25 September 2010

Karvy: Weekly review: Markets scaling newer horizons

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After more than 33 months, both the benchmark BSE Sensex and NSE Nifty spectacularly revisited the 20,000 and
6,000 levels last week!! However, the mood on the Street can hardly be described as “celebratory.” On one hand, in
an effort to time the market at lower levels, many retail investors were caught on the wrong foot yet again as the Nifty
jumped to 6,000 from 5,400 levels in early September. On the other hand, those few who are invested are becoming
increasingly skeptical and jittery of the current rally, as the market mayhem of 2008 continues to haunt investors.
Fuelled by strong FII infl ows, the recent rally has been primarily driven by large-cap stocks. The net FII infl ow for
September (as of 23rd of the month) was Rs20,000 crore, last seen in election-month May 2009. The same applies
to the rupee, which has strengthened to 45 levels against the US dollar. We believe that investors must change their
mindset and open up to long-term systematic equity and mutual fund investing. Ideally, investors should have a 5-
10-year horizon, with emphasis on sound companies and funds with good track records. This approach will obviate
the need to time the market, and investors will certainly not feel left out or let down.

IIFL technical call- buy Wipro target Rs 475

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Wipro CMP Rs446
The stock has done pretty much nothing in 2010, besides moving
in a trading band between Rs445-370. This week, after a long
time, the stock made an attempt to cross above the upper end of
the trading range.
A move above Rs445 would lead to a breakout from the
rangebound trading pattern. Our view is further validated after the
stock gave a close above the cluster of moving averages.
The rally was accompanied with a positive crossover in RSI,
earmarking inherent strength in the counter. Based on above
observations, it is likely that stock continues its uptrend in the short
term. We recommend high risk traders to buy the stock between
Rs444-448 with stop loss of Rs430 for a target of Rs475.

BUY Triveni Enginnering & Industries -target Rs 128: IIFL technical call

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BUY Triveni Enginnering & Industries CMP Rs114
In past few trading sessions, Triveni Enginnering has been holding
quiet well around the neckline of an inverted Head & Shoulders
pattern prevailing at Rs107-108.
This week, the stock rallied above its 200-DMA (Rs110) which is
likely to act as a solid base for resumption of positive momentum in
the counter. MACD sustaining above the reference line also
corroborate positive trend in the stock.
Applying inverted Head & Shoulders projection in the near term
gives immediate target of Rs125. We advise buying the stock in
the range of Rs112-115 with a stop loss of Rs107 for a shortterm
target of Rs128.

IIFL recommends Sterlite Technologies - Target Rs 130

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Set to leverage strong demand traction in power and telecom
Sterlite Technologies Ltd (STL), a major supplier of power conductors
and optical fiber cables, is well poised to leverage strong demand
traction in power and telecom sectors. With Government of India
laying substantial impetus to its “Power for all by 2020” scheme,
demand for transmission equipment such as power conductors is set
to witness a quantum leap over the medium term. Demand for
optical fiber cables is correlated to telephony and internet
penetration in an economy. Both these factors are expected to
improve considerably in India and other emerging countries.
Capacity expansion across segments to service demand
STL is expanding its existing fiber manufacturing capacity of 12mn
km to 20mn km by end of FY12E. Power conductor capacity is being
increased from 160,000 MT to 200,000MT. STL is also expanding its
optical fiber cable manufacturing capacity to 12mn f-km by end of
FY12. The total outlay for this expansion would be Rs4bn.
Vertical integration to help maintain operating margins
STL is amongst the few fully integrated manufacturers of power
conductors and fiber optic cables across the world. This aids STL to
maintain OPMs in a competitive and inflationary economic
environment.
Healthy order book provides good revenue visibility
STL’s current order book stands at Rs26bn; 70% of which comes
from the transmission segment alone. Healthy order book, proven
execution capabilities and marquee clientele will translate into
revenue growth in the near term. STL primarily caters to the public
sector, but is steadily increasing its presence within the private
sector.
Attractively valued at 10.4x FY12E EPS
STL is currently trading at 10.4x its FY12E EPS. Assuming full dilution
of equity due to conversion of warrants in FY12E we expect an EPS of
Rs9.3. STL’s leadership status and demonstrated ability to leverage
on industry growth drivers justifies a P/E of 14x based on which we
arrive at a target price of Rs130.

India IPO Gray Market Premium Price September 25th, 2010

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Company Name
Offer Price
Premium
(Rs.)
(Rs.)
Indosolar Ltd.
29 (Lower Band)
DISCOUNT
Tirupati Inks (FPO)
43 (Upper Band)
6.5 to 7
Career PointInfosystems
295 to 310
150 to 155
Eros International
158 to 175
43 to 45
Microsec Fin
113 to 118
15 to 17
RamkyInfrastructure Ltd.
405 to 468
32 to 35
Orient Green Power
47 to 55
Discount
Electro Steel
10 to 11
1.10 to 1.20
Gallantt Ispat
50 (Fixed Price)
5 to 7
VA TechWabag
1230 to 1310
300 to 325
CantabilRetail
127 to 135
14 to 15
Tecpro Systems
340 to 355
30 to 32
AshokBuildcon
297 to 324
25 to 27
Sea TV Network
90 to 100
19 to 20
Bedmutha Ind 
95 to 102
8 to 10