29 Dec 2009

29 Dec 2009 09:20




Asian Markets :

SGX Nifty : +6.50 (5183.50)

Hangseng : -55.87 (21424.35)

Nikkei : -19.91 (10614.32)

SSE : -14.27 (3174.51)

STI : +3.22 (2858.90)





Stocks to Watch & Buy :



Our market may open flat on the basis of flat Asian markets. Nifty’s level to watch is 5210-5220 similarly on the lower side, support level of 5150 should not be breached on closing basis. Nifty weekly pivot comes at the level of 5110, so it will also act as a crucial level to hold the bullishness of the market.



Stock Recommendations :



Buy Aban Abv 1254 close

Buy DLF Abv 376 close

Buy ICICIBank Abv 872 close

Buy ITC Abv 160 close

Buy Jindalshwl Abv 1840 close

Buy Lichsgfin Abv 806 close

Buy Mcdowell-n sl 1275, Trg 1345

Buy Bankindia around 370  sl 365 Trg384,
Buy Relcapital Abv 859 close

Buy Relinfra sl 1080,Trg 1138

Watch SBIN to Buy

Buy STER sl 848, Trg 884

Buy Tatapower sl 1340, Trg 1370

Buy Videoind sl 218, Trg 238 Abv 229 close



Sell Cipla Sell on rise





Stocks in News :

Reliance Ind :

RIL (Reliance Industries) updates non binding proposal for LB (LyondellBasells)

RIL updated proposal has higher cash component;

Offers cash of $ 5-6 billion versus previous cash offer was for approximately $ 2 billion

Reliance Power :

Reliance Power’s 1200 MW Rosa Project commences generation

Stage I: 600 MW power to be supplied to UP, project investment at Rs 6,000 crore

Stage II: 600 MW expansion underway

Iron Ore export duty

Government doubles export duty on Iron Ore Lumps

Export duty on Iron Ore Lumps hiked to 10% (from 5%)

5% export duty imposed on Iron Ore Fines versus nil

Steel Ministry wants 10% export duty on all grades



Max India : Goldman to pick up 9.4% stake in Max India for Rs 540 crore via subscribing to compulsory convertible debentures which will be converted into shares in 15 months

Advertisers may have to pay 10-15% premium to DTH from January, premium may go up later – BS

UTV, Sun TV in talks for a Tamil movie channel – BS

Maruti expects December sales to jump 30% - BS

3G winners may have to pay bid amount upfront, to get spectrum only in August – BL

Ranbaxy arm gets FDA warning, USFDA warning to Ohm Lab for manufacturing norm violation

Board meets today - Zee Entertainment & ETC Networks on detailed composite Scheme of amalgamation

Aban Offshore still in NSE F&O curb







US Markets :

Yesterday, It was a flat close on Wall Street after a choppy session. Modest gains in the early trade turned into modest losses during afternoon action, but some late support from the dollar and retail sales helped the stock market settle higher for the sixth straight session.The Dow Jones Industrial Average added 26.98 points, or 0.3%, to 10,547.08. The Standard & Poor's 500 Index rose 1.30 points, or 0.1%, to 1,127.78, and the Nasdaq Composite Index added 5.39 points, or 0.2%, to 2,291.08. The volatility index traded around the 20 mark.

The dollar's marginal weakness supported gains on Wall Street early on it continued trading close to the 78 mark after 0.1% decline yesterday.

Energy prices gained on the back of modest weakness in the dollar. Crude settled at the highest level since mid-November in New York trade yesterday. It is trading close to the USD 79 levels.





Last Week :

After being in doldrums for most of the month, the Indian market suddenly sprung back to life thanks largely to the short covering ahead of the F&O expiry. The key indices made a new high for 2009 on the eve of Christmas, rekindling the festive spirit. Two extended weekends and the derivative settlement could mean that the market will be volatile. The Nifty could surpass 5200 but further advance could hit speed breakers as valuations are not cheap and a few concerns are still in place. At the same time, a big slump is not on the cards. The Nifty is likely to find support at 5100 and 5000.



Global markets could see choppy, inconclusive trade as many are expected to have opted for a long year-end weekend. Also, a few markets could even be shut till the start of the new year. After having made a spectacular comeback, the bulls are unlikely to take any undue risks. The best thing to do next week would be to keep away from the markets and take a long hard look next year. Enjoy the holidays and begin afresh in 2010.





NSE FUTURES & OPTIONS(F&O) Report

(24/12/2009)

NIFTY FUTURES DETAILS

SYMBOL EXDATE OPEN HIGH LOW CLOSE CONTS. OPENINT C'O'INT C'O'INT

(%)

NIFTY 31-Dec-2009 5,159.95 5,209.95 5,136.4 5,185.4 439,519 18,898,050 -1,704,300 -8.27

NIFTY 28-Jan-2010 5,167.0 5,214.0 5,144.0 5,194.6 106,489 10,223,150 2,621,050 34.48

NIFTY 25-Feb-2010 5,178.6 5,220.0 5,148.9 5,197.35 1,969 256,700 25,200 10.89



________________________________________

TOP TRADED FUTURES

SYMBOL EXDATE OPEN HIGH LOW CLOSE CONTS. OPENINT C'O'INT C'O'INT

(%)

NIFTY 31-Dec-2009 5,159.95 5,209.95 5,136.4 5,185.4 439,519 18,898,050 -1,704,300 -8.27

NIFTY 28-Jan-2010 5,167.0 5,214.0 5,144.0 5,194.6 106,489 10,223,150 2,621,050 34.48

MINIFTY 31-Dec-2009 5,166.0 5,209.5 5,136.6 5,185.3 44,006 873,100 -49,200 -5.33

BANKNIFTY 31-Dec-2009 8,935.0 9,014.0 8,892.5 8,970.5 23,077 1,011,100 -123,550 -10.89

TATASTEEL 31-Dec-2009 607.9 619.0 598.2 616.25 22,569 9,763,156 -636,412 -6.12



________________________________________

TOP TRADED OPTIONS

SYMBOL INST. OPT EXDATE STRIKE OPEN HIGH LOW CLOSE CONTS. OPENINT C'O'INT

NIFTY OPTIDX CE 31-Dec-2009 5,200.0 31.9 49.5 22.05 39.05 329,919 6,234,050 -146,000

NIFTY OPTIDX PE 31-Dec-2009 5,100.0 26.0 33.0 11.05 16.95 221,353 5,080,550 288,850

NIFTY OPTIDX CE 31-Dec-2009 5,100.0 85.0 116.0 66.8 103.9 201,692 3,413,750 -666,950

NIFTY OPTIDX PE 31-Dec-2009 5,200.0 64.0 83.45 36.4 47.65 163,732 4,326,050 1,528,900

NIFTY OPTIDX PE 31-Dec-2009 5,000.0 10.0 14.0 5.15 6.5 153,936 6,350,850 891,700



________________________________________

TOP OPEN INTEREST

SYMBOL INST. OPT EXDATE STRIKE OPEN HIGH LOW CLOSE CONTS. OPENINT C'O'INT

IFCI FUTSTK XX 31-Dec-2009 0.0 53.0 55.9 52.7 55.1 9,853 58,973,920 -7,525,400

UNITECH FUTSTK XX 31-Dec-2009 0.0 82.95 83.7 81.45 82.25 10,303 55,494,000 -5,148,000

ISPATIND FUTSTK XX 31-Dec-2009 0.0 20.7 20.85 20.45 20.75 2,637 54,593,250 -7,208,550

SUZLON FUTSTK XX 31-Dec-2009 0.0 89.0 89.8 87.05 88.5 15,323 43,980,000 -2,010,000

ISPATIND FUTSTK XX 28-Jan-2010 0.0 20.9 20.9 20.55 20.8 2,036 31,971,600 9,897,750



________________________________________

TOP INCREASE IN OPEN INTEREST

SYMBOL INST. OPT EXDATE STRIKE OPEN HIGH LOW CLOSE CONTS. OPENINT C'O'INT

IFCI FUTSTK XX 28-Jan-2010 0.0 53.0 56.0 53.0 55.3 3,886 30,763,520 17,406,920

ISPATIND FUTSTK XX 28-Jan-2010 0.0 20.9 20.9 20.55 20.8 2,036 31,971,600 9,897,750

UNITECH FUTSTK XX 28-Jan-2010 0.0 82.75 83.9 81.65 82.55 3,430 24,583,500 7,213,500

SUZLON FUTSTK XX 28-Jan-2010 0.0 89.2 90.0 87.35 88.75 4,876 23,775,000 5,799,000

FSL FUTSTK XX 28-Jan-2010 0.0 34.75 35.45 34.3 34.55 766 12,711,000 4,132,500



________________________________________

TOP DECREASE IN OPEN INTEREST

SYMBOL INST. OPT EXDATE STRIKE OPEN HIGH LOW CLOSE CONTS. OPENINT C'O'INT

IFCI FUTSTK XX 31-Dec-2009 0.0 53.0 55.9 52.7 55.1 9,853 58,973,920 -7,525,400

ISPATIND FUTSTK XX 31-Dec-2009 0.0 20.7 20.85 20.45 20.75 2,637 54,593,250 -7,208,550

UNITECH FUTSTK XX 31-Dec-2009 0.0 82.95 83.7 81.45 82.25 10,303 55,494,000 -5,148,000

GTLINFRA FUTSTK XX 31-Dec-2009 0.0 37.2 37.65 36.2 36.5 1,908 26,097,850 -4,753,000

RNRL FUTSTK XX 31-Dec-2009 0.0 70.5 71.5 70.1 70.35 3,803 22,807,728 -3,114,696



________________________________________



India Property Valuation :

Valu ati o n pr e miu m of DLF/Unit e c h lo o k s u nju stifi e d. DLF, Unitech and BSE Sensex

universe are quoting at FY2011E P/B of 2.2X, 1.6X and 2.4X with FY2011E RoE’s of 10.6%,

9.3% and 16%, respectively. Thus these stocks are pricing in earnings upgrade while there has

been 5% downgrade for Unitech FY2011E EPS since June 2009. We retain our SELL rating on

DLF and Unitech with target price of Rs320 and Rs65, respectively. HDIL has seen

earnings upgrade, which we believe is largely on account of better TDR pricing.

Valuation premium of Unitech not in sync with earnings movement

DLF and Unitech continue to be expensive as they are trading at FY2011 P/E’s of 22X and 19X,

respectively, compared to Sensex P/E of 16X. DLF, Unitech and BSE Sensex universe are quoting at

FY2011E P/B of 2.2X, 1.6X and 2.4X with FY2011E RoE’s of 10.6%, 9.3% and 16%, respectively.

Cash accretion has significantly lagged PAT for DLF/Unitech and this should result in these

companies quoting at lower valuations compared to BSE Sensex. Thus these stocks are pricing in

either sharp earnings upgrades or faster relative growth beyond FY2011E. Against expectation of

earnings upgrades, there has been FY2011E earnings downgrade of 4.8% for Unitech while DLF

has seen upgrade of 21% on expectation of revival in commercial real estate (Exhibit 1). In the

same period, earnings profile for BSE Sensex Universe has remained flattish.

We believe earnings movement is not in sync with premium valuations of DLF/Unitech. We retain

our SELL rating on DLF and Unitech with target price of Rs320 and Rs65, respectively. These stocks

have underperformed over the last six months and we believe this will continue on account of

potential earnings disappointment (Exhibit 4).

Earning upgrades in DLF and HDIL, downgrades in Unitech

We see a divergence in trajectory of consensus earnings with upgrades in DLF, HDIL and

downgrades in Unitech since June 2009. Exhibit 1 shows that FY2011E earnings for DLF and HDIL

have increased by 21% and 12%, respectively, and declined for Unitech by 5%. We believe that

key drivers for direction of earnings are trend of new launches, pricing movements and progress

on execution.

DLF. DLF’s consensus earnings for FY2010E and FY2011E have seen upgrades of 7% and 21%,

respectively. Earning upgrades in DLF is largely on account of pickup in launches in 2HFY10 and

good construction progress at project sites. Comfort on earnings has also increased on account of

steady rental income and the sale of Capital Greens (SBM, Delhi) project. DLF has also increased its

construction run rate by approximately 6.5 mn sq. ft in 2QFY10.

Unitech. We observe consensus earnings for FY2010E and FY2011E have declined by 15% and

5%, respectively, since June 2009. We believe consensus was anticipating more new launches or

better execution and there has been disappointment, especially on the execution front. Unitech

has launched 21 mn sq. ft of projects in FYTD10 and most projects have just started

preconstruction activities or have yet to break ground. We believe consensus upgrades are possible

only if there is significant progress on the execution front.

HDIL. HDIL’s consensus earnings for FY2010E and FY2011E have seen upgrades of 17% and

12%, respectively. We believe the earning upgrades for HDIL is largely on account of pickup in

TDR prices which impact near-term earnings. Our market sources indicate that recent TDR

transactions have taken place in the range of Rs2,300-2,500/sq. ft. HDIL has already sold 3.5 mn

sq. ft of TDRs in 1HFY09. HDIL has also launched 4.6 mn sq. ft of residential projects since January

2009 but these would contribute to earnings post-FY2011 as HDIL books revenue on project

completion basis.





Company Name Land Bank (Mn Sq.Ft.)

DLF 432

Unitech 400

Indiabulls Real Estate 225

HDIL 125

Phoenix Mills 34

Purvankara Projects 125

Sobha Developers 138

Mahindra Lifespaces 67







Disclaimer :


This document has been prepared by the Research Division of Integrity Financial Consultants Pvt. Ltd.,Pune, India and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of iNTEGRITY. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.


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