Monday, May 21, 2012

View for the week 21/05/2012 - 25/05/2012

NIFTY (4891)

The week saw nifty open on a steady note and then continue its downtrend aided by rising inflation and CPI with the Greece crises making matters worse, giving way to correction across all global markets.

Nifty has now closed for 2 weeks in a row below its key moving averages and is making lower lows and lower tops in its short term charts. Nifty needs to trade above 4925 and holds friday's low of 4789, in order to see any short covering. US$ broke out of its small consolidation and now 53.75-54 will work as good support as it  will attempt further upside.

Nifty has 2 gap ups pending @ 4650 / 4740 which will act as support and targets for downside and 2 gap downs pending @ 5180 / 5225 which will act as resistance. For the week nifty needs to sustain above 4875 for any short covering rally while it faces strong resistance at 5000 and strong support at 4800  

Support levels for the week: 4800 / 4700 / 4625
Resistance levels for the week: 4975 / 5050 / 5135

Investment Pick of the week

NMDC (176)

NMDC is India's largest iron-ore producer with approx 30 mn tonnes of annual extraction capacity and rich iron-ore reserves & resources of approx 1.36 bn tonnes. It has 3 fully operating mines located in Chhattisgarh and Karnataka with an average cost of production of US$22/tonne while India’s second largest iron-ore miner, Sesa Goa has an average cost of US$35/tonne against the world average of US$50/tonne, primarily due to open cast mining operations, low processing costs led by its high grade iron ore reserves and inexpensive labour.

NMDC is actively pursuing the acquisition of overseas strategic mineral assets in Australia, Brazil, Mozambique, Russia, South Africa, Tanzania & USA with an objective to meet its own requirement and for raw material security of steel industries. It is developing a steel plant at Jagdalpur, as well as pellet plants in Donimalai and Bacheli; and invests in the development of renewable energy resources, which include a wind mill project of approximately 10.5MW capacity in Karnataka. In addition to the iron-ore and coal it is also looking at fertiliser minerals like Rock Phosphate and Potash. As India is a net importer of fertilizer minerals, the acquisition of fertiliser minerals mine provides healthy market for its presence.

The average ROE of mining universe globally is around 21% while NMDC is able to maintain ROE of around 36%. Its recent price correction has been primarily due to execution challenges and return on international steel assets and the current form of the mining bill.

Accumulate only in dips for a target of 250.

Trading Stock of the week

CESC (273)

The stock over the week appears to have made a bottom formation and derivative data suggest fresh long positions in it. Buy for a target of 284 with a stop loss of 267.

Best wishes for a successful week in the market

Sunday, May 13, 2012

View for the week 14/05/2012 - 18/05/12

NIFTY (4929)

The week saw the ministry deferring GAAR which lead to a sharp rally on Monday. However, that was just a false relief as market thereon crashed heavily with PSU Banks and Infra stocks facing the brunt specially with negative IIP noes for March coming in on Friday.

Nifty has now closed below all key exponential moving averages and unless it starts moving up we could see some more selling pressure. Currently, market appears over-sold hence a brief rally from Friday’s low should not be ruled out. However, unless nifty sustains above 5150 the possibility of another sell-off should not be ruled out. US$ seems to be seeing selling pressure near INR 54 as it remained range bound between 53 - 53.75 for the week.

Nifty has 3 gap ups pending @ 4650 / 4740 / 4880 which will act as support and targets for downside and 2 gap downs pending @ 5180 / 5225 which will act as resistance. For the week nifty needs to sustain above 4875 for further rallies while it faces strong resistance at 5150 and strong support at 4880  

Support levels for the week: 4850 / 4775 / 4625
Resistance levels for the week: 5065 / 5200 / 5275

Investment Pick for the Week


Ipca is one of the better quality, mid-size Indian pharma firms, with an improving business mix ( from API’s to formulation, rising share of US and institutional business and falling share of slower growth in therapies in India) in India & abroad, backward integration into APIs & healthy balance sheet.

Expectations are that Ipca’s business in India and US will return to their full potential over the next year, as transient issues holding them back appear close to resolution. While the recent inspection and imminent approval of the Indore facility should ease capacity constraints in the US, growth in India is likely to recover in line with the market. This augurs well for growth and profitability.

Ipca is one of only four suppliers prequalified for the Arthemeter & Lumefantrine combo drug (US$250-300m market) & the only backward integrated player. Despite being the latest entrant in this market, it has been able to capture c15-20% share in just two years.

Besides higher contribution from the US, India and the institutional business (all higher margin businesses), Ipca will benefit from operating leverage. The growing sales force, restructuring of the divisions and the scale up in the market demand will lead to better business.

On financial terms it is better placed in debt to equity with almost 0.4x for FY12E and improving profitability and cashflows to keep the balance sheet healthy. The stock trades at 12.3x FY12e and 10.7x FY13e earnings. The stock can be re rated on strong earnings growth post USFDA approval of the SEZ and bounce-back in India going forward.

Investors may accumulate in dips for a target of 400

Trading stock of the week


As per EOD charts the stock appears to be taking support at these levels. Derivative data suggest short covering in it. Buy for a target of 170 with a stop loss of 150.

Best wishes for a successful week in the market.  Universal Currency Converter ®
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About Me


All opinions are based on my technical study; however, I do not vouch for the accuracy or the completeness of the matter. I am not liable for any potential damages that may be incurred while acting upon any information mentioned in this report. The views expressed are not of binding nature. The report is intended for a restricted audience & I am not soliciting any action based on it. Please exercise discretion and due diligence in making your decisions. Investments in Capital Markets are not my obligation or guarantee and are subject to investment risks. In no event will I be liable for any damages, including without limitation direct or indirect, special, incidental or consequential damages, losses or expenses arising in connection with this report or use thereof or inability to use by any party, or in connection with any failure of performance, error, omission, interruption, defect, delay in operation even if I am thereof, advised of the possibility of such damages, losses or expenses.