on reforms front.

    Sectors that had surged in the run-up of the budget were witnessing profit booking while FMCG and infrastructure stocks were in demand.

    “Markets are rarely in agreement with the political class, especially when short term steroids are not articulated. Reforms for markets may mean something different than what they mean for the Government. The bottomline is this: don’t despair as the huge dollops of stimulus unleashed could actually stand India in good stead (in the longer term). Authors of the budget defend the lack of announcements saying it is not necessary to include the same in the budget. This gives some hope of disinvestment and PSU IPOs in the coming quarters.

    It remains to be seen whether the markets regain their composure after the Monday mayhem? Some sort of a comeback is a given after such a big selloff. But the global picture is not too encouraging. One will also have to contend with corporate earnings. Be stock specific and stick to quality stuff. The FIIs’ stance, whether you like it or not, will play a major role too,” said India Infoline report.

    At 12pm; Bombay Stock Exchange’s Sen*** was at 14097.50, up 54.10 points or 0.39 per cent. The index touched an intra-day low of 14000.68 and high of 14251.88.

    National Stock Exchange’s Nifty was at 4181.05, up 15.35 points or 0.37 per cent. The index touched an intra-day low of 4155.50 and high of 4231.80.

    BSE Midcap Index was down 0.49 per cent and BSE Smallcap Index declined 1.44 per cent.

    Amongst the sectoral indices, BSE FMCG Index was up 4.37 per cent, BSE Auto Index gained 3.02 per cent and BSE Capital Goods Index moved 0.91 per cent higher. BSE PSU Index declined 2.30 per cent and BSE Realty Index fell 2.12 per cent.

    Reliance Industries (-3.15%), Reliance Communications (-3.01%), Tata Power (-2.87%), Tata Motors (-2.77%) and ONGC (-2.67%) were amongst the Sen*** losers.

    ITC (6.80%), Maruti Suzuki (4.62%), Mahindra & Mahindra (4.17%), Grasim Industries (4.02%) and Hero Honda (3.78%) were amongst the gainers.

    Market breadth was negative on the BSE with 1503 declines and 740 advances.

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