DAILY RECOMMENDATIONS

1, BUY ASHOK LEY FUT AT 80, SL 77, TARGET 86, CMP 79.50
2. BUY ZEEL IN FUT AT 387, SL 377, TARGET 407, CMP 387
3. BUY HCLTECH IN CASH AT 977, SL947, TARGET 1050
4. SELL GBPINR [POSITIONAL] AT 98.90, SL 99.40, TARGET 97.70
5. BUY MCX CRUDE [AUG] AT 3250, SL 3200, TARGET 3350

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Nifty Market Outlook

Nifty (8603.45, -6.40, -0.07%)
With almost a flat close with some stocks like Ultratech or CESC posting strong moves, it would appear as if things continue to be the same; however, for the first time in many days the tables seem to have turned and that becomes apparent once you peek at the option statistics of the Nifty and the same getting corroborated by the Bank Nifty as well. Well, what we see are newly emboldened bears mustering enough courage to create fresh position in writing calls as opposed to their usual meek stance of closing out failed call short positions. Not just that in the put option section, the same story is repeated in reverse gear: leaving aside at the money put of 8600—where we see an addition of nearly 153000 units being added in open interest—there is a reduction in outstanding positions in quite a few strike prices in a substantial manner. However, it would be rather too early to read too much for the bulls batting on the back foot for just a day.

In any case, you need to see the Nifty staying below the 8605 – 8590 support area for the most part of the day to signal some unwinding of the erstwhile large long positions taken recently. Only when you see the index falling below 8562 on the back of heavy volume it would signal the onset of a much needed correction. On the other hand, if the index shrugs off yesterday’s indecision and moves above 8625 and stays there it would be an encore for the old story, the bulls marching ahead.

• Most critical level for the day: 8605 - 8592, its immediate support as well


• Strong resistance: 8625 – 8640 and 8670 - 8693


• Major resistance: 8740 – 8750


• Strong support: 8562 – 8520


• Major support: 8487 – 8430

Bank Nifty (19032.70, -62.00, -0.325%)

The momentum might have dissipated and the call writers have scaled down their activities rather they are busy creating fresh positions. Even after that they need to take out the levels between 19035 and 18985 support area to signal some initiative really coming back to them. And when they are able to push the index down below the 18795-support on high volume activity and large scale position building it would signal real weakness in the banking stocks market action. On the other hand, if you find that after a brief stint below the 19000-mark, the index bounces back and moves up again to get past 19150 – 19195 then the initiative would go to the bulls again. However, that looks wee bit unlikely since without some conviction in their strength the bears would not have created fresh positions to the tune of 131375 units.

• Most critical levels for the day: 19035 – 18985, its immediate support as well


• Strong support: 18795


• Strong resistance: 19150 - 19195


• Major support: 18731 - 18622


• Major resistance: 19315 – 19333 and 19430 – 19535

DAILY MARKET OUTLOOK

Dear Customer,

 

Markets always tend to be interesting with something or the other happening all the time. Our Morning Mantra is released before the opening bell and it includes the market commentary along with Corporate & Global news for the day.

 

• US stocks edged higher on Monday, with optimism over Greece’s crisis and strong earnings reports pushing the S&P 500 and the Nasdaq Composite in record territory.

Dow Jones	18100.4	+14.0	+0.08%
Dow Futures	17981.0	-22.0	-0.12%
Hangseng	25479.9	+75.1	+0.30%
Nikkie	20739.8	+88.9	+0.43%
SGX Nifty	8623.5	-2.5	-0.03%

 

• Asian stocks rose as a weaker yen buoyed Japanese equities and consumer shares advanced.
• Market is expected to open on flattish note and likely to witness some profit booking during the day.
• IOL chemical received USFDA approval for its Ibuprofen plant. Now it can suuply Ibuprofen to US market.
• Sun Pharma has said that due to ongoing halol plant resolution, consolidated revenues would remain flat or would decline in fy16. Also restraints of supply of few products due to halol plant and one time charges for Ranbaxy integration profitability would be adversely impacted. Negative
• Tata Steel may be forced to further reduce assets in its Europe business, hurt by continued challenges due to adverse currency volatility and surging Chinese imports, company mentioned in its annual report
• Bharti in talk with Orange to sell 4 countries operation in Africa.
• Goldman Sachs, Warburg Pincus To Invest Rs 1,500 cr In Piramal Realty
• SpiceJet’s promoter Ajay Singh pledges nearly 34% of his stake in co

 

• Results Announced

Ultratech Cement - Insti	UltraTech Cement (UCL) posted a very good set of numbers for 1QFY16, withbetter-than-expected performance on all parameters. EBITDA at Rs11.5bn was above our as well as consensus estimates on account of better realisation and volume as well as lower operating costs. Volume improved 3.8% YoY whereas realisation increased 3.2% YoY. Operating costs grew at a modest rate of only 2.7% YoY led by lower power and fuel expenses as pet coke prices were down by ~30% in US dollar terms. As a result, EBITDA/mt rose 5.7% YoY to Rs928
Kajaria Ceramics - Insti	Despite our below consensus revenue estimate, reported revenue of Kajaria Ceramics (KCL) for 1QFY16 was 3.3% below our estimate. With weak volume growth at 6.4% against 14.0%/12.8% in FY14/FY15, respectively, net revenue grew by a mere 9.3% to Rs5,487mn. Higher operating margin on account of a rise in in-house manufacturing and lower power and gas costs by 168bps aided net profit growth. Growth in blended realisation moderated to 2.5% in 1QFY16 against 5.4% in FY15 and in the wake of weak demand we expect KCL to go for price cut to improve volume. Capacity utlisation decreased from 97.7%/97% YoY/QoQ, respectively, to 94.9%, while the working capital cycle increased to 29  days from 23 days YoY. KCL is expanding its capacity by 26.8% in FY16, the utilisation of which will come under further pressure. As a result, we expect the operating margin to decline to 15.7% in FY16 from 16.9% in 1QFY16. We expect a reduction in Bloomberg FY16 PAT estimate, which is 10% above our estimate. Currently, KCL stock trades close to its higher valuation, and at 24.5x/12.7x FY17E P/E and EV/EBITDA, respectively, there is little room for upside in the near term. With weak demand, likely pressure on margins and deteriorating return ratios, we expect a de-rating of KCL in the near term. We have retained Accumulate rating on KCL with a revised target price of Rs735 (Rs728 earlier), based on 12.0x/23.2 FY17EV/EBITDA and 23.0x P/E respectively.
CCL Products	result good. Sales came at 212 cr vs exp 201cr and yoy 175cr Q1 is seasonally weak qtr and q4 is best qtr. As such qoq result not comparable. In last qtr concall company said some despatcg of order got delayed in Vietnam facility which must have been done in Q1 this has led to higher sales in this qtr. EBITDA has also improved substentially both at India and Vietnam Facility to Rs.48cr vs exp 43cr yoy 36cr. Margin came at 23% vs yoy 20.5% PAT came at Rs.30.2cr vs yoy 20.2cr qtr EPs is Rs.2.27.
Federal bank - Insti	Federal Bank’s 1QFY16 bottom-line was down 36% YoY on account of slippage of a large corporate loan account in the metal sector worth Rs1.4bn. Excluding this oneoff, loan slippage was in line with our estimate of Rs1.7bn. PAT was also lower on account of MTM (mark-to-market) investment provision of Rs0.5bn. The bank made healthy NPL provisioning for the quarter. As a result, despite a 55bps increase in gross non-performing assets or GNPAs, net non-performing assets or NNPAs increased by only 25bps. Provision coverage ratio was healthy at 80.5%. Net interest income (after adjusting for interest reversal on loan slippage worth Rs160mn) grew 10%. Adjusted net interest margin (NIM) was down 10bps sequentially to 3.2%. Noninterest income grew 24% on the back of healthy traction in forex income and recovery from written-off loan accounts. Growth in fee income was muted at 6%. Operating expenses grew 17% as the bank provided for a wage hike. Deposits grew at a healthy rate of 17%, with the CASA (current account savings account) deposit ratio improving 84bps on a sequential basis to 31.3%. NRE deposits grew 29%, shrugging off market fears. Credit off-take was moderate at 10% on account of muted growth in corporate and gold loans. We have cut our ABV estimates by 3% each for FY16/FY17. We have retained Buy rating on Federal Bank with a target price of Rs89, valuing the stock at 1.65x P/ABV FY17E financials.
Welspun India	result marginally ahead of exp. Sales came at 1248cr vs exp 1326cr qoq 1224cr EBITDA came at 360cr vs exp 338cr qoq 344cr yoy 250cr PAT came at 163cr vs exp 156cr qoq 161 yoy 105cr
Hindustan Zinc	result ahead of exp. Sales came at 3596cr vs exp 3638cr qoq 4073 yoy 2962cr EBITDA came at 1660cr vs exp 1559cr qoq 1978 yoy 1352cr PAT came at 1921cr vs exp 1620cr qoq 1978cr yoy 1617cr
Tata Coffee	Result is not good Sales is Rs 380.1 cr vs QOQ Rs 424.4 cr YoY Rs 357.5 cr EBITDA is Rs 65.9 cr vs QoQ Rs 96.7 cr YoY Rs 80.4 cr PAT is Rs 25.4 cr vs QoQ Rs 39.4 cr YoY Rs 41.8 cr
Kitex Garments	result below exp sales came at 97cr qoq 147cr yoy 96cr EBITDA came at 30cr vs qoq 66cr yoy 27cr PAT came at 16cr vs qoq 42cr yoy 14.4cr.
LIC Housing Fin	result operationally ahead of exp but Provision also increased so overall result inline. NII came at 658cr vs exp 637cr qoq 649cr yoy 506cr PBP came at 623cr vs exp 597cr qoq 586cr yoy 497cr provision came at 44cr vs qoq 10cr yoy 9cr PAT came at 382cr vs exp 374cr qoq 378cr yoy 322cr.
Sasken	result improved qoq but flat yoy. Qtr EPS 4.62
Tinplate	company result good. Sales came at Rs.223cr vs qoq 246cr yoy 179cr EBITDA came at 42.78cr vs qoq 31.64cr yoy 32.78cr Adj PAT came at Rs.17.8cr vs qoq 12.44 yoy 10.63cr Qtr EPS Rs.1.70. At Q1 annualised EPS share is trading at 8.8 PE
Rane Brakes	result inline
Triton Valves	result ok

 

• Result to be Announced (Reported PAT Rs cr)

Companies	June’14	Mar’15	June’15 Exp	NBIE
Can Fin Homes Ltd.	19.0	22.9	26.1	#N/A
Century Plyboards (India)	25.7	48.0	40.5	#N/A
Edelweiss Financial	71.8	88.4	94.8	#N/A
Eicher Motors Ltd.	178.5	195.3	227.2	#N/A
HDFC Bank Ltd.	2233.0	2806.9	2732.2	2822.1
Hindustan Unilever Ltd.	1056.9	1018.1	1109.9	#N/A
Honeywell Automation	28.6	7.1	32.7	#N/A
Indiabulls Housing Fin	423.8	551.0	na	#N/A
Idea Cellular Ltd.	728.2	941.8	911.3	#N/A
Infosys Ltd.	2886.0	3097.0	3020.3	3073
Maharashtra Scooters	0.9	3.5	na	#N/A
Rane Engine Valve Ltd.	-0.1	27.1	na	#N/A
Sanofi India Ltd.	57.5	64.5	60.5	#N/A
Supreme Petrochem Ltd.	7.7	20.5	na	#N/A
Tata Sponge Iron Ltd.	44.3	8.6	14.3	#N/A
Welspun Corp Ltd.	-37.7	143.8	75.9	#N/A
Whirlpool Of India Ltd.	83.0	55.3	95.0	#N/A

 

 www.adamcapitalfinancial.com