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Nifty...all set to spark a heat with a monthly closing "above 5400" ???

P r o f i t i s t h e A n s w e r

Global Economy -Abhishek Agarwal

Volume 1 : Issue 6, 8th September 2010 Total Pages: 4

India : Towards Greatness

For more details contact@ 033 4009‐9919/ 98311‐51909 website: www.vckgroup.com Page :Page :Page :‐‐‐ 111

Hemal Kampani

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"I am quite optimistic about India because the way to grow an economy is through entrepre-neurship and capitalism and India seems to have figured out the right formula. So fundamentally, the next 20 years would be great for India."

- Vinod Khosla , Founder, Khosla Ventures

"The growth rates that you are seeing in India are not being seen anywhere in the world, and that is reflected in the capital market flows that you are seeing into India. "

- Manisha Girotra, MD, UBS India

"It is our firm belief that the Indian stock market will per-form exceedingly well in the next 10-20 years. "

- Christopher Spelman, Chief Executive , JP Morgan Asset Management

“Emerging economies have survived stress test”

- Adrian Mowat, MD & Chief EM Strategist, J.P. Morgan,

Europe appears to be an outlier in terms of economic mo-mentum. In August, The Economic Sentiment Indicator (ESI) rose to 102.7 (up by 0.6 of a point) in the EU and to 101.8 (up by 0.7 of a point) in the euro area. In both the EU and the euro area the ESI is above its long-term aver-age. Upbeat export order books in industry confirmed that businesses are experiencing strong external demand. Confidence improved in all sectors except services, where it worsened substantially.

The private sector in America is on the road to recov-ery.US GDP grew at an annual rate of 2.4 % in the sec-ond quarter of 2010. U.S. consumer confidence increased by 4.9 % from July to August 2010, but still remains weak, at a level of 53.5. The U.S. lost 54,000 nonfarm jobs from July to August 2010 and its unemployment rate increased in August to 9.6 % versus 9.5% in July 2010. The U.S. trade deficit stood at 3.6 % of GDP in the Q2FY2010, against 2.4 % of GDP in the Q2FY09.

Industrial production in Brazil, Latin America's largest economy, grew at a very robust sequential rate of 3.0 % in the first quarter. Although Industrial production continued to expand in the second quarter, growth downshifted to 1.4 %.

Most Asian economies appear to be transitioning to slower growth paths. Start with China, where the year-over-year GDP growth rate slowed from 11.9 % in first quarter to 10.3 % in the second quarter. The decline in the manufacturing PMI to a 17-month low in July suggests that the third quarter got off to a sluggish start.

China is not the only Asian economy that appears to be transitioning to a slower growth path. Real GDP in Korea, which shot up at an an-nualized rate of 8.8 % in the first quarter, slowed to 6.0 % in the second quarter. Taiwan expects a slowdown in in-dustrial production (IP) growth - from nearly 50 % in the first quarter to about 30 % in the second quarter.

Finally we got a monthly closing above 5400! It touched a low of 5348.9 on last day of the month and managed to close at 5402.4, last month it's closing was 5367.6 so it is very much clear to you all - "nifty's up-trend is still very

much intact". Last month it rebounded from our recom-mended level of 5330-5350 (low was 5348.9) hope u all had faith in our view and bought those scripts we suggested from Technical Re-search Desk commu-nication. After break-ing July high of 5477.50 nifty touched 5640(afetr feb"2008) as we predicted in the previous issue of this article and profit booking interest dragged it down till 5350 level that gave you another buying opportunity, but what we believe that nifty will maintain this lvl

(5330-5350) as because this stands as the major trend line support for the time to come.

Apart from this , we would request you all to recapitulate our heading for last month's Article on Nifty ...and it was....."NIFTY, ONE STEP BACKWARD BEFORE A GREAT LEAPFORWARD??"Actually it happened Nifty made a low of 5348 and then already made a 300 points swing towards the upside. Hope this headlines itself was sufficient to prove the accuracy of our view given in Market pulse August.

Why 5400 level is so important ??? can you remember...in the month of April it made high of 5399.65 and from there on nifty got beaten down heavily till 4786.45 (in may,2010) and again rebounded from that level. So from technical point of view that high makes a lot of sense. Apart from this all the technical parameters like monthly obv, rsi etc is still in good shape and indicating another up move in days to come. Now the challenge for nifty in coming days is to break out and close above 5650.

So traders are advised to buy on dips with stop at 5310 levels for more profits. -By Jaydeb Dey

Re. 1/-

Dear Friends,

In my last communication of Market Pulse Issue on August 08, 2010 stated that at August end, Nifty will have a dip and will offer lots of lots of good stocks to be invested in and I think I was correct because while I write this today, Nifty is 5607 an increase of about 5% from its low of 5348 on August 31, 2010. During this period, our Technical

Research Desk gave the calls as shown in the table :

Have you invested in these calls, which had been advised by us? If yes, then your average return works out to be approx. 4% per month for Intraday and 15% per month for Positional, which is

more than attractive, and mind it you also would have invested in Equity Shares of the best Corporate Houses in India.

At VCK our Endeavour has always been that you earn out of the market and it has always been our focus to ensure that we give the best of calls at the right time, so that you can benefit from our research.

Since we are in September, I thought of making a review from April to August on our performance and judgment of the market. If you go through all our previous issues, you will find that our recommendations have proved that “Profit Is The Answer” and our guidance has by and large come to be correct.

I feel that market going forward, will go strong and you may see a higher top, but, before it reaches 5800-6000 levels, there has to be a correction which will bring down Nifty to 5350 at the most.

So happy investing and take advantage of our Calls.

With warm regards

Call Total Profit Stop Loss Open / Exit

Intra Day 27 17 6 4 Positional 10 8 1 1

Source : ET

For Private Circulation Only

Volume 1 : Issue 6, 8th September 2010 VCK MARKET PULSE

For more details contact@ 033 4009‐9919/ 98311‐51909 website: www.vckgroup.com Page :Page :Page :‐‐‐ 222 For Disclaimer and Terms of Use visit www.vckgroup.com

Pintu Samanta, Saidpur

Arun Kumar, Bistupur

Sudarshan Kar, Dalhousie

Prabir Chowdhary, Belur

Tathagata Mukherjee, Tapan

Swapan Sarkar, Karimpur

Maloy Kr. Banik, Jiaganj

Swapan Mistry, Domkal

Nikhil Biswas, Krishnanagar 1

Nirmal Kr. Saha, Jalangi

Arun Kr. Somani, Islampur

Alok Maitra & Atul Kr. Dubey ( Baruipur)

Pradip Kr. Das, Balurghat

Sriman Santra, Chandipur Kalyan Karmakar, Ghatal

Nirmal Kr. Bag, Belpukur Tapas Kr. Das, Chandrakona Town

Ananda Roy, Uluberia Sabyasachi Chakraborty, Egra

Sushanta Bhuniya, Debrabazar Sriman Guchait, Temathani

Mohitlal Shom, Krishnanagar 3

Congratulations to all the Achievers ……..Well Done!!!

Samir Mukherjee, Dakghar




Indian Economy -Arijit Das Stocks To Stock Up: -By The Research Team

A Bird in Hand: - Manish Bothra


OIL & NATURAL GAS CORPORATION LTD. (BUY TARGET – Rs.1500): We are bullish on upstream PSU oil companies specially ONGC on valuation basis, as this company is highly undervalued due to Govt’s informal sub-sidy sharing mechanism and lower APM prices. ONGC’s valuation is strongly related with the new awaited reforms made in the Indian Oil and Gas sector. The Govt. has recently raised the price of APM Gas by more than 2 times to USD4.2/MMBTU in order to bring it in line with KGD6 Gas price. The increase in Gas price alone will increase EPS by ~11% in FY11 and FY12.Moreover, the deregulation of petrol price and hike in diesel and cooking fuel price will reduce the under recoveries and thereby ease ONGC’s subsidy burden by Rs.56 bn for FY11.As per the production sharing contract, ONGC was paying 100% royalty although it had only 30% participating interest in Rajasthan Block operated by Cairn India. Post announcement of Cairn India’s acquisition by Vedanta, the Govt. agreed to reimburse 70% extra royalty of Rs211.4 cr to ONGC. The development efforts in the form of EOR/IOR will enhance the production of crude oil and natural gas arresting its decline in production from ageing fields. All the above factors are likely to improve the overall net profit from Rs.194 bn in FY09 to 268 bn in FY10.The current reserve replacement ratio of 1.74 is favorable compared against global range of 0.9-1.39x. At present the company is trading at a P/E multiple of 11.23x of FY11E and 10.28x of FY12E earnings. We are recommending a BUY on ONGC with the price target of Rs.1500 and investors are advised to accumulate at every dip going forward.

SHIV-VANI OIL & GAS EXPLORATION LTD. (BUY TARGET – Rs.525): We expect the E&P activities will boost up in the coming years in order to complete the minimum work commitment programme under NELP which will benefit Shiv-Vani. The company has a unique integrated business model compared to its seismic peers like Alphageo and Asian Oilfield. We believe there is a strong visibility of revenue for the next couple of years on the back of huge order book position which is 3x of FY10 revenue. The company has reported 53.40% rise in net profit driven by 41.16% increase in net sales on YoY basis. The company’s top line and net income improved by 32.55% and 37.37% respectively on QoQ basis which is better than our estimation of 27% increase in net sales and 29% increase in net profit. We maintain BUY on Shiv-Vani with a target price of Rs.525 per share which shows potential upside of ~20% from the current market price We have arrived at our target price by applying a P/E multiple of 8.75 x to its FY12E EPS. This is at a significant discount to international peer valuations (2-year forward) of P/E of 14x and EV/EBITDA of 6x to 7x. At the current market price the company is trading at an EV/EBIDTA multiple of 6.63x and 6.41x of FY11E and FY12E EBIDTA.

HINDUSTAN CONSTRUCTION CO LTD (BUY TARGET – Rs.77): We recommend a buy rating on the HCC with a target price of Rs. 77 wherein standalone core business is contributing 32% at Rs. 25 (PEx of 12 to its FY12 expected earnings), Infra assets contributing 18% at Rs. 14 (P/BVx of 1.1) & Lavasa contributing 49% at Rs. 38 (as per DCF basis). We recommend a buy rating on the stock with a potential upside of ~ 28% from present level. Lavasa Valuation: Our DFC calculation shows potential value to the extent of Rs. 49.45 Bn with HCC’s per share estimate post IPO at Rs. 38 (~60% of the present market price). Our model does not incorporate any annuity revenue on SPV’s post 2025 due to lack of visibility on the same. Execution period for the whole project is assumed for the same next 15 years with a discounting rate of 15%.

USHA MARTIN (BUY TARGET – Rs.102): After the sharp drop in realizations (across all the products) over the last few quarters, the gloomy scenario is improving slowly with increased demand and better macro economic out-look. We expect the average realization to improve marginally by ~8% in FY11 with an EBITDA margin expansion of ~ 500bps mainly on account of the combined effect of captive sources of coal, iron ore and savings in power-fuel cost .With the increased billet production to 0.80mmt in FY11 from the current level of ~0.35mmt, the total raw material cost in absolute terms for billet production should not increase beyond 30%. This huge relief from the raw material front will be the key trigger to boost the EBITDA margins in the years ahead. We have recommended the stock at a CMP of Rs 89.05 with a target price of Rs 118. At a CMP of Rs 91.25, the stock is trading at a PE 5.45x and EV/EBITDA of ~ 4 xs based on FY12 financials. With the 100% backward integration, expected commissioning of the sinter plant in Q2FY11 margins are likely to improve in the coming quarters and we reiterate our ‘BUY’ ratings on the stock with a short to midterm target price of Rs 102.

TATA STEEL (BUY TARGET – Rs.695): We have assigned a FY12 EV/EBITDAx of 5.25 for Tata Steel India and 4.5 for the Asian entities (NatSteel and Tata Steel Thailand). In case of Corus keeping in mind the non inte-grated nature we have given a discount to its nearest peer Arcelor Mittal (FY12 EV/EBITDA~4.5) and assigned a multiple of 4.0 to FY12E EBITDA which translates to an EV of Rs 24100 crore for the company. On the basis of our SOTP valuation (based on FY12 financials) we reiterate our ‘BUY’ ratings on the stock with a target price of Rs. 695. We also believe that the company will offer significant upside on an extended time frame (beyond FY12), once the 2.9 mmt brown field expansion of Tata Steel Jamshedpur and raw material security of Corus are factored in the valuation. But in our valuation we have discounted beyond FY12 earnings (as we are not comfortable of valuing cyclical commodity like steel on an extended timeframe) and recommend to BUY the stock with a midterm target price of Rs 695.

RELIANCE INDUSTRIES LTD. (BUY TARGET – Rs.1133): We believe that growth in the E&P segment would continue on account of rising gas and crude output from D6. We expect refining realisation will increase due to im-proving GRM and petchem margins might under-perform owing to capacity addition in Asia and the Middle East. Post the APM price hike to US$4.2/mmbtu , there exists a case for the benchmark of gas price to move higher as all other are such as Ravva , Cauvery (ONGC), C-Series are available at 4.75, 5, 5.25 $/mmbtu. As against the earlier expectation of KG-D6 gas production reaching 80mmscmd by Q4FY11 the production is now expected to reach its peak on 2HFY12. Deregulation of petrol and hike in diesel led to reopen over 660 retail outlets operational mainly in Western and Southern India. We believe Reliance’s investment of over US$ 3 billion in shale gas assets and its foray into telecommunication & power sector will increase the company’s profitability. Recently the company has acquired 14.8% stakes in EIH Ltd and has announced plans to build hospitals, universities and set up a sports marketing company. The company is aggressively diversifying itself to deploy its cash & cash equivalent (26407 cr as on June’10) which will add to its valuation. The stock is currently trading at PEx ~13.9x based on FY11 financials and 11.6 x of FY12 earnings. We Recommend BUY on Reliance with a target price of Rs1133 per share.

ASHOK LEYLAND (BUY TARGET- Rs. 85-90): We expect Ashok Leyland’s revenue to grow at a CAGR of 23.5% from FY10-12E. The company will experience higher margins with an expected 200bps lower tax rate due to benefits of ramp up at Uttarakhand plant. The company has increased the prices of its entire range of CV up to Rs 50,000 and has raised the price of M&HCV segment by 3% in order to overcome the impact of rising input costs. Ashok Leyland is planning to introduce 25 models over the next 3-4 quarters. The company has planned capex of Rs 1,200 crore over the next two years and is expected to invest Rs 800 crore in JVs. The stock is cur-rently trading at a 13.5x of FY12E EPS of Rs.5.5. We recommend BUY on Ashok Leyland with a price target range of Rs. 85- Rs. 90 per share.

EMAMI (BUY TARGET- Rs. 480-495): Emami Ltd. is the flagship company of the Kolkata based Emami Group, which is engaged in the business of manufacturing personal care and health care products for over 3 decades. By repeatedly outperforming the industry standard, Emami Ltd has maintained a CAGR of 27% over the last 5 years. Some of the major brands of the company are Boroplus Antiseptic Cream, Boroplus Prickly Heat Powder, Fair and Handsome Fairness Cream for men, Navratna Oil, Himami Fast Relief, Mentho Plus balm, Sona Chandi Chywanprash and Amritprash, amongst others. Going forward, the company will experience significant improvement in margins due to savings in Interest Costs, as it proposes to be debt free by FY12. The company is foraying into tax incentives markets such as Egypt and Bangladesh which will improve both its top line and bottom line. The company hikes the prices of its product nearly on an avg 4-5% which will help it to beat the effect of inflation in its key raw materials which are predominantly crude based derivates. The pipeline of their new products will help it to increase its presence across personal and healthcare segment. The company is very keen on Acquisitions in the personal care segment-both domestic and International-which will make it a dominating player in the FMCG space. We are assigning a P/E multiple of 23x to FY12e EPS of Rs. 21.36. We are recommending a buy rating on the stock with a price target range of Rs. 480-495.

In my previous article we talked about of achieving the 5600 levels for Nifty, even it was said that Nifty is heading for 5608, which was duly achieved on 7th Sep 2010.

Now what?? The gap between the support & resistance levels has increased thereby increasing the chance of Volatile market going ahead. From here Excellent support for Nifty stands at 5530 whereas Resistance stands at 5608-5663-5766 going ahead.

FII still buying which is most importantly driving the market higher however a question remains unanswered that inspite of such a big inflow of FII money Rupee has not got stronger yet and is still trading around the 46.50/47/$ for a longer time.

Metal stocks are shining as Dollar Index maintaining around the 82 level.

Shanghai Market also on an upward move and a closing above 2700 plus could take higher to 2779 2831-2865 levels.

Though we have not changed our mind style yet as still we are rolling our money in anticipation of higher returns. Money is a honey and its a mystery too so make it a habit of taking your profit home as whatever you book is your actual gain.

Remember a Bird in hand is better than two in the bush.

SL.NO. SEPTEMBER PORTFOLIO BUY ZONE CLOSING

BASIS STOP MONTH TARGET

1 DLF 315-320 302 350 2 UNITECH 81-82 77 91 3 JSW STEEL 1200‐1220 1170 1295 4 HINDALCO 178-182 172 198 5 AUROPHARMA 1020-1030 1000 1060 6 DCB 51-52 48 58

Calls For The Month Of Sept. 2010: -Uttiya Chandra

The domestic inflation rose for the 11th consecutive month, at 3.3% in August 2010 after consumer prices rose 0.23% from July. The average domestic inflation for this year currently stands at 3.5%, and is expected to be at 3.4% for the year 2010.

India’s GDP grew 8.8 % in first three months of current fiscal. GDP growth in 1QFY11 outpaced the 8.6% growth in 4QFY 10 & 6% growth in the same period last year when economic re-covery had just started. The manufacturing and agricultural sector plays a key role in boosting economic growth, which grew by 12.4% and 2.8% respectively.

India's exports rose for the ninth straight month in July, growing an annual 13.2%to $16.24 billion. Imports for the month rose 34.3% to $29.17 billion, widening the country's trade deficit to $12.93 billion. Exports during the April-July period rose 30.1% to $68.63 billion.

Index of industrial production (IIP) for the month of June has reported 7.1% higher than its level a year ago, way below the May growth rate of 11.3%. The decline in growth was largely because of lower increase in manufacturing and electricity gen-eration, which came in at 7.3 % and 3.5% respectively.

India has received a quantum of 62.52 centimeter (cm) rainfall during the current monsoon season which is marginally deficit by -3% compared to Long Period Average (LPA) rainfall of 64.42 cm for the same period. As on August 2010, country has received 70% of its seasonal rainfall quantum of 89.21 cm. The rainfall has been deficit by 23% in northeast states so far. The country as a whole is likely to receive normal rainfall during the last month of monsoon in September, according to IMD. Capitulation is when investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves ex-tremely high volume and sharp declines. It usually is indicated by panic selling.

Saleability is a technical analysis term used to compare performances of different trading systems or different investments within one system. It is "ratio of the number of winning trades or investments to the total number of trades or investments made, a number ranging from zero to 1." Saleability = nProfits/nTrades - 1/(1+aveProfit/aveLoss).

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Editor-in-Chief Hemal Kampani

Editor Samir Kothari

Senior Sub-Editor Varun Singh

Art Work Evolve Communication

Pronab Mondal

Technical Team Dibyendu Ghosh Hazra

Uttiya Chandra Vikrant Chaturvedi

Jaydeb Dey

Research Team Nikita Khilani Ujjal Deb Roy

Debanshu Patra Rina Sanghavi

Arijit Das Abhisek Agarwal


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In the month of August we recommended the following Positional Calls through Tech-nical Analysis. The few of the calls provided has been given for your reference.

Index: MP—Market Price on the day of the call STP— Stop Loss Price BTST—Buy today Sell Tomorrow Intraday— Buy & Sell on the same day SL— Stop Loss

TOTAL CALLS 20 HITS 14 MISSED 6 STILL OPEN N/A STRIKE RATE 70%

Positional Calls

Commodities – the steam is still on...... -Vikrant Chaturvedi

TOTAL CALLS 105 HITS 57 MISSED 35 EXIT (BUY LVL.) 13 STRIKE RATE 61.95%

Intraday Calls


BULLION > Till now India was known in the bullion market as the biggest buyer of gold and it can control the global gold prices. However, in the recent past India has acquired a new role in silver market also. A good monsoon season, like that experienced this year, leads to a better harvest and more money for silver jewellery and bullion purchases.

Many analysts believe both demand from investors and industrial uses has helped to bolster silver prices this year, which have increased by 18 percent, compared to gold’s 14 percent, since the start of 2010. Throughout July and most of August, silver has remained range-bound between $17.50 and $18.50 an ounce. True to tradition, the white metal began to rally the last week of August closing in on $20 an ounce.

Gold > Gold is making newer highs and heading towards a strong resistance zone at 19800 and 20000. Downside support for Gold is at 18500 and 18300.

Silver > Silver is shining brighter than Gold. The white metal has resistance at 31800 and 32500. Silver has strong support at 30150 and 29500.

ENERGY COMMODITIES > Weak US GDP growth forecast for 2011 could impact North America oil demand while ample liquidity conditions and a second round of quantitative easing ahead should support crude oil prices. The very high levels of crude oil and petroleum product inventories in the United States are still creating some downside risks to oil prices in the short-run. With demand decelerating, a sharp drawdown in stocks is unlikely, suggesting there are some downside risks to oil prices in the short-run.

Mexico's state oil company Pamex has shut its refinery after it caught in fire on blast 7th September.

Tropical depression Hermine weakened after making landfall in northeastern Mexico hours earlier. The storm was about 20 miles northwest of Brownsville, Texas, moving north-northwest at 14 mph.

Crude > Crude Oil is trading in a range between 3880 and 3280. Buy MCX Crude on the lower levels close to this boundary and sell close to the ceiling of this channel. We will see the Black commodity trading in this channel unless we get a decisive breakout or breakdown.

Natural Gas > Natural Gas has corrected strongly in the last month. However, it seems that it has made its bottom at 175. We will however see it strengthening only above 200 levels.

BASE METALS > With the equity markets on the verge of a strong breakout and the global economic sce-nario looking attractive, the base metals are bound to continue their rally in tandem with the global equity markets.

Copper > Copper has rallied strongly since April this year. The industrial metal is now consolidating close to its breakout zone of 360-365. Copper has resistance at 390-400. Downside support for Copper is at 345 and 330

Nickel > Nickel is on the verge of a bullish Inverted Head and Shoulder breakout at 1040 leves. Any weekly closing above this level can take Nickel to 1100 and 1150.. Down-side support for Nickel seen at 990 and 970.

Summary of August’s Positional Calls:

Mumbai Office : 401 Malhotra Chambers, 4th Floor. 31/33 Police Court Lane Fort, Mumbai—400 001. Ph- +91-22– 6632 5727, Fax +91-22 6632 5737 On behalf VCK Share & Stock Broking Service Limited, Printed and Published by Mr. Samir Kothari, Printed at Shree Krishna Print & Publicity Concern, 34, Kali Krishna Tagore Street, 4th Floor, Kolkata - 700 007 and place of publication : Duckback House, 41, Shakespeare Sarani, Kolkata - 700 017. Editor : S. Kothari


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