Market Updates 14th Jun11

 

Market Outlook

 

Technically, the domestic markets have seen a reversal of the previous weeks feeble attempt to rally as weekly chart shows a lower top and bottoms formation. Staying below the 5450 levels will weaken the bulls further. The weekly range advocated for the Nifty between the 5700 / 5350 levels have held as the benchmark trended within these levels. The coming week is likely to witness a range of 5650 on the upside as long as the Nifty stays above the bullish pivot at the 5525 mark. In case of declines, the Nifty is likely to test a level of 5350 as long as the bears keep the Nifty below the 5500 levels. The risk reward ratio does not favour the bulls and I re-iterate my view that traders should exercise abundant caution.

 

Technical Calls

 

Buy IVRCL Ltd. 75.90 target 80

Buy Patel Engg. 158.00 target 165

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Momentum Calls

 

Buy Sicagen Ltd. 26.65 target 30

Buy Punj Lloyd 65.00 target 70

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Investment

 

Federal Bank

Investment rationale

> The business of the bank has improved by 19% from Rs 630.08 billion in March 2010 to Rs 749.68 billion at end of March 2011. The management expects loan growth to be around 20-22% in FY12. 

> Federal Bank has received RBI`s approval to open 108 newbranches across the country. The new branches spread over tier-I,-II and -III cities will be launched over the next 12 to 15 months. It aims to double its branch network in the North over the next three years from its existing 50 branches. The management expects to have branch count of 830 by end of FY 2012.

> The net worth of the bank increased to Rs 51.09 billion as on Mar. 31, 2011 from Rs 46.90 billion as on Mar. 31, 2010. The capital adequacy (CRAR) of the bank, computed as per Basel 2 guidelines, stands at 16.79%, against the regulatory minimum of 9%. The CRAR computed as per Basel 1 norm is 15.39%. The Tier-1 (core CRAR) capital works out to 15.64% under Basel 2.

> The net interest margin (NIM) for the quarter stood at 4% while that of for FY11 stood at 4.22% against 4.19% and 3.82% respectively in the corresponding previous period. The management expects to maintain NIM of around 3.80% for FY12.

> The percentage of GNPA (gross non performing asset) stood at 3.49% at end of Q4FY11 as against 2.97% a year ago and 3.95% a quarter ago. The management expects to put GNPA% below 3% by end of FY12. The percentage of NNPA (net non performing asset) stood at 0.6% as against 0.48% a year ago and 0.81% a quarter ago. The provision coverage ratio stood at 82.06% at end of FY11. 

> The bank is betting on small and medium enterprises (SME) and its non-resident Indians customer base for future growth. It has established specialized corporate banking branches at Mumbai and New Delhi and is following cluster based approach for the SME lending. As on March 2011 advances to SME accounts to 30% of its total advances. During the fiscal ended March 2011 advances to SME grew by 28% to Rs 95.64 billion.

 

Investment

 

V-Guard Industries:

Investment rationale

> On Capex, company has plans to spend about Rs 200 million in FY12 largely on green field expansion for future launches of products and on creating godowns for storage of goods. The company is setting up a manufacturing facility for solar water heater at Perundurai with improved technology.

> For FY12, the company expects the net sales to be around Rs 10 billion. The sales from South Indian market should grow anywhere between 25-30% and the sale from Rest of Indian market should double i.e. around Rs 3 billion for FY12. 

> The management expects to launch 3 new products in consumer appliance category in the next 5 years.

> The company has adopted various strategies like it has increased the product prices by 2-4% and started providing cash discounts, tied up with banks for providing channel financing facilities with the dealers where in interest rates are lower etc. The company spends about 5% of sales every year on brand building and advertisements. 

> It is the official partner to Kerala`s 20-20 IPL Team Kochi Tuskers Kerala. This prestigious partnership will give V-Guard the opportunity to feature Sri Lankan Cricketers Mahela Jayawardane, Muttiah Muralitharan and Indian Batsman VVS Laxman in their brand association promotions.

> It has fully utilized the proceeds of the IPO for commissioning of various projects mentioned in the offer document and the remaining two projects i.e. distribution centre in Hubli and Vijayawada will be completed in the third quarter of the current fiscal. Source SMC

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

 

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