30 July, 2010

       

It was a sluggish day for the markets as Nifty hovered around 5400 for the whole session. In the end, Bulls just about managed to move Nifty past 5400. July series of derivatives expired with a gain of 90 points for the whole series. Banking sector was the clear out performer for the series as Bank Nifty gained about 5%, with many banks managing much higher gains for the series. Some side counters like Titan, Sintex, Petronet, Godrej Ind, United Spirits, LIC Hsg, Core Projects, Exide and Bharat Forge were amongst the significant gainers for the series. Losers amongst the heavyweights were RIL, Maruti, Hero Honda, Dr Reddy and JSPL. Results played their part in changing the sentiments for many stocks. So, while TCS was a major gainer post its numbers, stocks like Maruti and RIL were the clear losers post results. Overall, market managed to sustain its uptrend though the momentum seems to be waning a bit for last week or ten days. Technically, Nifty made a new high at 5477 but has since found it difficult to sustain above 5440-50. Higher levels have attracted profit taking but on the positive side Nifty has managed to sustain above the short term support levels of 5350-70. Break below 5350 could be an early sign of break down but till that happens even the short term trend could be taken as positive. On the higher side, 5440-60 would act as a significant barrier. Banking, in fact the whole financial sector continues to be in a firm uptrend. IFCI has seen a breakout above 62 and could have an immediate target of Rs 67-69. HDFC may have completed its corrective move and is likely to move to around 3060-70 in coming sessions. Tata Steel and Sterlite have positive short term structure and could see reasonable upside.

Below 5390 Nifty could slip to around 5335-50 while resistance is seen around 5440-45.

LOW RISK / HIGH RETURN

HOLDING PERIOD – ONE MONTH PLUS

BALKRISHNA INDUSTRIES

Present Price – Rs.638.20

Projected Price – Rs.710

Balkrishna Industries Ltd (BIL) , is the world's premier manufacturer of pneumatic tyres for special applications. It focuses on the production of range of off highway tyres that includes agricultural, industry, material handling, forestry, lawn and garden, construction and earth moving tyres.

BIL has a worldwide distribution network ensuring extensive reach and penetration. Its plants are located at Bhiwadi, Chopanki and Waluj. BIL also has a 5 MW windmill plant located at Rajasthan. The power generated from the plant is used for its captive consumption.

BIL is planning to spend Rs 1,200 crore over FY11-13 towards expanding capacities through greenfield expansion. The revival in demand and rise in capacities would enhance its topline and bottomline significantly.

BIL today is one of the world’s leading manufacturers of “off-highway tyres”. BIL has the widest product range containing more that 1800 SKU’s (Stock Keeping Units) and is “One Stop Shop” for off-highway tyre solutions. Tyres are sold under the “BKT” brand.

The company has an Equity Capital of Rs.19.33 cr ( Face Value – Rs.10) and a Strong Book Value of Rs.341.80. Last paid dividend was 70%. For FY10, it reported sales of Rs.1387 cr and a Net Profit of Rs.208.7 cr giving it an EPS of Rs.108. We expect the company to report Net Profit of over Rs.300 for FY11 giving it an EPS of Rs.155. The current market price discounts this by just 4.11 times leaving ample scope for appreciation.

The short term target on the basis of technical charts works out to Rs.710. Long term investors with a one year plus time frame can expect even higher returns.

INDEX LEVELS