Weekly Wrap 13th May 2013

STOCK OF THE WEEK  - MAHINDRA & MAHINDRA

 

COMPANY BACKGROUND

 

o   Founded in 1945 as a steel trading company, M&M entered automotive manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads.  Over the years, they've diversified into many new businesses in order to   

o   better meet the needs of our customers.

 

o   M&M follows a unique business model of creating empowered companies that enjoy the best of entrepreneurial independence and Group-wide synergies.

 

o   This principle has led their growth into a US $15.9 billion multinational group with more than 155,000 employees in over 100 countries across the globe.

 

RATIONALE

 

 

o   M&M increased prices by around 3% over its UV portfolio after the govt announced an additional SUV tax in the FY14 Budget. With only the Quanto and the Verito outside the ambit of the SUV definition, the PV segment demand deteriorated in April. Mgmt has noted in press (Source: Economic Times) that the additional 3% tax burden will be significantly detrimental to the SUV segment. Mgmt's outlook is that of cautious optimism, with hopes of a positive impact from a possible interest rate cut by the RBI.

 

o   Mgmt has noted that the company could look into launching new variants / models that do not attract the additional tax i.e. lower than 1.5 liter engines, smaller than 4m in length and reducing the ground clearance to below 170mm.

 

o   Festival timing helps tractor volumes rise around38% YoY - With major festivals of Gudi Parwa and Navratras falling in April this year vs in March last year, April volumes for the tractor segment were robust. We think there could be a build-up of inventory on expectations of a strong monsoon and we should have more clarity over end May /early June.

 

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Fwd: First Morning Technical Call 13th May 2013

MARKET OUTLOOK

NIFTY (6107): CNX Nifty made a high above 6111.80, by marking its new  high for the CY2013 at 6114.55 which is also the highest level touched by the index in as many as 28months, and closed highest in 131 weeks too. Nifty  is in its lifetime high territory on Weekly closing basis ,where it has closed above 6100 for 6^th time which gives more reasons for 6357 all time high to be crossed and taken apart. For the day Nifty holding 6080 is important to target 6165 & 6200, while Nifty below 6080  could have chances of correcting below 6040 and can take support around 6020. DRREDDY R s.2091, has gapped-up(2029-2042) and made all time high Rs.2108 ahead of results on 14/May stock looks very good for 5-8% returns on higher side. YESBANK Rs.512 has closed highest in 59trading days and now all time high Rs.545 could be potential target in days to come. Market is on verge of major bull rally with political uncertainty being the only risk, so if fluid political conditions don't disturb the markets then Nifty crossing its all time high levels at 6357 in next few months could be possible once we see close above 6130.

SENSEX (20122): Sensex has closed highest in 123 weeks and 20203-20260 are important levels to be crossed with 19850 becoming very important support in short term. Today Sensex holding 20045 and crossing 20150 could possibly give an up move till 20203 & 20325 are possible levels on higher side while the index drifting below 19995 could open up gap levels on the down side and 19694 can be retested.

TECHNICAL CALLS

BUY ICICIBANK Rs.1168: ICICI BANK has made a pole and flag formation on daily charts, and within the flag the stock has formed an inverted head and shoulder pattern which suggests that there is more upside to be seen in the stock in the days to come, the stock's double top is at around Rs.1188 ,which if crossed could take the stock to its next levels on the upside at  Rs.1230 & Rs.1280 which could be potential targets for the stock. ICICI BANK is trading above 200DMA Rs.1067, 100DMA Rs.1119 and 50DMA Rs.1083.

BUY BAYERCROP Rs.1213: BAYERCROP after making all time high of Rs.1340 has corrected to low of Rs.1040 and has almost consolidated for 22weeks and now given triangle break-out and closed highest in 16weeks and all to cross all time high. The stock is trading above all major moving averages with the 200DMA at Rs.1108, 100DMA at Rs.1165 and 50DMA at Rs.1129.

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Derivatives Strategist 26th April 2013

Data Feeler: Nifty future after a gap up opening following the better global cues had volatile session ahead of Expiry day. Nifty continued to maintain its northward journey with buying seen in the last hour of trades mainly supported by Auto, HC and Oil & Gas sector stocks. Nifty future for the day, if it sustains above 5900 levels then rally may be continued towards 5950 levels whereas sustaining below 5880 levels may see profit booking in the market towards 5850-5820 levels. Looking at the option concentration data for May series, maximum put OI is concentrated at 58 00 followed by 5700 strike prices whereas maximum call OI is placed at 5900 followed by 6000 strike prices. Bank Nifty for the day it has support around 12500 levels whereas the immediate hurdle area is around 12800-13000 levels.

Put Call Ratio based on Open Interest of Nifty moved down from 1.22 to 1.05 levels. Historical Volatility of Nifty moved up from 19.1 to 19.42 levels and Implied Volatility also moved down from 15.1 to 14.38 levels.

Market witnessed buying interest especially in Auto, HC, Oil & Gas, Metal, Banking, Power, PSU, CG and FMCG sector stocks whereas selling pressure was seen in IT, Tech, Realty and CD space. Nifty future closed at premium of 6 points as compared to discount of 2 points in previous trading session.

The market turnover increased by 47.33% in terms of number of contracts traded vis-à-vis previous trading day whereas in terms of rupees increased by 48.9%.

 

Derivative Calls: Buy on ULTRACEMCO and M&M.

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First Morning Technical Call 26th April 2013

MARKET OUTLOOK

NIFTY (5916): CNX Nifty gapped up on Thursday (5844.30-5853.30) and made a higher high and a higher low yesterday too as has been doing the same for the past seven trading sessions. Nifty closed above 5900 suggesting that it has now broken the short term resistance around the psychological 5900 levels. Nifty has closed above all its moving averages after 30 trading sessions and now looks good to target 6000-6100 on the upside and move towards its 52 week high levels. For the day if Nifty crosses 5950 on the upside then a rally towards 5980-6050 cannot be ruled out. Failing to cross 5980 the index could witness some profit booking till 5870-5840 levels and till such time Nifty keeps making higher highs and higher lows, the trend is likely to remain on the upside. May Month derivative contract is bit long with almost 24 trading days so traders should always follow strict stop loss levels and trailing Stop loss levels as we have seen sharp rally in last 7 days.

SENSEX (19407): Sensex closed higher yesterday as traders rolled over their positions from the April, 2013 series to the May, 2013 series. For the day, Sensex holding 19250 on the down side and crossing 19575 on the upside could be a major positive trigger for the index as this could open up possibilities of 19800-19900 in the days to come. On the flip side, the index struggling to hold onto 19250-19230 levels could see some profit taking till 19100-18900 too.

TECHNICAL CALLS 

BUY DRREDDY Rs.1992: DRREDDY has made all time high of Rs.2000 crossing previous high of Rs.1970 after gap of 60trading days with very high volume and looks very good to target Rs.2150 & 2300 on higher side. It has been trading  above all major moving averages such as 200DMA at Rs.1774, 100DMA at  Rs.1858 and 50DMA at  Rs.1836. DRREDDY is buy on any dip for 8-10% rally in next 3-4weeks.The stock has taken support at  the lower trend line support of the ANDREWS PITCHFORK around 1750 levels.

BUY HINDZINC Rs.118: HINDZINC has closed above its 50DMA Rs.117, and looks very good to target Rs.125 on higher side. Stock 2013 high Rs.143 and has corrected till 2013 low of Rs.106 made on 17^th April2013 and now sharp recovery with good volumes are seen suggesting good buying in the stock.

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