Gujarat Gas Company - Value Pick

Gujarat Gas Company Ltd

 

CMP - 454                        Target - 575

 

Investment Rationale

 

          ~ Optimum sales mix

        ~ Lower debt on books

          ~ Robust financial performance

          ~ 65% promoter holding shows promoters' confidence in the company's growth.

          ~ A consistent dividend player

          ~ Growth strategy

          ~ Improving industry outlook

 

Valuations

With looking at the performance of the company natural gas being of the fastest growing energy market which is expected to touch 23% of the primary energy basket by 2020 (currently 11%) suggest a significant growth in the sectors and the company as well. At CMP the company trades 18.52x FY11E earnings and 16.72x FY12E earnings. The stock looks good for the target price of 575 for next 12 months time horizon.

 

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Equity - Monthly presentation

Negative sentiments to continue... 

 

Nifty

Nifty if breaches 4820 levels and closes below these levels for one to two trading days then selling pressure may get intensified with breaking the recent low of 4720 and may head towards 4500-4350 levels.

Sensex

Sensex from 1990 has corrected every 2 years 1990,1992,1994,1996,1998,2000,2002,2004, 2006,2008 and this correction which started in 2010 November has till now corrected 25% that is 15800 which has been the lowest till now comparing with 2006 but this correction can be even 33% where levels of 13900 are also possible if things don't improve

Sector view - IT (Negative)

■         

We continue to maintain our stance of being negative on IT as said in the last presentation also.  

No end to the worries for the tech stocks as they lower the budgets for 2012 also citing lack of visibility of orders for outsourcing companies.

Also recruitment by Indian IT companies witnessed a slowdown (down by 49%) in the month of August, owing to the crisis in the US and Europe region

INFOSYS, HCLTECH, WIPRO, TCS looks weak on charts, these stocks are in pullback phase and if fails to hold the rally then heavy selling could not be ruled out. One should keep cautious approach in these stocks.

 

Gain from Volatality - SIP way - 11 stocks that look good fundamentally and are trading below thier 5 year average PE

 

 

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Daily Fundamental Snippets

OUTLOOK

 

The market is likely to see a firm start tracking positive Asian equities. The recent resumption of buying by foreign funds will also support gains.

 

The much awaited Land Acquisition Bill, which seeks to lay down norms for increased compensation to land owners, was approved by the Union Cabinet on Monday, 5 September 2011. It is to be introduced in the Parliament today, 7 September 2011. The bill integrates land acquisition and rehabilitation and resettlement, defines public purpose clearly, has clause for retrospective effect and draws timelines for compensation.

 

Many events are lined up this month globally as well on domestic front which may keep the markets on heels and may also help to take some direction.

 

For today we continue with our cautious view on markets.

 

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Derivatives Strategist 07 SEPTEMBER 2011

Market Outlook

 

After a gap down opening, Nifty future took support around 4930-4940 levels and witnessed a smart rally towards 5070 and closed near day's high levels. On option front, maximum Put OI is at 4700 followed by 4800 strike while maximum Call OI is at 5200 strike. If Nifty future sustains above 5050 levels then it may move up towards 5100-5150 levels. On downside if it fails to hold 5000 levels, then selling pressure may get intensified in the market towards 4950-4900 levels.

Derivatives Calls : Buy Educomp and Sell Tatapower

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First Morning Technical Call

Market Outlook:

S&P CNX managed to close above 5000 mark for 4th day in succession after remarkable recovery from lower level after breaking. Nifty intraday important support would be 5010 while 5125 would be resistance on higher side.  Market to show any major strength should cross the 5150 levels on closing basis for 2-3days for short term rally. Bear market rallies are fast, swift and takes everyone by surprise before they fizzle out timing is a big problem, confirmation would come once it fails to hold certain important support levels with 4900 in Nifty and 16300 in Sensex would be important trend reversal levels to watch. Nifty 200WMA 4823 is very crucial support and if we break and close below that Indian market could see fastest correction in shortest time period as in last 9months correction has been slow to erode wealth.

 

 

§  Sensex- has held 16440 and didn't break and a smart rally gave 12 trading days highest close and now 16995 is important level crossing which 17355 can also be target. Till Sensex can hold 16440 market would be range bound to positive.

 

Technical Calls:

 CROMPTON GREAVES Cmp Rs.150, Stock has made good bottom formation with irregular double bottom and now trading above short term average 20DMA Rs.145 and in short term Rs.160 & 175 can be possible target. This stock if sustains above Rs.154 can see a sharp move.

ESCORTS Cmp Rs.72 has closed @ 14trading days high on higher volumes and also hit 20DMA Rs.72. Stock is showing short term bottom formation where a rally of 10-12% minimum becomes possible for short term. Stock on higher side has strong resistance around Rs.85-88 levels.

 

 

  Technical View: :  JKCEMENT Cmp Rs.111, Stock has formed made good bottom formation in last 4months and last 16weeks now the stock is near major resistance of 100DMA Rs.111 and falling trend line which connects October/2010 high. Now if the stock can sustain present levels Rs.120-125 could be possible target in short term.

 

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