Nifty View 26 04 2011

Upbeat: Metals, Auto & Auto Ancilliaries, Oil – All kinds, Shipping, Pharma
Neutral: Banks, Sugar , Real Estate
Downbeat: IT

Overall market direction: Rangebound between 5750 and 5950. The undertone is bullish. In the F&O
segment, 43 stocks are in a strong uptrend (ADX14 > 30 and DMIPlus14 > DMIminus14) while just 3 are in a strong downtrend.

Trading Strategy: Short term traders should go with intra day trades until a breakout in either direction.
Position Traders should buy for a few days/weeks since many stocks are giving signs of bullish bases / patterns. Short selling above 5750 is not recommended.

Stock to Trade 26 04 2011

• Hindalco 220.80 Hindalco making a bullish H&S pattern. Breakout at 223. Target at 250
• Maruti 1307 Maruti is making a bullish H&S pattern. Breakout at 1325. Target 1536.

INVESTMENT PICK 26 04 2011

AJANTA PHARMA
Present Price – Rs.236.90, Projected Price – Rs.275

Ajanta Pharmaceuticals Limited (APL) is a Mumbai based midsized pharmaceutical company. Its core therapeutic segments are: Nutraceutical, Cardiovascular, and Anti-microbial, Antitubercular, Ophthalmology, Diabetes, Dermatology, Gynecology and Ortho- Rheumatologic range. APL's manufacturing plants are replete with state-of-the-art equipment that follows all the cGMP laid down by WHO.
Ajanta has set up worldclass manufacturing facilities in India, Mauritius and Turkmenistan that are equipped with state-of-the-art infrastructure.APL manufactures and markets a number of OTC and ethical products, with a market spanning 50 countries across the world. Ajanta has identified the importance of R&D for long term sustainability quite early. Hence the company has made continuous investments in R&D. The main focus area for the company is New Drug Delivery System (NDDS) and new combinations. APL has a fullfledged R&D center in Mumbai – Advent with strength of 250+ scientists. 1380 product registrations in different markets and over 1029 more waiting in pipeline is an example of its strong capabilities in R&D field.
APL has been catering to various voluntary organizations and governmental institutions like the UNICEF, UNHCR, Government Health Departments, Defence Services and Hospitals. Its subsidiary in Mauritius produces dosage forms like tablets, capsules and Injections. Besides existing products, research and development is in full swing to evolve new molecular structures and formulations in many therapeutical segments. It has demarcated the global market into six zones, India, South-East Asia, Africa, West Asia, Europe and Central Asia. It now plans to enter the lucrative US markets. Ajanta’s current business model is tilted towards exports which contributes 60% of the total revenues. Once these new therapeutic segments start contributing and expanding reach in domestic market we believe that the company’s exports-domestic mix would be moderated at 50:50.
APL is a strong player in Africa, Asia and LatAm. After gaining expertise in semiregulated markets the company is now targeting world’s largest generic market (market size of ~$34 bn) – US for its next phase of growth. Ajanta Pharma has filed two ANDAs in FY10 from its USFDA approved facility at Paithan and expects approvals to come in 2HFY12. We believe that business from US would be a major push for Ajanta’s future growth however meaningful revenues from US would only come from FY13. Management expects to file five ANDAs annually from FY12 further driving momentum to the expansion plans of the company. The global life sciences manufacturing outsourcing opportunity is estimated at around US $20 billion and is expected to reach US $31 billion in 2010. India has emerged as a hub for global players due to the availability of world class facilities and quality products at competitive prices. In the R&D sector the
value of the outsourced business is expected to be about US$ 7 billion by 2011.

According to a McKinsey report, India will emerge as the 10th largest pharmaceutical market by 2015 overtaking Brazil, Mexico, South Korea and Turkey. From a market size of around US$ 7 billion, the Indian pharmaceutical market is projected to grow to about US$ 20 billion by 2015. In fact, the incremental growth of US$ 13 billon is likely to be the 3rd largest among all markets after US and China. According to Crisil Report, exports, which are expected to drive growth of Indian pharmaceutical market, are set to nearly treble over next 5 years. We expect Ajanta to report over Rs.565 cr for FY12 as topline and the estimated EPS could be in the region of Rs.54 plus. The current price discounts this by just 4.38 times leaving ample scope for appreciation. Investment is advised in this scrip for a period of six months plus. Long term investment with a 12 months plus perspective can expect even higher returns.

DERIVATIVE PICK 26 04 2011

• SINTEX ( CASH – Rs.176.65) : Buying is advised above Rs.180 for a target of Rs.184 and Rs.186. Higher target of Rs.190-192 is also possible. Stop Loss of Rs.174 should be kept. The time frame of the trade would be around 7-8 trading sessions.

• SESA GOA (CASH – Rs.323.75) : The stock has been moving up in a slow and steady manner. The 14 day RSI is consistently hovering above the crucial 60 level clearly indicating the strong bull grip in the counter. Buying is advised above Rs.325 for a target of Rs.329 and Rs.334. Higher target of Rs.340-342 is also possible. Stop Loss of Rs.316.95 should be kept. The time frame of the trade would be around.7-8 trading sessions.

Market Outlook 26 04 2011

It was a better week for the markets as both global cues as well as the domestic corporate results helped the bullish bias. Global markets were in fine fettle as sliding dollar index boosted the commodities. Back home, after the shocker from Infosys there were no such unpleasant surprises this week. HDFC Bank, Yes Bank, Indusind Bank posted good numbers and helped the banking stocks to regain positive momentum. TCS came with good results that were inline with the expectations and so the stock witnessed huge volatility and some profit taking at higher levels. RIL declared its numbers after the market hours on Thursday. Results were below expectations as GRMs came in below the market expectations. However, the company also announced some encouraging gas and oil discoveries and that might just help the stock to sustain around current levels. Last week’s best performing sectors were Autos, Oil & Gas and metals while at the bottom of the ladder were Capital Goods, mainly on account of BHEL’s underperformance. Maruti is coming out with its results on Monday and that may have its impact on the Auto universe. Auto companies have been witnessing record sales but the margins would be keenly watched. Technically, Nifty reversed directions from around 5700 and that happens to be the 200 DMA also. Nifty is witnessing huge volatility between 5700 and 5950 as markets reacts to global cues as well as corporate announcements on day-to day basis. The range between 5900 and 5950 is providing stiff resistance and this could continue to be the case even for next week as we enter the last week of current F&O series. Volatility is likely to persist. 5830-40 is the immediate support for Monday but the significant resistance is seen around 5770-5780. The heavyweights are displaying contrasting trends. HDFC and HDFC Bank are positively biased and sustained trades above 732 and 2410 respectively could open up meaningful higher targets. TCS witnessed profit taking around 1240-1250 that also happens to be its all time high. But, the stock remains in uptrend and is likely to find strong support around 1140-1150. Bharti too confronted some profit taking at 375-380 but this is another heavyweight that seems to be headed higher and is a Buy on dips counter. SBI is interestingly poised as sustained trades above 2850 would mean a breakout from around 6 months range.

The stock could than rally to around 3025-3050 over next 2-3 weeks. On the other hand, Infosys continues to struggle and may not move further than 2960-2980. RIL faces stiff resistance around 1050-1060 and is unlikely to pose any threat to this resistance going by the below expectations results declared on Thursday. Auto and Metal heavyweights are in a side ways mode. Amongst the other sectors, Tyres and textiles rallied sharply over last two sessions. MRF and Apollo tyres have broken out from their respective trading ranges. MRF could rally to around Rs 8200 while Apollo has next resistance around Rs 79-80. Arvind Ltd has moved to around 3 years’ high and showing great momentum. Next technical target is around Rs 90-92 but the broad structure suggests great potential over next 9-12 months. Alok could target Rs 29.50-30 and then Rs 34. The textile stocks are showing good bullish structures and it seems that most pure textile stocks are headed for out performance in medium term.

Nifty has immediate support around 5830-40 while resistance is seen around 5920-35.