Market Pulse February2011
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Re. 1/- Profit is the Answer Volume 1 : Issue 11, 8th February 2011 Total Pages: 4 Dear Friends, Global Economy - Nitin Agarwal US: US economy is showing signs of strengthening backed by In India, when the people and industry performs well, somewhere the politicians up there play havoc. Payroll gains which picked up in January’11 even after ac- Today, despite market current being bullish, there is no sight of reforms or no implementation of counting for the restraining influence of winter storms. Employ- ment increased by 146,000 workers last month after a 103,000 promises made by the political administrator. This has put the market into a forceful down trend, gain in December’10. Economic growth accelerated to a 3.2 which shows India and its policy makers in poor light and triggered sale by FII more commentary on % annual rate in the Q4’FY10 as consumer spending climbed the working of political administrators than economy. by the most in more than four years. U.S. GDP advanced at a 3.2 % annual rate in the Q4’FY10. PMI also accelerated in When we factor the market, we only look at the profitability of the Companies, international scenar- January’11 at the fastest pace since May 2004. Companies like Ford Motor Co. and Emerson Electric Co. are hiring as ios, but, obviously nobody can factor that somewhere up there, there will be huge corruption and consumer spending, business investment and exports climb. scams which can result into down trend in the market. The recovery in US economy is also helping boost the confi- dence of real estate investors. In my last communication, I said that the IIP Numbers would be favorable, which was not. This time Europe: The European Central Bank kept interest rates at a around it is believed that market has lot of value in scrips that it can offer, but lot depends on how the record low in Feb’11 as policy makers weigh the risk of faster budget will fan out and it is anybody’s guess. inflation against the danger that higher borrowing costs could worsen the region’s sovereign debt crisis. Political tensions in Egypt are stoking oil prices and in Germany, where import- My humble advice is to please identify the individual stocks suggested by our research, which has con- price inflation is running at the fastest pace in 29 years, work- sistently done well in their own parameters. Scrips which has not fallen greatly in this market, yet, ers are demanding bigger pay increases. Euro-area inflation is prices have come down, please walk into such scrips and I am advising my technical team to look into already in breach of the ECB’s 2 % limit, accelerating to 2.4 % this kind of scrips which has a higher chances of bouncing back, when the bounce back does happen. I in January’11, the fastest in more than two years. Europe debt don’t think that the market can go below NIFTY 5350 and should come bouncing back, but, again the crisis may damp growth as government across the region cut spending to rein in budget deficits. budget would be the deciding factor. China: China’s manufacturing expanded and input costs climbed, underscoring the case for more interest- rate increases to tame inflation pressures in the fastest- growing major economy. The Government has raised Hemal Kampani benchmark rates twice since mid- October and pushed banks’ re- Nifty onto the threshold zone of its previous break out level -Jaydeb Dey serve requirements to the highest in more than two decades to lock up cash that could stoke inflation. The government last Last month (Jan) nifty shut shop at 5416. We all burnt our hands very badly and we have witnessed a almost month expanded measures to cool the real-estate market, 1000 points correction from its top (i.e. more than 15%) it reacted away from the double top, the reaction is much raising minimum down-payment requirements for second- more severe than we anticipated . In the month of Dec 2010 nifty closing was 6134 and in Jan 2011 it closed at home purchases. An input-price index rose to 69.3 from 66.7 5416, loss of 700 points just in a single month which is just next to disastrous and most importantly month on in December’10 as food costs climbed. The World Bank esti- month basis it is maintaining lower closing. Now two important features that we want you all to notice is that last mates that China’s economy will expand 8.7 % in 2011, three month nifty made a bearish engulfing pattern and closed below 5700, second one is it closed below its 200 times the pace of the U.S., as developing economies continue DEMA also. to outperform richer nations. China’s expansion was 9.8 % in the Q4. So from technical perspective nifty is in short term down trend and monthly closing below 5700 confirms that very strongly. Why this 5700 is very crucial for nifty, lets check out ...5700 Stocks for Feb. 2011—Monthly Calls was the monthly double bottom and most importantly this was the upper wall support level of that up trending channel that we talked about many times before, so this acted as the major support level for the last 2 months and finally broke down. SCRIPT BUY STOP LOSS TARGET Fig -1 And for the time being nifty again DLF 230‐232 221 246, 256 coming onto its previous breakout RELIANCE 890 855 960 level around 5350 where the nifty ANDHRA BANK 134‐136 128 145,150 had been into a consolidation phase for almost 8 weeks after having a STATE BANK 2590‐2600 2550 2690‐2730 inverted head shoulder break out (fig DIVIS LAB 634‐636 620 670 -2) and then started its dream run upto 6300 level. So these support STAR ARCOLAB 365 355 390 levels of 5200(long term tred line, Note: ALL STOP LOSS ARE ON WEEKLY CLOSING BASIS marked by blue arrow in fig-2)-5350 is fairly strong. We are looking for a rebound from those levels, lets see what we have in the womb of future. Fig -2 Last month our trading call in nifty got stop triggered and the after effects are now known to all of us. So our sincere suggestion to all traders is put strict stop loss before initiating any trade in such volatile market condi- tion other wise it could dent even your core capital also. Take advantage of your “VCK Tech Desk” and Earn Profits... Registered. No. : KOL RMS / 419 / 2011‐2013 RNI Registration. No. : WBENG/2010/34033 Page :‐ 1 For more details contact@ 033 4009‐9919/ 98311‐51909 For Disclaimer and Terms of Use visit www.vckgroup.com Volume 1 : Issue 11, 8th February 2011 www.vckgroup.com VCK MARKET PULSE Stocks To Stock Up: -By The Research Team Emami ltd. (Buy-Target Price-INR-462.5): We re- UCO Bank (Buy-Target Price-INR-141): For main positive on Emami’s growth prospects and expect 9MFY11, UCO Bank has registered a robust ~90% in- its topline and EBITDA to grow at a CAGR of ~21% and crease in its NII because of 17% increase in interest ~29% respectively over FY10-12e.We upgrade our rat- earned and 3% decline in interest expended. However, ing on Emami to BUY from Hold (refer Q2’FY11 result with cost of deposit continuing its downward bias after update dated 2nd Nov’10) - after its recent correction of 6 quarters, and CASA deposit declining, we believe ~18% - but with reduced target price of INR. 462.5 pro- that further expansion in net interest spread is limited viding ~15% upside from the current levels. Our target for UCO Bank. Its Cost-Income ratio is also expected to Price is based on EV/EBITDA multiple of 16.19x for stabilize at current level of ~42%. In last three quarters, UCO Bank has classified FY12e (BSE FMCG Benchmark index). At the CMP the INR.1500 crore as fresh NPA and hereon expects slippage to come at normal levels – stock is currently trading at an EV/EBITDA multiple of INR.200-300 crore per quarter. It’s GNPA and NNPA is expected to be 2.62% and 19.7x and 14x to its FY11e and FY12e EBITDA respectively while on earning basis it is 0.83% respectively for FY11E and 2.63% and 0.66% respectively for FY12E. At the trading at a P/e multiple of 23.4x and 17.9x to its FY11e and FY12e EPS respectively. current levels, the stock is trading at PE multiple of 5.5x and 2.7x its FY11E and Biocon (Accumulate-Target Price-INR-415): We strongly believe that the Biosimi- FY12E earnings respectively and adj. P/BV of 1.06x and 0.76x its FY11E and FY12E alr segment backed by its established brands like INSUGEN, ERYPRO, BASALOG, adjusted book value respectively. We reiterate our BUY recommendation on the stock launch of the new therapeutic segments and strategic global agreement with Pfizer for with target price of 141/share (1.0x FY12E adj. Book Value). the worldwide commercialization of Biocon’s biosimilar versions of Insulin and Insulin Tata Consultancy Services Ltd. (TCS) (Hold-Target Price-INR-1222): TCS has analog product, will be the key growth driver for the Biocon in the coming years. been able to maintain the margin on back of healthy volume growth. However, we are Though regarding short to mid term we have no doubt about the biosimilar prospects, slight cautious on the margin front going forward as we believe that it will be difficult to but the regularity change in Germany is bound to drag Axicorp’s business in the com- maintain utilization at such elevated levels.