Buying in Infosys is the best bet

The FIIs on Wednesday stood as net buyer in equity while net seller in debt. The gross equity purchased was Rs1,437.60 Crore while the gross equity sold stood at Rs1,295.30 Crore and gross debt sold stood at Rs3 Crore. Therefore, the net investment of equity reported was Rs142.30 Crore and net debt was (Rs3Crore).

Today, Nifty has support at 6,052 and resistance at 6,261 and BSE Sensex has support at 20,074 and resistance at 20,719.

Nelco(Rs.167.15) bagged new orders. Definitely a cheap stock in this overvalued midcap market.

Ahluwalia Contracts India Ltd ( 338.15 )Looks hot for buying

News Snippets:

The Government is considering a hike of Rs4 and Rs2 per litre for petrol and diesel respectively in February.

MTNL is likely to get pan-India mobile license.

LN Mittal in talks with HPCL to make joint bids for offshore oil & gas blocks.

Future Capital fixes its IPO price band at Rs700-765 for its IPO.

RIL and ONGC to face competition from LN Mittal for NELP blocks.
ONGC revives Kakinada refinery after shelving it in 2006.

Bharti Airtel cut its local call rates to a flat Re1 per minute.

Retail investors may get an option of paying 25% at application stage in Reliance Power IPO.

Auto companies report low sales in December

Rotterdam Port in talks with L&T for investing in a Greenfield project in India.

The JV between Verizon and Videocon to start offering internet services; awaits security clearance.

Nuclear Power Corporation may team up with BHEL to build turbines.

ONGC to pay subsidy of Rs170bn in FY08.

Tata group plans to transfer Tata Powers’ strategic electronic division (SED) to Nelco.

Oil PSUs to buy 10% stake in Oil India (OIL) at issue price

Essar led consortium likely to bag Ratna and R-series oilfields.

ONGC and Hinduja plan to invest US$10bn for developing oil and gas fields in Iran.
Petronet’s upcoming LNG terminal in Kochi will be delayed, to be ready by 2011.

Oil PSUs plan to open 3,000 outlets this year.

Abu Dhabi awards US$460mn contract to Japan’s Sumitomo, Germany’s Salzitter and Jindal Saw of India.

UB to seek out a JV partner to grow its Rs15bn business.

Religare to sell stake in its NBFC arm, Religare Finvest to Societe Generale, Goldman Sachs, Blue River Capital and a couple of other PE funds.

Ashok Leyland develops multi point fuel injection engines for CNG carriers.

Parsvnath gets a go ahead from Haryana Government for its IT Park.

Sebi has ruled out flexibility for PSUs in complying with Clause 49.

Broadcasters to receive duty cuts in line with IT and telecom sectors.

Tamil Nadu to nationalize cement plants if companies don’t cut prices.

The Government says Goa's decision on seeking de-notification of three SEZs legally untenable.

The Government plans to bear 80% of the cost of generating solar power.

Singapore Exchange plans launch of BSE products.

The Government may revive ailing fertilizer firms.

The Government may clear civil aviation policy today.

The Government allows 28 new SEZ approvals, including SAIL's Salem SEZ in Tamil Nadu.

Technical picks

Reliance had been consolidating lately
within a range of 2800-2950. However, it
surged in the Friday's session on the back
of increasing volumes. The higher band
of 2950 levels had been witnessing
increased selling pressure followed by
renewed buying interest at the bottom
levels of 2800. The leading indicator like
14-day RSI has given a strong buy signal
as it stabilized around the 60 levels of the
100 scale and cut the trigger line, indicating
significant surge from the current levels.
The stock is currently trading above all the
major moving averages and the 30-day
EMA is placed around 2800 levels which
should act as a strong support. This stock
is an excellent pick from the current levels.
All long positions in the stock should be
protected with a stop loss placed below
2750 levels on a closing basis for upside
targets of 3100 and 3200 levels.

Axis Bank had been consolidating lately
around its rock solid support zone of 900
levels. The stock had witnessed significant
rally in the penultimate month during
which it made an all time high of 1025
levels. However, profit booking forced the
stock to test lower levels of 900-950. The
stock has broken out above the
consolidation band and further decline in
the stock is largely ruled out. The 14-day
RSI is hovering around 65 levels and has
generated a strong buy signal from the
current levels. Immediate resistance is
placed at around the all time high levels.
A sustained close above that level will induce
fresh buying interest in the stock, which might
guide it to test further highs of 1100
and 1150 levels. The 50-day EMA level is placed
at around 900 levels which is unlikely to be
broken in the near-term.Investors are advised to
assume long positions in the stock in the range
of 950-1000 levels for a medium-term target
of 1100 and 1150 levels. All long positions in the
stock should be protected with a stop loss placed below
885 levels on a closing basis.

Pre Market Watch

Range-bound trading — The index exhibited range-bound trading in the 6111- 6060 band throughout the day’s trading session. On the upside, index faces resistance around yesterday’s high at 6111. Intra-day strength can be expected above the 6111 level and index could test 6185 levels on the upside. On the downside, intra-day support is around 6060, and a break below the 6060 level could see the index drift down intra day. Lower support levels are 6040-6000.

We once again caution investors not to get into low priced stocks or penny stocks with out fundamentals. Many stocks are witnessing explosive growth in the PE ratios and Q3 results have to justify the prices.

Varun Shipping(Rs.99.95) is in a no resistance zone. Watch for a 20-30% gain from these levels

Reliance Energy might get a boost from the SEBI's decision to clear Reliance Power's IPO. DLF is planning to hive off various businesses that will become separate companies in a measure that will increase the shareholder value. Indian market is likely trade down today though there will be trading oppurtunities in midcaps.

We have a Moderately Bullish view on Tata Steel . We recommend a Bull Call Spread strategy:
o Buy One Tata Steel Jan 920 CA @ 38 - 40
o Sell One Tata Steel Jan 960 CA @ 28 - 30
o BEP: 930
o Tgt: 960
o Investment: Rs.85,000 (Approx)
o Time Frame: 6-8 Days

Watch : Ioc,Cairn,Indiainfo,Indiabull,Cinemax buy in dips only.

Stocks in News:

SEBI clears decks for Reliance Power IPO by disposing complaints against the offer and asking promoters to lock-in entire 20% of their contribution for five years.

DLF plans to raise US$5bn over the next three years by listing five of its business units.

NTPC has signed agreements for loan and bond subscription worth Rs20bn LIC.

L&T plans to invest Rs25bn in building shipyard and expanding its engineering manufacturing unit.

GMR Infrastructure is considering listing GMR Energy on domestic bourses to fund its upcoming projects.

Unitech is close to announcing two joint development deals in Hyderabad and Chennai.

Reliance Communication slaps legal notice to DoT asking to freeze allocation of additional spectrum to existing GSM players.

ONGC Videsh strikes crude in Arabian Gulf Block off Qatar.

BOI gets board approval to raise Rs15bn via QIP. The floor price has been fixed at Rs359 per share.

GSPL and a subsidiary of Gujarat State Petroleum Corporation plans to invest Rs25bn on new pipelines.

Dabur India to foray into milk-based beverage segment.

Yamaha is likely to team up with Bajaj to create a common engine platform for high-end bikes.

L&T to hive-off concrete business into separate entity.

BoB raises Rs5bn through issue of bonds.

Bhushan Steel in technical assistance JV with Sumitomo Metal for the Orissa plant.

GSK Pharma to launch two vaccines in India.

Canara Bank ups its open offer price for Can Fin Homes to Rs78 per share from Rs63.

Wipro Consumer Care to provide lighting solutions for retail industry in India.

Infosys plans to offer wealth management solution in the domestic market.

JSW Steel and Essar Steel to set-up retail outlets for showcasing products.

Combined output growth of six key infrastructure industries was lower at 4.5% in October Vs 9.9% last year.

The Government is likely to scrap service tax on business and first-class air tickets for international journeys. It is also likely to halve duty on ATF from 10% to 5%.

The Railway Budget is likely to bring down freight on key commodities including steel, cement and petroleum products by 5%.

Mobile companies may have to shell out a higher percentage of their annual revenues as spectrum charges.

Leading tea players have hiked prices and the remaining companies are expected to follow suit.

Trai has asked I&B ministry to specify the date on which the CAS would become mandatory in 55 of the country’s top cities.

Have a great trading day

Market will................

Nifty opened on a positive note in yesterday’s session
continuing the momentum of Monday’s trade. Nifty witnessed
strength through out the session as short covering amid with
fresh buying was prevailed in index heavyweight. The breadth
of the market ended on strong note at 922:260 suggesting
buying witnessed in mid-cap and small-cap stocks as well. Nifty
Januay futures have witnessed accumulation of long positions;
January futures have added 60 lakh shares in open interest
along with significant increase in premium to 33.35 points from
16.45 points. The rollover in the market stands at 60.71% while,
Nifty rollover is at 70.62 %. On the options front, Nifty Dec 6000
call options have seen closure of short positions while, Dec
6000 put options witnessed buying suggesting market to reamin
highly volatile.The market is expected to open on flat to positive
note today ; trader are advised to assume long position if Nifty
sustains above 6050 levels for immediate targets of 6110 and
6180 levels.

We have a Bullish view on Reliance. We recommend a Protective Put strategy:
o Buy One Reliance Jan Fut @ 2930-2934
o Buy One Reliance Jan 2900 PA @ 100-104
o BEP: 3034
o Investment: Rs.83,000 (Approx)
o Time Frame: 6-8 Days

Reliance Buy 2865-2875 with sl 2840 target 2960-2970 for 4-5 Days

Bulls above 20000 only

Nifty — The index opened on a strong note and exhibited strength throughout the day’s trading session. It ended the session with a gain of 214 points.

Support & Resistance — The index closed above the 10 dma = 5934 and 20 dma = 5869. Intra day declines should find support around the 5934-5869 band. On the upside, the index faces resistance around 6012 and 6185 level.

Conclusion — Expect test of 6012, break above 6012 can see further strength

Shares of media and entertainment companies may attract investors' attention with films like "Taare Zameen Par" and " Welcome" doing well. While TZP is co-produced by PVR, Welcome is being distributed by the Network 18 group. Multiplex operators such as Inox, Adlabs and Shringar Cinemas could also gain.

Victory of Narendra Modi in Gujarat is perceived to be very positive for Adani Group. Keep an eye on Adani Enterprise and Mundara Port.

Ambalal Sarabhai Enterprises Ltd.
Go positive in this counter for a mid term target 52.00

Stocks in News:

SAIL to invest Rs200bn in West Bengal, about two fifth’s of its total planned investments.

State owned India Infrastructure Finance Company to lend Rs18bn to Tata group's Mundra UMPP.

ONGC-Mittal JV wins block in Trinidad & Tobago with estimated gas reserves of 2tn cubic feet.

Lanco Infratech in talks with global airport operator as partner in its bids for non metro airports. (Mint)

The Board of SBI will meet on January 25 to consider the merger of six associate banks with the parent.

Maruti Suzuki India will hike prices of its vehicles across different models between Rs4,000 and Rs12,000 next week.

ONGC has agreed to supply natural gas for the proposed 104MW gas based thermal project at Monarchak in West Tripura district.

GNFC has lined up an investment of Rs40bn over the next four years.

Allied Digital is close to two small-size acquisitions.

Coal India subsidiary in talks with Uttar Pradesh Rajya Sabha Vidyut Utpadan Nigam to float a 50:50 JV for setting up a 1,000MW thermal station.

BPCL is in talks with Japan based Nippon Oil for sharing expertise on fuel-cell cogeneration system.

Central education and oil cess to be kept outside the dual goods and service tax structure from April 2010.

Mobile tariffs for national long-distance calls are set to witness a further drop by 5-10%.

The Coal Ministry has asked the power ministry to ensure import of at least 20mt of coal next year.

The Government is likely to save Rs30bn on fertilizer subsidy bill.

IT STOCK TO SURGE

FII Gross purchases Rs 2585 Cr, Gross sales Rs 3678 Cr, Net Sellers Rs 1093 Cr.
MF Gross Purchases Rs 1055 Cr, Gross Sales Rs 932 Cr, Net Buyerss Rs 123 Cr

We will see rally of 450-500 points on sensex but donot ignore profit booking

A pink paper reports that the government requested NTPC, BHEL, SAIL, ONGC, IOC, BPCL, HPCL and Gail to issue bonus shares,as their reserves and surplus have increased to several times their paid-up capital.

SEBI finally opened up short selling to all though the start date is yet to be decided. valuations will come into picture once short selling is allowed

Watch out for IT/ITES stocks for bumper returns in the next 1 month

Sonata Software(Rs.53.60) is likely to move up to 70 levels.

HOT PICKS - SATYAM,CMC,KIRLOSKAR FERROUS,CONTAINER CORP

Stocks in News:

IOC to venture alone for small onland blocks in NELP VII.

MRF expects to get possession of 500-acre land at Tiruchi, Tamil Nadu by January for setting up a new facility.

Reliance Entertainment is divesting a 5% stake at an enterprise value of US$1.5bn.

Gail to issue bonus shares in next 3-6 months.

Ford plans to make India the hub for supply of petrol and diesel engines.

Ansal Properties looks at development of ports in partnership with UEM Builders of Malaysia.

ONGC will increase spending to increase output. It will pay mid year dividend of Rs18 per share.

The Maharashtra State Consumer Disputes Redressal Commission has charged ICICI Bank with forging of documents to recover loan.

Dunlop raises US$90mn from hedge funds to restructure loan and meet other corporate needs.

Attrition prompts Voltas to go for massive recruitment in next three years.

Bharti Enterprises to acquire Delhi-based retail chain Big Apple.

RPG group’s Spencer Retail to venture into specialty retailing.

Dr Reddy’s to shift output of 12 Betapharm drugs to India.

5-step guide to locating a 'wealth creator'

The first rule to investing is ‘Don’t lose money’. The second rule to investing is ‘Don’t forget rule no. 1’! It is essential to stick to these rules when it comes to investing, in order to avoid the possibility of capital erosion.


1. Assess the entry barriers created by a company

Entry barrier should be preferably intellectual in character

Remember, a stock is nothing but a stake in the company’s business. So, observe the company’s business and the entry barriers created by it. The entry barrier should be more ‘intellectual’ in character rather than ‘physical’. This is because while it is next to impossible to compete with a strong brand (an intellectual barrier), competitive advantage associated with a piece of land (a physical barrier) disappears when a competitor acquires one as well.

Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-à-vis its competitors for long time to come.

Entry barrier should be long-lasting

An entry barrier should not only be strong, but also long lasting. Such companies will keep making money because their entry barriers keep working for them. For instance, Britannia may not be the best managed company but its strong brand continuously earns money for it.

Buy into such companies at the earliest

As an investor, buy into such businesses ahead of the crowd. If an entry barrier has been established very recently, it may not yet be exploited by the business. Accordingly, the market would not have valued it in the company’s share price.

For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential delivers best appreciation.

“Though difficult to practice, think ahead of the crowd”

2. Management should be competent and passionate

Choose companies that are led by a team and are competent and passionate. Both these attributes are equally important. Competence or passion alone will not work. An individual with a local degree combined with passion would have greater growth prospects than one who has a Harvard degree but no passion. A company like Pantaloon Retail is a shining example of how passion can create wealth.

“The definition of a great company is one that will remain great for many years”

3. Management should have integrity

Integrity is the most crucial quality that a company’s management must have. Such companies not only run their businesses in an honest manner, but, are honest to all their stakeholders, whether they are employees, the government or the shareholders.


If honesty is part of a company’s DNA, it will be fair to its smallest stakeholders – the minority retail shareholders. Companies such as Tata and Infosys have this quality, which has added to their growth and market attractiveness immensely.

“Without management integrity, no margin of safety can be high enough”

The above-mentioned three characteristics (long lasting intellectual entry barrier, competent and passionate management and integrity) must all be simultaneously present in a company that you choose to invest in.

4. Buy low

The price that you pay for a stock determines your rate of return. So, it is essential that you get your purchase price right. While some companies come out on top with respect to all the first three parameters, the returns falter when it comes to the purchase price.

For instance, HLL comes on top with respect to all the first three parameters but has not delivered as much as far as its stock goes. Its stock delivered a CAGR of approximately just 3 per cent over the last 5 years, when the market delivered a CAGR of approximately 44 per cent over the same period.

The quote - “In the bible it is said that love takes care of a lot of sins. In investments, purchase price takes care of a lot of mistakes” – is very apt. You can make mistakes on assessing the first three parameters, since they are subjective in nature, but getting the right purchase price covers up for all your mistakes. Hence, estimate the expected value / intrinsic value of the company and keep an adequate margin of safety in the purchase price.

“It is much more important to buy cheap than to sell dear”

5. Have patience

When you buy a house you don’t expect it to appreciate overnight. You look at its appreciation over a long period. The same goes with equity. After having bought a company that conforms to all the above four criteria, you need to have patience. Investing in equities is often driven by two emotions – greed and fear. And patience is the mantra that helps overcome these emotions. Patience makes the difference between investing and speculation. It’s like a fertiliser to the investment process.

“In reality, patience is crucial, but it is a rare commodity”

End note

Investing is laying out today’s money for more in the future. Its about performance of the underlying assets. Success in investing is the outcome of a disciplined approach.

Happy Investing !