Issue Date : November 09, 2012    Archives  
In this issue
Round-up
Fundamental - Markets end lower on the week...
Technical - Profit Booking...

Sectoral outlook
Recommend a mix of consumers and rate sensitives...

Market outlook
Fundamental - Maintain bullish stance...
Technical - Get ready for cracker of a week...

Calls you can execute
EdelStar - Re-iterate Buy Federal Bank Limited
CMP: Rs. 472 Target Price: Rs. 535

Fundamental

This Week’s Market Round Up: Markets end lower on the week ...

  • Sensex closed at 18,683, down 0.40% on a weekly basis and the Nifty closed at 5,686, down 0.20% on a weekly basis.

  • Amara Raja Batteries, Cipla, Tech Mahindra, Dena Bank, Oil India and Ashok Leyland reported strong numbers. On the other hand, PSU banks, ONGC, Hindalco, Tata Power, Cadila Healthcare, Indian Hotels and Kingfisher Airlines came out with disappointing results.

  • FIIs pumped in US$402mn into Indian stocks between Nov. 2 and Nov. 8. With this, their net investments into Indian equities Year-To-Date has reached US$18.40bn. Mutual Funds have been net sellers to the tune of INR 363 crores during the week from Nov. 2 to Nov. 8. They have offloaded stocks worth ~US$8.5bn YTD.

  • Rupee ended at week’s low of 54.78 against the US dollar on Friday, after hitting a week’s high of 54.00 earlier in the week. It had closed at 53.81 on Nov. 2.

Market Outlook: Maintain bullish stance...

  • At the current level of 18,755.45, the Sensex trades at a PE of 14.82x FY13x earnings and 13.21x FY14E earnings estimate.

  • At 14.82x, we trade below average valuations of 15.4x 1 year forward earnings.

  • The government has moved on a number of reforms in the form of FDI in retail, aviation, insurance, pension and other key reforms like SEB debt restructuring and fuel price hikes. Markets will continue to remain bullish on the back of further expected action.

  • We see markets moving higher to levels of 5800 / 5900 on the Nifty.

Sectoral Outlook: Recommend a mix of consumers and rate sensitives...

  • RBI in its latest policy maintained rates at status quo on concerns of rising inflation. However, the RBI did cut CRR by 25 bps to infuse liquidity to support the busy credit season.

  • The lack of a growth impetus due to delayed rate cuts is well outlined by the RBI when it cut its GDP growth forecast for FY13 to 5.8% from 6.5%.

  • We advice investors to play quality interest rate-sensitive shares like Banks and Capital Goods (ICICI Bank, J&K Bank, Bajaj Finance and L&T).

  • At the same time, in consumption we recommend buying into (Astral Poly, Maruti, Coromandel Fertilizers and Amara Raja).

  • Other stocks we like include midcaps like Gateway Distriparks and Supreme Industries.

EdelStar - Re-iterate Buy Federal Bank Limited
CMP: Rs. 472 Target Price: Rs. 535

Time Horizon – 3 months

  • Federal Bank (FEDBAN) is a Kerala-based private sector bank. It has an asset base of ~Rs. 605bn as on Q2FY13 and a market cap of Rs. 83bn, branch network of over 1010 (57% in Kerala), an ~1100 ATMs. SME and retail lending are the bank’s focus areas and constitute 29% and 28%, respectively, of its loan book. The bank’s merger with Ganesh Bank has added 32 branches to its existing network, increasing its foothold in western India.. Bank also has a joint venture agreement with IDBI Ltd & Fortis Insurance International N V for a Life Insurance Company under the name of IDBI Fortis Life Insurance Company Ltd. During the year 2007-08, FEDBAN has opened its Representative office at Abu Dhabi, Capital of U.A.E. for the gateway of the bank to the whole of Middle East.

  • FEDBAN generates best in class net interest margins of ~3.6% on the back of its structurally strong deposit franchise. .Around 28.7% of its deposits comprise low-cost current account and savings account (CASA) deposits, (where the bank pays ~4 to 6%), which collectively enable the bank to contain its deposit costs. Going forward, after NRE deposits hike.

To read more click here >>

Technical

Round-up: Profit Booking...

  • After taking support at 5583 levels, Nifty opened the week on a positive note and broke the mentioned resistance of 5730 and further made a high of 5777. However, on higher levels, profit booking was witnessed and Nifty made a low of 5677. Finally, Nifty closed at 5686 with a marginal loss of 0.18%.

Nifty Outlook: Get ready for cracker of a week...

  • On the weekly chart, Nifty had formed a Doji pattern which indicates that there is a tug of war between the buyers and the sellers. Besides this on the daily chart Nifty is trading near to the support of 21DEMA as well as near the upper band of the Flag pattern.

  • Thus, going forward Nifty is still looking strong and we maintain our upside target of 5820 and above that 5850. We believe that any downside correction till 5660 should be used as a buying opportunity.

  • On the downside Nifty has support at 5660 which is the 21DEMA. However, a close below 5660 will lead to some correction in the market.

 
 

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