Sunday 3 April 2011

Technical Outlook: Bullish bias shows followthrough...

Market Outlook: Indian markets are expected to open on the positive note and trade range 5800-5880 while On the global space US markets end higher on jobs report; euro, oil up too and Asian markets trade higher; Hang Seng, Shanghai up 1%. Overall outlook for the markets today is that of cautious optimism with 5800 levels as a major support.

Global events to watch

Þ Employment Index

Þ Jobless Claims

Þ Chicago PMI

Þ Factory Orders

Global indices Update @ 8:

Dow Jones : 12376 (+56.99)

NASDAQ : 2789 (+08.53)

Nikkei 225 : 9778 (+69.89)

Hang seng : 24055 (+253.4)

SGX CNX Nifty : 5875 (+10.00)

Gold (USD/t oz.) : 1431 (+02.40)

Nymex Crude (F) : 108.5 (+00.65)

INR / 1 USD : 44.65

Technical Outlook: Bullish bias shows followthrough...

Friday was a rather dull affair but what was important about the day's trading was that it managed to hold on to the gains made during the week and created yet another up day, making it two weeks in a row of rising trends. There is no doubt that after such a frenetic 10-day run, the trends would certainly be at an overbought or stretched state and therefore it is most logical to expect some sort of a pullback or at least a consolidation in the indices. But the scenario could be shifting to non-index stocks and that may create a new domino of its own, especially if the mid and small cap stocks get into a trot.


Now, that seems quite likely if one takes a look at the mid cap index as well as the charts of many of the stocks. There appears to be either some brisk upward price action or even some accumulation patterns in certain stocks that is suggestive of a return of interest to this area. In this week we don't really have any market moving events or newsflows. hence we are likely to see fund flows as well as localised concentration of demand supply as the main mover of prices. This is more easily achieved in the small and mid cap space and hence we would recommend readers to shift their attention also to this segment. The time for momentum investing could be making a comeback.

Considering however, that most people have their money stuck in some non performing stock or the other, there are two choices. Either exit from some of them (mostly, booking a loss) or get new money. Depending on which is more convenient, one should play the coming week. Mid cap stocks in the Futures space too should see some good action. Expecting the Nifty to run somewhat range bound, albeit with an upward bias, one should be looking for shorting Puts as one of the ways to play the market ahead. Alternatively, if the action slows down even more than expected, then shorting straddles and strangles of ATM strikes could also prove to be an effective way of handling this week.


Monthly pivot is at 5615 while weekly pivot is at 5575. The daily pivot for today is at 5860. While the former two are to be used as support buy levels during the week, we can use the daily pivot level to gauge how to position ourselves in the market during the day. There is enough overhead room still left in the market for day traders to still play long on upside breakouts. But understand that the higher we go the greater the risk. Address that and then enter.

STRATEGY FOR THE DAY: Intra day dips are to be looked upon as buying opportunities. A narrow range of 5835-5870 has been built up. Look for this range to be resolved as one of the pointers for day trades. Positional players need to be using bigger dips into support as buying opportunities. Shift focus towards mid cap stocks and check out the ones that are staging volume led advances. Try finding news in some of these names as those are the ones that would be in play.

Stocks to buy if market is strong

GREAT OFFSHORE

Shipping counters managed to sail along on Friday and this counter did particularly well.The strong breakout on volumes saw a fantastic closing to the week. With daily charts showing healthy signals of buying emerging after some consolidation one can consider some buying opportunities today.

Entry

Stop

Target

Buy around 270-272

3 point

275 / 278 / 280

Or dips to 266

3 points

270 /273 / 275

THERMAX

This engineering counter has shown some upward traction as it broke out from its range displaying a buing participation on Friday. The sustained volumes indicate that buying interst is still evident pushing prices higher. The higher top higher bottom formation invites us to go long in this counter.

Entry

Stop

Target

Buy above 634

5 points

640/644/647

Or dips to 629

5 pointS

635/639/642

Stocks to sell if market is weak

SKF INDIA
The bears have stuck into this counter as they are not allowing any recovery attempted in this counter. As prices neared its prior top they were overwhelmed with supplies triggering a collapse. The steady fall resulted in support around 575 being broken decisively.The declining momentum suggests shorts.

Entry

Stop

Target

Sell below 565

5 points

558 / 554 / 551

Rallies near 571-573

5 points

564 / 560 / 557

NIFTY RECOMMENDATIONS FOR THE DAY

Buy Nifty above 5875 stop 5835 for tgt 5920.

Buy Nifty on dips near 5775 stop 5760 for rise to 5840.

Stocks in Action for the day: Siemens, JSW Steel, United Spirits, Wipro

Wipro: -To buy global oil & gas tech info arm of SAIC for USD 150 million -Wipro says to add 1,450 staff through SAIC deal -Hope to strengthen energy business operations via SAIC operations buy Wipro says: On CNBC-TV18 -Energy identified as vertical for organic, inorganic growth -Post acquisition, revenues from Europe, US will be nearly equal -Expect deal to be completed this quarter -SAIC will carve out this business, closure in 45-60 days -Deal also involves buying out arms in Europe, Oman

CBI sources say -Charge sheet names 9 persons & 3 companies -Charge sheet filed under sec 420, 120B, 13(2)B of PC ACT -125 witnesses, 654 documents, 12 accused part of chargesheet CNBC-TV18 Alert: Swan Telecom was associate firm of Reliance Telecom

2G charge sheet arrives in court in 7 steel trunks -Special court begins hearing; CBI charge sheet submitted -Gautam Doshi, Sanjay Chandra, Vinod Goenka named: sources -Shahid Balwa, A Raja, S Behura, RK Chandolia named -Balwa, Behura, Chandolia, Raja produced in court

2G case hearing: -Lawyer faults CBI probe on several counts Balwa's lawyer says CBI prejudiced in approach -Balwa's lawyer says Swan not a beneficiary from FCFS policy -Balwa's lawyer says Swan has no connection with Reliance Comm -Swami's lawyer seeks copy of charge sheet, defense opposes

Divestment Update -PFC FPO likely May 1st week, PFC RHP likely April 3rd week -ONGC, SAIL FPOs likely in Q1 :: -IndianOil FPO not likely before year-end -Finance Ministry prepares cabinet note for NBCC IPO -10% divestment likely in NBCC -MMTC, RINL FPOs also likely in FY12

DoT says got court order staying on Idea-Spice Merger -Idea says will resist dot's move to scuttle merger

NMDC -FY11 production of iron ore up 6% at 25.19mt -Iron ore sales up 9% at 26.33mt
-Turnnver likely to increase by 80%

DoT finalises Draft Broadband Policy: CNBC-TV18 exclusive -Draft Note Sent To Ministries For Discussion CNBC-TV18 alert Note incorporates TRAI broadband report Broadband policy may be sent to cabinet in a month

BSNL to be nodal agency to implement fibre rollout -Broadband policy execution divided in 3-phases -Execution of phase 2 & 3 to depend on need -DoT estimates 5 Lakh Km of additional optic fibre required -Optic fibre rollout to cost Rs 20,000 crore CNBC-TV18 alert -Network to connect all habitats with more than 500 CNBC-TV18 Exclusive -Fibre Infra to be equally available to all stakeholders

SC orders Glaxo India to pay Rs 71.2 crore for overpricing of the drugs scheduled under Drug price control order (ET)

Coal Ministry plans to invite bids for 58 coal blocks with over 18,600 million tonnes of reserves in six months (ET)


Temasek Holdings is in talks with TPG capital to buy a part of its stake in Shriram Transport Finance company for around Rs 2500 crore (BS)

-FDI in the Pharma sector of over 49% may require a go ahead from the Foreign Investment Promotion Board (FE)


-Hindusthan Glass Industries to finalize a strategic overseas acquisition in the pharma sector valued at around Rs 200-400 crore (Mint)


-United Spirits acquires 41.54% stake in Karnataka based Sovereign Distilleries for Rs 3.5 crore & (TOI)

-JSW Steel revives its plan to list on the London Stock Exchange (BS)

ACC March cement sales up 12.4% at 2.18 mt (YoY)

UltraTech cement March cement sales up 2.2% at 3.78 mt (YoY)

Ambuja Cement March cement sales at 2.05 mt versus 1.95 mt (YoY)

Hero Honda March total sales up 24% at 5.15 lakh units (YoY)

BEL FY11 turnover up 6.3% at Rs 5550 crore

Promius Pharma (Dr Reddys affiliate) and Valeant form collaboration to market cloderm cream in the United States'.

Siemens wins 2 contracts worth Rs 747 crore in consortium with Siemens AG, Germany

Friday 1 April 2011

Myiris.com: Analysts take on AP Paper Mills - International Paper deal

International Paper has agreed to acquire 53.5% stake of promoters of Andhra Pradesh Paper Mills for all cash deal at USD 257 million and will be paying USD 104 million for acquiring additional 21.5% stake from other share holders. International Paper will pay USD 62 million non-compete fee for AP Paper.

We have collated views of analysts on the announcement of deal. The same is as under:

Kartik Mehta - AVP Equity Research, Sushil Finance:

AP Paper has created hope for re-rating of entire paper sector where earlier valuation were compressed. Paper demand in India is expected to grow at 8%+ CAGR for FY10-20E, compared to sluggish scenario is overseas markets. Also Indian paper companies generate higher return ratios (almost double) compared to global players in developed markets. In terms of per capita paper consumption, India scores very less at 8.5Kg compared to 63Kg, 227Kg, 55Kg and 45Kg of China, USA, World average and Asia average, respectively. With high growth in GDP, increasing literacy rate, education sector gaining importance and improving standard of living, growth in the paper industry is expected to remain robust. For example, an increase of 1 kg in the per capita consumption would absorb an additional production of 1.1 MTPA of paper.
International Paper has agreed to acquire 53.5% stake of promoters of AP Paper for all cash deal at USD 257mn and will be paying USD 104mn for acquiring additional 21.5% stake from other share holders. This gives per share valuation of AP Paper at Rs.632. This price is still 2.67 times higher than today’s closing price of Rs.236.15 on BSE.
Hence we see AP Paper stock price to reach at least Rs.500+ considering all the remaining stake holders (46.5%) surrenders their shares implying 46% acceptance ratio by International Paper for acquiring additional 21.5% stake.

Prashanth Tapse, senior research analyst, Mehta Equities:

Shares of paper companies were overlooked from long time and saw suddenly in demand following to the International Paper’s acquisition of Andhra Pradesh Paper Mills. APPM is the country’s fifth largest paper producer by revenues behind Ballarpur Industries, JK Paper, Tamil Nadu Newsprint and the paper division of diversified firm ITC. The stock was in action from last couple of days mainly on the back of talks with world’s largest paper company International Paper for majority stake and last evening the deal was finalised to acquire 53.5% or entire promoters stake in mid size firm Andhra Pradesh Paper Mills Limited (APPM) for $257 million or Rs 1,150 crore in cash. Also agreed to a USD 62 million or Rs 2800 million non-compete payment to the sellers. International Paper will also coming out with a mandatory public tender offer and seeks to acquire up to an additional 21.5% of the outstanding shares of APPM for approximately USD 104 million or Rs 4700 million in cash. If totally successful as it is expected to be, International Paper will end up with 75% stake in the company, the maximum allowed in a listed firm.

On the data available on public grounds calculations show International Paper is paying a significant premium to the existing market price with the deal struck at around Rs 542 a share (not counting the non-compete fee to the Bangurs). The share purchase and public tender are expected to be completed by third quarter of 2011, after regulatory approvals. Once it’s completed, the transaction will position International Paper as the first global paper and packaging company with a significant position in India`s fast growing economy. We believe that the acquisition of APPM by International Paper will help industry to be re-rated which was once ignored and neglected. Hence we advised investors to hold on to there investments in paper industry as we expect some more deals to strike the industry as it is hovering around for better prospects. We seen AP Paper deal certainly brings focus onto the paper sector which had been missing. We like Ballarpur and TNPL for long term investment.

Shares of the company gained Rs 39.35, or 19.99%, to close at Rs 236.15. The total volume of shares traded was 10,619 at the BSE (Wednesday).

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.

Myiris.com: Analysts take on AP Paper Mills - International Paper deal

Myiris.com: Analysts take on AP Paper Mills - International Paper deal

Source: IRIS (30-MAR-11)

http://www.myiris.com/newsCentre/storyShow.php?fileR=20110330154719043&secID=fromnewsroom&secTitle=From%20the%20News%20Room&dir=2011/03/30

International Paper has agreed to acquire 53.5% stake of promoters of Andhra Pradesh Paper Mills for all cash deal at USD 257 million and will be paying USD 104 million for acquiring additional 21.5% stake from other share holders. International Paper will pay USD 62 million non-compete fee for AP Paper.


We have collated views of analysts on the announcement of deal. The same is as under:

Kartik Mehta - AVP Equity Research, Sushil Finance: AP Paper has created hope for re-rating of entire paper sector where earlier valuations were compressed. Paper demand in India is expected to grow at 8%+ CAGR for FY10-20E, compared to sluggish scenario is overseas markets. Also Indian paper companies generate higher return ratios (almost double) compared to global players in developed markets. In terms of per capita paper consumption, India scores very less at 8.5Kg compared to 63Kg, 227Kg, 55Kg and 45Kg of China, USA, World average and Asia average, respectively. With high growth in GDP, increasing literacy rate, education sector gaining importance and improving standard of living, growth in the paper industry is expected to remain robust. For example, an increase of 1 kg in the per capita consumption would absorb an additional production of 1.1 MTPA of paper. International Paper has agreed to acquire 53.5% stake of promoters of AP Paper for all cash deal at USD 257mn and will be paying USD 104mn for acquiring additional 21.5% stake from other share holders. This gives per share valuation of AP Paper at Rs.632. This price is still 2.67 times higher than today’s closing price of Rs.236.15 on BSE. Hence we see AP Paper stock price to reach at least Rs.500+ considering all the remaining stake holders (46.5%) surrenders their shares implying 46% acceptance ratio by International Paper for acquiring additional 21.5% stake.

Prashanth Tapse, Senior Research analyst, Mehta Equities:
Shares of paper companies were overlooked from long time and saw suddenly in demand following to the International Paper’s acquisition of Andhra Pradesh Paper Mills. APPM is the country’s fifth largest paper producer by revenues behind Ballarpur Industries, JK Paper, Tamil Nadu Newsprint and the paper division of diversified firm ITC. The stock was in action from last couple of days mainly on the back of talks with world’s largest paper company International Paper for majority stake and last evening the deal was finalised to acquire 53.5% or entire promoters stake in mid size firm Andhra Pradesh Paper Mills Limited (APPM) for $257 million or Rs 1,150 crore in cash. Also agreed to a USD 62 million or Rs 2800 million non-compete payment to the sellers. International Paper will also coming out with a mandatory public tender offer and seeks to acquire up to an additional 21.5% of the outstanding shares of APPM for approximately USD 104 million or Rs 4700 million in cash. If totally successful as it is expected to be, International Paper will end up with 75% stake in the company, the maximum allowed in a listed firm.


On the data available on public grounds calculations show International Paper is paying a significant premium to the existing market price with the deal struck at around Rs 542 a share (not counting the non-compete fee to the Bangurs). The share purchase and public tender are expected to be completed by third quarter of 2011, after regulatory approvals. Once it’s completed, the transaction will position International Paper as the first global paper and packaging company with a significant position in India`s fast growing economy. We believe that the acquisition of APPM by International Paper will help industry to be re-rated which was once ignored and neglected. Hence we advised investors to hold
on to there investments in paper industry as we expect some more deals to strike the industry as it is hovering around for better prospects. We seen AP Paper deal certainly brings focus onto the paper sector which had been missing. We like Ballarpur and TNPL for long term investment.

Shares of the company gained Rs 39.35, or 19.99%, to close at Rs 236.15. The total volume of shares traded was 10,619 at the BSE (Wednesday).

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.