SKS Microfinance - Sell

SKS - Exit

Regulatory action has damped its price and investors should refrain from getting in till sector rules are clearer, feel analysts.

Amidst growing uncertainty on the regulations governing the operations of microfinance institutions (MFIs), shares of SKS Microfinance, the only listed MFI in India, have taken a beating of 50 per cent since October.

Brokerages expect SKS to show earnings per share (EPS) of Rs 39 for 2010-11, versus Rs 49.7 estimated earlier, due to reduced lending rates, higher funding costs, lower loan growth and increasing non-performing loans. The loan growth is seen at 30-40 per cent over the next two-three quarters, say analysts at Citigroup.

While the new Andhra microfinance law continues to impact the business of SKS significantly, experts believe the worst is not over for the stock. And, that investors should consider exiting it, due to greater downside risks. Clarity on the regulatory framework will provide cushion to the stock's southward trip and till such time, investors should refrain from making fresh investments despite the fall. However, a geographically diverse loan portfolio, with Andhra Pradesh (AP) contributing about 28 per cent of its loan book and lower leverage (total assets/equity) of 3.2x (September) gives SKS an edge over its peers, which it can capitalise once the current uncertainty dies.

SLOWING DOWN
In Rs crore	FY09	FY10	FY11E
Total Income	359	670.50	967
Net interest income	312	596.40	865.70
Net interest margin (%)	15.40	17.30	19.20
Net profit	80.20	174.80	209.60
P/ABV (x)	5.10	4.90	2.80
E: Estimated ABV: adjusted book value Source: Citigroup report

Impact
The Andhra Pradesh Microfinance Institutions Bill, 2010, passed by the State Assembly recently, places restrictions on recovery practices and limits collections of debt to once-a-month from once-a-week earlier. If implemented (the parties concerned have challenged it in the high court), the provisions would adversely impact MFI operations.

SKS recently reduced its effective lending rate by two per cent. This, coupled with higher funding costs (due to banks reducing exposure to MFIs), will squeeze the net interest margin of the company. Loan spreads can fall by at least two to three per cent (from 15 per cent), believe analysts.

Loan growth has moderated due to a freeze on fresh loans by MFIs in AP and slowing disbursements in other states. Collections for MFIs in AP have dropped to 15-20 per cent from the erstwhile levels of 99 per cent, hitting asset quality. The Act intends to limit an individual to loans from one self-help group (SHG) and one MFI only at a time. This will further dent loan growth, as multiple MFIs usually lend to individual borrowers. Also, since borrowers earn daily or weekly income, a monthly collection cycle will impact the repayment efficiency.

Ahead
Quick resolution of this situation could curb losses. However, clarity is expected only after RBI creates a regulatory framework for MFIs by March 2011, based on the recommendations of the Y H Malegam committee on the sector.

Further, the central government is looking at introducing a Bill over the next five months and this is likely to override the Andhra one. Experts believe the MFI business will attain normalcy only by the April-June 2011 quarter.

Despite the current turmoil, MFIs have a strong presence in India, due to the strong underlying business economics (and demand). Their distribution reach is very large and this is a major positive, as this aligns well with the government's aim of financial inclusion. MFIs need to modify business models towards asset-light lending and broadening the product base, to continue being classified as priority sector lending.

Source : BS

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

Pattamal Plaza

3rd Cross Kamanahalli

BANGALORE 560084

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Moser Baer - Buy at 56

Technical Recommendation

We recommend a buy in the stock of Moser Baer India from a short-term perspective. It is evident from the charts that from June 2009 peak of Rs 114, the stock has been on a long-term downtrend. Medium-term downtrend that started in October peak of Rs 74 got arrested at its long-term support level of Rs 50 in late November. Triggered by positive divergence displayed in daily relative strength, the stock changed direction in early December. The stock emphatically broke through its long-term key resistance at Rs 60 by jumping 9 per cent accompanied with extraordinary volume on December 28. It has breached its 50-day moving average reinforcing bullish momentum. The 14-day relative strength index has entered the bullish zone from neutral region, whereas weekly RSI has firmly entered the neutral region from bearish zone. Daily moving average convergence divergence oscillator has signalled a buy. We are bullish on the stock. We anticipate the stock to move higher until it touches our price target of Rs 64.5 or Rs 66.5. Short-term traders can buy the stock while maintaining stop-loss at Rs 60.5.

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

Pattamal Plaza

3rd Cross Kamanahalli

BANGALORE 560084

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

JSW Steel Buy on dips

JSW Steel (Rs 1,164.3)

JSW Steel rebounded 11.5 per cent last week after taking support from its significant long-term support band between Rs 1,040 and Rs 1,050.

The stock, however, has been on a medium-term downtrend from its life-time high of Rs 1,400 that it marked on October 4.

The stock currently faces key longer-term resistance at Rs 1,200.

Inability to exceed beyond this level will result in the stock resuming its on-going medium-term downtrend and re-test the support band between Rs 1,040 and Rs 1,050.

Next support is at Rs 950. Strong move above Rs 1,250 will mitigate the downtrend and will pave way to Rs 1,300 or Rs 1,350 levels in the medium-term.

OUR RECOMMENDATION :

The scrip is finding good support around 960 levels and is finding it difficult to go through 1400 levels. This present excellent trading opportunity to buy around 1000 levels and exit at 1350 which gives you an upside of 35% holding period of 3-4 months.

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

Pattamal Plaza

3rd Cross Kamanahalli

BANGALORE 560084

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

FnO Strategy - Bear put spread will pay off !

Index Strategy: Bear put spread on Nifty

Srividhya Sivakumar

Well, the Union Budget is over now and with it perhaps also the euphoria. As market participants wake up to the real impact of the budget proposals, it is quite likely that much of initial jubilation may die down. We suggest traders to set a bear put spread on Nifty to benefit from such a weakness. You can do this by buying Nifty March 4,900 put option and simultaneously selling Nifty March 4,800 put. This would result in a net initial debit as the strategy involves buying in the money put as against selling one that is out of money. In this case, you will have to shell out Rs 105 for buying Nifty March 4,900 put, while you will receive Rs 70 when you write Nifty March 4,800 put. On the whole, the spread will cost you Rs 35/share.

You can time the purchase and sale of options depending on the day's market movement to optimise your cost. Note that for the coming week, we expect the markets to trend upwards first before it begins to fall lower.

Maximum profit potential: The maximum profit for this spread will occur when the Nifty moves below the strike price of the sold option, i.e. 4,800. The maximum profit, however, will be limited to the difference between the two strikes minus the net debit paid or the cost of setting the spread. In this case, it will be Rs 65.

Maximum loss potential: When your spread is totally out of money i.e. when Nifty value is higher than the 4,900, the maximum loss that you can suffer will be limited to the net debit paid, Rs 35 – that is the money that was spent initially in setting the bear put spread.

This means in essence you would be taking a maximum risk of Rs 35 to earn a maximum profit of Rs 65. Traders with a slightly more bearish view can tweak the strike price of the sold option lower to 4,700. This will result in a slightly higher risk-return payoff. Traders can also consider going short on Nifty with a stop at 5,025.

When to exit?

Traders should consider booking profits and closing the positions as soon as the underlying trends below the strike price of the sold put option. If you feel that the likelihood of the underlying moving down is low, close the position prematurely.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Elgi Equipments

The extent of diversification has allowed Elgi to maintain growth momentum.

Vidya Bala

Investors with at least a two-three year perspective can consider buying the stock of Elgi Equipments, a manufacturer of air compressors and automobile service station equipment.

Revival in capex in the domestic market, manufacturing /trading presence in high potential developing markets such as China and Brazil and a strong cash position that allows scouting for acquisitions in new markets are factors that favour earnings growth for the company over the medium term.

At the current market price of Rs 80, Elgi's stock trades at 8.5 times its per share earnings for FY-11.

The stock is currently at a steep discount to its bigger peer Ingersoll-Rand; the latter not yet fully out of the slowdown.

Long-term play

We do not expect any significant ramp-up in revenues in the next few quarters, owing to peaking of demand (according to the management) for air compressors used for water wells and the continuing sluggishness in overseas market.

However, given that the industrial business segment has also been contributing actively to revenues and emerging markets such as Brazil and China are likely to buttress sales growth over the long term, Elgi may have to be a buy and hold candidate in one's portfolio.

The stock, at this point, could be a dark horse play; investors can consider buying it in small lots and accumulate on declines linked to broad markets.

Business

Elgi is the market leader in air compressors (over 10 per cent) as well as automobile service station equipment and is also among the larger players in Asia.

Elgi has a very wide customer base, given the diverse application of its products in sectors such as mining, transport, power, railways, oil, textiles, shipbuilding, plastics and electronics, to name a few. It also has all major automobile manufacturers as its customers.

The extent of diversification has allowed Elgi to keep up growth momentum. Even as the capex slowdown hurt capital goods companies in FY-09 resulting in decline in sales/profits, Elgi managed to grow revenues, albeit marginally even as profits remained flat.

However, strong focus on global markets resulted in a slow recovery for the company in the current fiscal. The December quarter results though, have shown the first signs of a revival with all its segments reporting growth. Revenues for this period expanded by 30 per cent, even as profits jumped 70 per cent over a year ago, thanks to a low base and lower raw material costs. Interestingly competitors such as Ingersoll-Rand and Kirloskar Pneumatic are yet to demonstrate similar decisive revival signs. However, not all is well , since the company has admitted that its demand for air compressors in the water wells segment has peaked out, which effectively means that there could be some dent in revenues.

However, pick-up in auto equipment as dealers ramp up their capex, on improved auto sales could make up for the dip in the water wells compressor demand.

Reaching out

Besides, Elgi has utilised the slowdown period to test grounds and ramp up presence in the Brazilian and Chinese markets. In Brazil, where the company's products have for long had takers, the company has set up a wholly-owned subsidiary as a trading unit.

In China, it owns a manufacturing unit and also has trading presence; the company though, may take a longer time to ramp up demand in this market, as it has to compete with local players. Nevertheless, the scope of application for Elgi's products in China, given the latter's massive manufacturing activity, combined with superior technology, is tremendous. This market could, however, take a couple of years, before it contributes significantly to the bottom line, even as revenue flow may kick in early. Elgi products' application in the oil sector has also given it a market in West Asia.

The company has a presence in UAE. This market too, in the near term is likely to remain sluggish. Elgi is in the process of acquiring a European company, which makes compressors. This move too is intended to expand geographically rather than acquire new products, as Elgi's product range, thanks to its joint ventures with many overseas players, is fairly comprehensive.

We suspect this acquisition could come at attractive valuations, given the slowdown in the region. The company has stated that it will not go for any fresh debt, suggesting that internal accruals should meet the acquisition cost. Elgi has traditionally been a debt-free company has also has a lucrative investment book.

Elgi' sales grew at 20 per cent compounded annually (to Rs 595 crore in FY-09) over the last three years, while profits expanded by 25 per cent over this period. Operating profit margins, though healthy at 12 per cent levels, could come under pressure as a result of hike in cost of steel and copper.

While any excise duty hikes in its end product is unlikely to impact margins (as its products, mostly used as inputs by clients for their business enjoy cenvat credit), as they are passed on, whether its own raw material cost hikes will hurt margins, remains to be seen.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Buy Indusind Bank

Mr Romesh Sobti, MD and CEO.

M.V.S Santosh Kumar

One of the turnaround stories in the banking industry, IndusInd Bank continues to be a good investment opportunity for investors with a penchant for risk. We expect the return on equity (ROE) of the bank to improve from 10 per cent in 2008-09 to 17.5 per cent this fiscal, helped by improved net interest margins, better credit growth and operating efficiencies. ROEs even in the current year would have been better but for the equity dilution.

The bank's operating parameters have improved sharply over the past two years with a new management taking over. Consider this. IndusInd Bank's credit-deposit ratio has improved from 67 per cent to 77 per cent in the 21 months since the new management took over. This has aided improvement in the net interest margin to 2.94 per cent for the quarter ended December 31, 2009 from 1.37 per cent in the March quarter of 2008. The cost-income ratio too improved from 67 per cent in March 2008 to 50 per cent in December 2009, even as the net NPA ratio fell from 2.27 per cent to 0.67 per cent during the same time. However, the bank has still a long way to go before it can be comparable with the best in the industry.

While the bank consistently managed more than 90 per cent net profit growth over the last four quarters, this rate of growth may moderate, going forward. An increasing base and treasury losses from hardening interest rates may temper profit growth compared with historical rates.

At the current market price of Rs 149, the stock trades at a price-to-estimated FY11 earnings multiple of 13 and at a price-to-FY11 adjusted book value of 2.6 times. This is at a discount to Yes Bank, Kotak Mahindra Bank and HDFC Bank. High earnings growth may provide justification for this valuation.

Capital adequacy

IndusInd Bank raised Rs 480 core through a QIP issue this fiscal thereby witnessing a 15 per cent equity dilution, giving the bank much needed capital to fund high rate of loan growth.

The capital adequacy of the bank improved to 14.91 per cent in September 30, 2009 from 13.14 per cent on June 30, 2009. The capital adequacy ratio of the bank stood at 13.84 per cent at December 2009. Given the current levels, capital adequacy could be maintained above 12 per cent even if the bank's loan book grows by 30 per cent over the next one year, with the aid of internal accruals. IndusInd Bank also has significant headroom in terms of Tier-II capital raising to support loan book growth. However, the cost of Tier-II capital is expensive. Further equity dilution in 2011-12 cannot be ruled out.

Business

The loan book of the bank grew by 15 per cent compounded annually during the period 2004-09 and 32 per cent as of December 31, 2009. However, the loan book growth over the period 2009-11 may improve to 30 per cent annually, helped by better credit offtake, its commercial vehicle portfolio and retail lending. Around 32 per cent of IndusInd Bank's loans are auto loans with commercial vehicles forming a significant proportion. However, the proportion of these loans has come down from 44 per cent at the end of March 2009. However, with the revival in the auto industry, these loans, coupled with retail loans that have better yields, may form a significant portion of the loan book thereby helping the bank maintain its margins.

Improving NIMs

For the first nine months of the current fiscal (2009-10), the net profit of the bank grew by 158 per cent. Improving margins due to improving credit-deposit ratio, high rate of loan book growth (32 per cent as of December 31, 2009) and re-pricing of the advances led to high levels of profit growth. Helped by branch expansion, the proportion of low cost deposits has also improved to 22.5 per cent from 15 per cent as of March 31, 2008, also reducing the cost of deposits.

With the bank starting to meet most of its priority sector lending targets, it may not be required to invest in low-yielding bonds, which further help improve the margins. NIMs can be maintained at current levels even as the rates rise if the bank manages to improve its CASA and re-prices its loans. The lower proportion of treasury income compared with its peers would also help it survive rising interest rates efficiently. Fee income continues to support profit growth. The ‘other income' component to total net revenues stood at 40 per cent for the nine months of this fiscal.

Asset quality improved

Sequentially, even over the last quarter, the bank improved its provision coverage ratio from 35 per cent to 50 per cent. The bank is positive on improving its provision coverage to 70 per cent by the mandated period. Lower NPAs coupled with high provisions would improve the coverage and also shield the bank against any credit losses going forward. IndusInd Bank's restructured assets are one of the lowest in the banking industry with only 0.36 per cent of the total advances book restructured. While a high proportion of the current NPA is from the two-wheeler and the cars industry; this may fall as the revival in economy improves the credit worthiness of these borrowers.

Few risks

Around 52 per cent of the loans in the book are fixed, which may expose it to interest rate risk. The impact of the base rate implementation could be a bit higher for the bank due to a higher cost of funds and moderate profitability margins.

Source : BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Mahindra Holidays & Resorts

The company is a dominant player in the vacation ownership business.

Srividhya Sivakumar

Shareholders with a long-term perspective can retain their holdings in Mahindra Holidays & Resorts, the leading vacation ownership provider in the country. With a business model highly dependent on the domestic consumption story, the slow uptick in the economy suggests improving prospects for the company. A strong brand equity, multiple sales channel and unique revenue model further fortify its investment appeal.

However, at the current market price of Rs 434, the stock appears fully priced, trading at about 30 times its likely FY-11 per share earnings. While not having any strict comparables and being the market leader do lend room for premium valuations, it appears fairly valued at the current price. Near-term upsides, therefore, may be limited.

Unique model

In the business of vacation ownership, Mahindra Holidays' revenue model entails an upfront payment of the ownership fee with a recurring annual maintenance fee component thereafter.

This provides for higher visibility and a more stable stream of revenues compared to that of pure hospitality players. And unlike the asset-heavy hotel industry, the company does not operate on a capital-intensive business model. It adds to its assets only against the payment received on member additions. As a result, it enjoys strong cash flows and has near-zero debt on its books.

Mahindra Holidays, however, sells a significant majority of its memberships through financing schemes (monthly instalment options) and even securitises a portion of its receivables. While financing the vacation ownerships helps add to its member count, it also complements the revenue stream by way of interest income.

The risk of default is low here considering the overall profile of its member base — consisting of mostly employed professionals who are reasonably sound financially. And since MHRIL continues to hold the assets, the impact of defaults, if any, would only be negligible.

Besides, that it has so far managed to operate with near negligible rates of default lends confidence. That said, it still remains to be seen how the company would manage member additions in an increasing interest rate regime.

High interest rates tend to curb discretionary spending by consumers and so can pose a threat to member additions. This is especially relevant in the case of MHRIL since its business operates on the difference between the interests its pays to banks and the interest rate in-built into the EMI schedule of its members.

Growing membership enrolments — which is the key driver for future growth — at historical growth rates may, therefore, not be as easy (34 per cent compounded rate over the last four years).

Financials

Even though the company has a diverse source of income, its key contribution still comes from member additions only. Of the total membership fee charged, the company books nearly 60 per cent of that in the same year, while the rest is spread over the life of the membership (typically 25 years for the flagship Club Mahindra product) as entitlement fees (annuity income). It also charges an annual subscription fees over the life of the membership.

Over the last four years, Mahindra Holidays has grown its revenues and profits at a compounded annual growth rate of about 40 per cent and 76 per cent, respectively. In the same period, both its operating and profit margins have expanded significantly to about 34 per cent and 18 per cent, respectively.

For the nine-months ended December 2009, the company managed to grow its revenues by about 18 per cent. Profits surpassed last fiscal's full year earnings helped by a slew of cost-control measures, which helped expand the operating margins by about 4 percentage points to 38 per cent.

The company, however, is required to spend considerably towards sales and marketing exercises (its largest cost component), as member additions hold the key to its growth.

While bringing down the sales and marketing expenses last quarter helped it better its operational performance, it may pose a threat to member additions if the cost component is brought down drastically. This cost component therefore may have to be monitored vis-à-vis member additions in the coming quarters.

But to its credit, MHRIL enjoys a fairly strong brand loyalty; over 35 per cent of the vacation ownerships sold in 2009 came through member referrals.

Health check since IPO

The company had raised roughly Rs 177 crore through its public issue in June last year for funding the proposed addition to its room inventory (capex to extend up to FY11).

As against 1,105 rooms in FY-09, the company had, as of December 2009, created an inventory of 1,403 rooms.

Member additions in the nine months from FY-09, however, have been lower than its yearly average, growing by about 17 per cent; it now has 109110 members as against 92,825 vacation owners in FY-09.

The member per room ratio too has improved, decreasing from 84 in FY-09 to 78 members per room now. And with average occupancies hovering around 75 per cent, the proposed addition to room inventory will further help the spread. It plans to expand its property in Coorg, Ooty and Ashtamudi and set up of new ones in Tungi and Theog.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Buy Piramal Health

Investors with a long-term perspective can consider accumulating the stock of Piramal Healthcare. A strong presence in the domestic pharmaceutical market, established relationships with several global pharma majors, and its firming hold over the high-margin inhalation anaesthetics space underscore our recommendation.

While the restrained growth in CRAMS (Contract Research and Manufacturing Services) business so far this year could mar the company's overall growth picture, signs of restocking by global pharma majors suggest that a revival may be in the offing. With innovator companies under increasing pressure to manage costs, the low-cost, high-quality offering of domestic CRAMS companies may not be easy to ignore.

Valuations too appear reasonable. At current market price of Rs 397, the stock discounts its estimated FY11 per share earning by about 15 times. Piramal's increasing domestic market presence offers it a considerable long-term growth potential. The company has been improving its market share going by its better-than-market growth in six out of the seven last quarters. While growing competition, with MNCs too entering the fray, could throw up challenges, Piramal's large field force and growing focus on tier-II and semi-urban cities will provide it an edge. New product launches (26 so far this year) and focus on lifestyle products could further complement growth.

For CRAMS, the consolidation in the global pharma landscape, in addition to restructuring of manufacturing operations at Piramal's end, appear to have cast a cloud on the segment's near-term prospects. For the nine months ended December 2009, the CRAMS business shrank by about 12 per cent. In that too, while the business from overseas was impacted significantly due to the closure of its Huddersfield plant (which has been moved to India), the India operations managed a growth of 27 per cent. The management expects the segment to get back on the growth track by next year; its strong relationship with other MNC clients, as also the long-term contract with Pfizer giving it a fillip. The other business segment that offers a significant growth potential is the global critical-care segment. Piramal now has the intellectual property to manufacture inhalation anaesthetics across the pyramid, thanks to its last year's acquisition of the US-based Minrad International. The inhalation anaesthetics present an addressable market of about $435 million in the US.

Srividhya Sivakumar

BL Research Bureau

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - BSE Outlook 2nd March 2010

Sensex (16,429.5)

The positives and negatives of the Union Budget balanced themselves to have little impact on stock prices. But Pranab Da, in a very subtle way, pleased market participants by giving them what they wanted the most – a clear plan to revert back to fiscal prudence. It may be recalled that not outlining a road-map for curtailing fiscal deficit was one of the prime reasons for the 870 points plunge in Sensex on the Budget day 2009.

Higher disposable income in the hands of the small investor through changes in income-tax slabs was a bonus. Since the Government needs a buoyant stock market to meet its colossal disinvestment target of Rs 40,000 crore, market is unlikely to face any unpleasant policy changes, at least in the ensuing months.

FIIs were net buyers on Friday though they have net sold almost Rs 2,000 crore so far this month according to BSE data. Domestic institutions continued to sell through last week. Volumes remained buoyant through the week and spiked sharply higher in the budget session. Expiry of the February contracts has resulted in the open interest coming down to a more sedate Rs 88,000 crore.

There was hardly any movement in the Sensex in the first four sessions, as the index oscillated in a very narrow range between 16,200 and 16,300. Friday's surge led the index to the intra-week peak of 16,669 but it could not sustain there for long and ended the week below 16,500.

We had outlined three possible routes that the Sensex could take on the Budget day last week. The index followed the second path -unable to move beyond 17,000 and closing the week at 16,500. The Budget day is a non-event as far as its impact on the market trend is concerned since it has altered neither the medium or the short-term trend.

It is interesting to note the similarity of patterns in the charts of all the global benchmarks. The medium term trend is down in all the indices since the mid-January peak. A mild pull-back is currently on since the beginning of February. This pull-back has however not progressed sufficiently to signal the end of the January correction.

To put it differently, all global equity markets are moving in tandem and the fate of Indian equities are strongly interwoven with that of the other markets. Since the Union Budget has not been able to scratch even the surface of the market trend, it is back to watching Greece, US, China et al to decipher where we are headed.

The medium term trend in the Sensex continues to be down and inability to move past 17,000 keeps open the risk of the third leg of the down-move from 17,790 peak unfolding that drags the index down to 15,347 or 14,530 in the days ahead. The 200 DMA at 15,910 is the critical support that most market participants would be watching in the event of a decline. A strong close above 17,000 is required to negate the current bearish medium-term view for the index.

The short-term trend in the Sensex is up. But since it is nearing key resistances at 16,775 where the 50 DMA is also poised, investors ought to stay cautious. The index could get back to a lacklustre state in the week ahead and decline to 16,280 or 16,040. The near term view will turn overtly negative on a close below the second target. Resistances for the week would be at 16,670, 16,800 and 17,000.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Nifty Outlook

Nifty (4,922.3)

The Nifty too was confined in a narrow band between 4,850 and 4,900 in the sessions preceding the Budget before Friday's spurt took the index higher to 4,992. That the index was unable to move past 5,000 on the Budget day implies that the medium-term trend in this index continues to be down. If the third leg of the downtrend from the 5,310 peak unfolds now, it can drag the index to 4,599 or 4,357. The 200-day moving average at 4,680 would be the minimum target for a decline. Close above 5,070 is needed to mitigate this bearish view.

The short-term trend in Nifty is up since the trough at 4,675. But it is possible that this uptrend ended on Friday and the index could now decline to 4,870 or even 4,796. Traders can initiate short positions in rallies with stop at 5,025. Target on a move above 5,000 is 5,067.

Global Cues

Globally equities had a tough weak as worse than expected economic readings from the US and resurfacing of the Greece sovereign debt issue dragged stock prices lower. European and Latin American indices end the week 1 to 3 per cent lower. Asian benchmarks were relatively stronger and many of them such as KLSE Composite, Nikkei, Philippines Composite, Shanghai Composite and so on ended the week marginally in the green.

CBOE VIX spiked to 22.6 on Thursday before ending the week down at 19.5 implying that investors continue in a sanguine frame of mind. The dollar index appears to have formed a short-term peak at 81.4 and that should give some relief to emerging market equities and commodities.

The Dow could not move past the key short-term resistance at 10,400 and reversed mildly from there. Support for the week would be available at 10,200 and 10,100. Decline below the second support would mean that the downtrend from January 19 peak is continuing. Conversely rally above 10,400 would send the index to a new 2010 high.

The S&P 500 has also recorded a hanging man pattern in the weekly chart that is a reversal pattern. Key resistance for this index is at 1,110 and it is currently struggling to move over this. The week ahead is critical for defining the short-term trajectory for this index.

— Lokeshwarri S. K.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Fortis Healthcare

Fortis Healthcare (Rs 156): Fortis Healthcare has key long-term resistance in the zone between Rs 120 and Rs 130 and it was struggling to move past this zone till the last week of December 2009.

In our review of this stock in December last year, we had indicated that an ascending triangle pattern was forming that had the target of Rs 170.

The stock broke out of the upper boundary of this triangle pattern in December last year and recorded the recent peak at Rs 162.4 on February 17.

Investors with a short to medium-term perspective can hold with stop at Rs 132. If this level holds, investors can expect a rally to Rs 173 over the medium-term.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Asian Paints

Asian Paints (Rs 1,809.5): Asian Paints is in a gravity-defying run over the last two decades. The decline in 2008 too did not cause a deep gash in the stock price nor could it impact the positive long-term outlook.

It was one of the first to move to a new life-time high in 2009 and is currently poised over 30 per cent above its 2008 peak.

It is apparent that the stock is in a fresh leg of its long-term bull market since March 2009. Key support for the medium-term is at Rs 1,500. Investors with a long-term perspective can therefore continue to hold the stock with stop at Rs 1,450.

A sideways consolidation between Rs 1,500 and Rs 2,050 for a few months would be construed as positive and will build the platform from which the stock can move to a new peak.

However decline below Rs 1,500 can drag the stock lower to Rs 1,350 or even Rs 1,200. Investors with a short-term investment horizon can hold the stock with a higher stop at Rs 1,640.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical analysis - Astec Life

Astec Lifesciences (Rs 45.8): Astec Lifesciences started trading at Rs 85.5 in November 2009. After recording a life-time high at Rs 96 in December that year, the stock has been spiralling lower in to an abyss.

Insufficient history makes it difficult for us to give a long-term opinion on this stock. But it is apparent that it is in an intense down-trend since the beginning of February. Close above Rs 60 is the first signal required to show that the short-term down trend has reversed.

On the other hand we cannot rule out further slide in the days ahead. Investors can therefore divest their holding at current levels and re-invest on a close above Rs 60. Subsequent targets are Rs 65 and Rs 72.

Source BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - 3i Infotech

3i Infotech (Rs 73.6): 3i Infotech had been moving in a range between Rs 75 and Rs 103 since August last year. It declined slightly below the lower boundary of this range during last week and closed rather precariously just below.

Unless the stock climbs above Rs 76 next week there is the possibility of the decline continuing to Rs 64 or Rs 55 in the months ahead. Investors should divest this stock on a move below Rs 68.

Conversely if the stock moves above Rs 75 next week, it will imply that it can progress to Rs 91 or Rs 102 in the medium term.

A weekly close above Rs 112 is needed to make the long-term view positive for this stock. Investors with long-term perspective can buy the stock in declines with stop at Rs 52.

Source : BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Balrampur Chini

Balrampur Chini (Rs 105.4): This stock is currently in strong medium-term correction, supports from which can bounce up over the ensuing months are Rs 99 and Rs 82. Investors can hold the stock as long as it holds above the second support. More of this stock can also be purchased on reversal from this level, with stop at Rs 80.

Source : BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - HDIL

HDIL (Rs 301.1): In our review of HDIL in November last year, we had written that one leg of the up-move had ended at Rs 410 and the stock could launch into a decline to Rs 280 or even Rs 197 over the medium-term.

The stock has tested Rs 290 twice since then and is currently poised around this level.Key medium-term support for the stock is at Rs 280 and sideways move between Rs 280 and Rs 400 for few months will be construed a positive consolidation phase that can be followed by a rally to Rs 460, Rs 590 or Rs 720 over the next 12 months.

Medium term investors should divest their holding on a decline below Rs 280 since that would signal a possible decline to Rs 237 or Rs 196 over the next 12 months. Long-term investors can hold the stock as long as it trades above Rs 196.

Source : BL

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Technical Analysis - Index Outlook 13-17 July 2009

Index Outlook — Poised on the brink
Sensex (13,504.2)

The Union Budget for 2009-10 was definitely not scary enough to make equities fall off a cliff the way they did. Though the packaging of the Budget and missing road-maps caused a great deal of consternation among market participants, the 1,400 points weekly loss in the Sensex appears to have been largely caused by unwinding of short-term positions built in expectation of a post-election surge in stock prices.

Volumes tapered off towards the close of the week. Data released by SEBI reveals that foreign institutional investors have bought $603 million in the four sessions from the Budget day.
Domestic institutional investors too were largely net buyers last week.

Retail investors seem to have borne the brunt of the post-budget selling.

A turnover of Rs 96,000 crore, recorded in the derivative segment of NSE on Monday indicates that leveraged positions built up in anticipation of a post-Budget rally could have been the primary factor that pushed stock prices lower on the Budget day.
The 10-day rate of change (ROC) oscillator has declined into negative zone and the 14-day relative strength index is positioned at 38.

Both these readings reflect a bearish short-term outlook. That the Sensex has recorded a close below its 50-day moving average is also a negative.
But investors can take heart from the weekly momentum indicators that are holding in the positive zone.

Interestingly, monthly ROC has risen from the negative zone and is poised on the median line. The inference is that the movement of Sensex over the next few weeks will determine the long-term direction that the index takes.
The third wave of the down-move from 15,600-peak started on the Budget day and this wave has the downward targets of 13,513 and 12,553. Sensex moved to the first target on Friday. There are a cluster of supports around the 13,500 level provided by the trough formed on May 26 and the ceiling of the post-election result gap.
A short-term bounce is possible here that takes index to 14,000. But failure to record a strong close above 14,000 would mean that the weakness would continue in the short-term.

We stay with the view that the medium-term trend will turn conclusively negative only on a close below 13,300. The yawning gap between 12,219 and 13,479 will result in the decline accelerating once the index closes below 13,300. Fibonacci retracement of the up-move from March lows give us the medium-term targets of 12,730, 11,840 and 10,950 in the event of a protracted down-move.
A brief review of the long-term outlook is warranted at this stage. We have adhered to the view that the up-move from March lows was a counter-trend rally in a long-term down-trend (bear market rally in common parlance and B wave in E-wave terminology).
A strong weekly close above 16,200 is needed to alter this view. The behaviour of market participants in May and June had all the hallmarks of the B wave and patterns in the charts of other global indices also support this view. Investors holding short-term positions need to tread carefully at this point since the C wave of the long-term down-trend could have commenced from the 15600 peak. This count will be confirmed on a strong close below 13000. The force and ferocity of the C wave downward is known to all. But bulls need not throw in the towel just yet. A strong rebound next week will mean that the B wave can extend for a few more weeks and maybe help Sensex reach 16,000.
Sensex closed on a very weak note on Friday. But a short-term rebound can take the index to 14,059 or 14,455 early next week. Key resistance zone for the week would be between 14,000 and 14,250. Failure to move beyond this zone will result in the index heading lower towards 13,346 or 12,730 in the short-term.

Nifty (4,003.9)

Nifty moved to the low of 3,976 on Friday. Targets of the down-move from 4,693 peak are 3,930 and 3,590. Since Nifty is close to the first target, a short-term rebound is possible that takes the index higher to 4,181 or 4,296. Short-term traders can use rallies to these levels to initiate fresh short positions. Medium-term targets for the Nifty based on retracement levels are 3,876, 3,624 and 3,371.

A close above 4,450 is needed to make the medium-term view positive again for Nifty.

Global Cues
Global equities began correcting in earnest last week; most of the major indices gave up between 3 to 4 per cent. Asian indices were however resilient, indices such as Jakarta Composite, KLSE Composite, Seoul Composite and so on closed near the upper end of their medium-term trading ranges. CBOE VIX spiked to an intra-week high of 33 before closing at 29 implying that investors are getting just a trifle edgy.

The Dow moved in line with our expectation, declining below the first target of 8,198. Close below 8,200 is a negative from a short-term perspective and implies that the index could decline towards the next target between 7,960 and 8,000. But we stay with the view that a re-test of March lows becomes a possibility only on a strong close below 7,800.

Commodities led by crude pulled the CRB index lower by almost 3 per cent. This index has retraced over 40 per cent of the rally from the March lows and the speed of the current decline implies that the long-term trend in commodities continues to be down.

— Lokeshwarri S.K.

Businessline.com

Index Outlook for 4-8 May 2009

Index Outlook

Sensex (11403.2)

Equity markets maintained a nonchalant attitude last week despite many unsettling developments. First it was the swine flu that sent a tremor through financial markets, then there were reports of large US banks needing additional capital following the much-talked about stress test and Chrysler filed for Chapter 11 bankruptcy protection. Sensex managed to end the week on a highnote helped by some frantic last hour short-covering of derivative contracts.

It has been a stunning performance by Sensex in the month of April closing with 17 per cent gain. BSE Midcap and Smallcap indices kept pace with 18 and 21 per cent gain respectively. Trading was extremely volatile last week on long and short unwinding exerting pressure in both directions. Breadth was, however, weak as the action was concentrated mainly in the large-cap stocks. Volumes went through the roof, especially in the derivative segment of NSE. FIIs were net buyers for the week.

There is a slackening in the momentum indicators in the daily charts. Ten-day rate of change oscillator is perched on the zero line and the 14-day relative strength is moving down from the overbought zone. Weekly oscillators are however gung-ho. The 14-week RSI is rising at 62. The implication is that though there can be volatility in the short-term, the medium-term outlook is positive.

The three-day week just gone by has not changed our outlook along any time-frame. Sensex is moving in a narrow trading range over the short-term. Interpreting such sideway moves is tricky since though they are mostly continuation patterns followed by resumption of the up-trend, in rare cases, such moves turn out to be the last part of a up-trend called terminal corrective or a rounding top. The correct labelling becomes apparent only on completion of these patterns.

The safe way to play such patterns is to stay with the trend; that is to buy in declines until the index gives clear indication that is has reversed by declining below certain levels. Short-term investors can stay invested as long as Sensex holds above 10650. The trend-deciding level for medium-term investors would be 10200. Immediate medium term resistance band is between 11600 and 11800.

The all-pervading scepticism about the sustainability of the current rally appears to be aiding the Sensex to cover more ground. There can be a move higher to 11547 or 11687 next week. Strong move beyond the second resistance would take it to 12136. Supports for the week would be at 10700, 10440 and 10230.

Nifty (3473.9)

Nifty closed marginally in the red after a volatile start to the week. The index could move higher to 3487 or 3517 next week. If there is a close above the second target, it would usher in a rally to 3572. Supports for the week would be at 3300 and 3170. Short-term traders can continue to buy in declines as long as the index trades above the first support.

Medium term view for Nifty stays positive and a close below 3170 is required to signal a medium-term trend reversal.

Global Cues

Most global indices retained the gains recorded over the past month and closed marginally in the green. CBOE Volatility index declined below 40 as investors resumed betting on a sustained recovery in the markets. Europe was mostly strong. DJ Euro STOXX 50 closed with 2 per cent gain. Dow Jones Industrial Average made a tentative move above the 8100 mark. This index has been moving in a narrow range over the last four weeks. There is a strong chance of a break-out higher to 9100 or 9500 and this positive view will be mitigated only on a close below 7500. Jakarta Composite Index was the out-performer last week with 8 per cent gain.

Our View :

We feel that the market may pause or drift downwards.  The reports of a hung verdict will add to the woes.  Most of the Quarterly results are already priced in and it will be more of stock / sector specific jumps.

IT, Banking, Infrastructure are looking bullish and one can buy on dips.  Realty and Metals could be avoided for the week.

Compiled and Brought to you by 

Equity Research Team

Intelligent Investor -

Invest Advisory Arm of

Ravina Consulting - Bangalore India

Read - www.intelligentinvestor1.blogspot.com

Follow - www.twitter.com/SmartInvestor 

Premium Services -

* Porfolio Advise

* Long Term Wealth advise

* Short term trading Opportunities

TA - SBI 27-04-09

SBI

SBI declined sharply from the resistance at Rs 1,350 indicated last week to an intra-week trough at Rs 1,202.

But the strong recovery from this level implies that the medium term trend in the stock continues to be up. Though the stock can move between Rs 1,200 and Rs 1,350 for a few more sessions, there can be an upward break-out that takes it higher to Rs 1,433 or Rs 1,577.

Investors however need to tread cautiously till the stock closes above Rs 1,350.

The medium-term view for SBI will stay positive as long as it trades above Rs 1,100.

Repeated attempts to cross above Rs 1,600 between July and September 2008 makes this level a possible ceiling for this calendar.

— Lokeshwarri SK

businessline 27-04-09

SBI is struggling to get past 1350 and is likely to drift lower.  Investor should buy the stock around Rs.1250 levels for a target price of Rs.1600 for a holding period of 6 months.

Equity Research Team

Intelligent Investor -

Invest Advisory Arm of

Ravina Consulting

Bangalore India

Read - www.intelligentinvestor1.blogspot.com

Follow - www.twitter.com/SmartInvestor 

TA - Reliance Industries

Reliance

RIL moved sideways between Rs 1,700 and Rs 1,800 last week.

Though it declined to Rs 1,670 on Tuesday, it recovered to close on an optimistic note.

As explained in our last column, the stock faces strong resistance in the band between Rs 1,800 and Rs 1,850 and a medium term reversal is possible from here.

But if RIL holds above Rs 1,600 over the next two weeks, there can be another leg of up-move that can take the stock higher to Rs 1,886 or Rs 2,020.

Next Fibonacci retracement level if RIL breaks past Rs 1,850 is Rs 2,100.

Short-term traders can hold the stock with a stop at Rs 1,660.

Swing traders can hold with a deeper stop at Rs 1,580.

— Lokeshwarri SK

businessline 26-04-09

Reliance Industries has touched a low of Rs.1150 and from that point has just jumped close to 45% Right now it is consolidating and may correct a bit in the short term.  Long term investor should look for buying around Rs.1500-1550 levels for a target price of Rs.2100-2200 for a holding period of 1 year.

Equity Research Team

Intelligent Investor -

Invest Advisory Arm of

Ravina Consulting

Bangalore India

Read - www.intelligentinvestor1.blogspot.com

Follow - www.twitter.com/SmartInvestor