WEEKLY REPORT FOR TRADERS AND INVESTORS

FUNDAMENTAL STOCK PICK

ESS DEE ALUMINIUM

CMP 368 TARGETS 600

Ess Dee Aluminium  has recently acquired 90% stake in India Foils Limited  from Madras Aluminium Ltd  a Vedanta Group Company. It infused Rs 1.2 bn into IFL and would merger it during the current fiscal. It has plans to revive IFL, currently under BIFR through a Rehabilitation Scheme. co along with MALCO have infused Rs 2.61 bn in IFL in the form of equity and preference shares to repay all outstanding debt IFL has with various lenders, thus making it totally debt free. IFL is a frontrunner for the distinction of being one of the earliest manufacturers of aluminium foil in Asia.

When fully integrated, the IFL-EDAL combine will have a capacity of 36,000 tonnes, twice the level of ESS DEE”s present capacity, making it the largest pharmaceutical foil manufacturing company.

ESS DEE would also get access to IFL's existing clients and higher international presence (IFL exports to over 35 countries globally). With the help of new capacities under its belt, the company can look at launching a basket of new products to meet the growing demand for packaging.

Strong growth witnessed in Indian pharma, FMCG, food and retail sectors have led to robust demand for packaging. On account of better quality of aluminium packaging as compared to the traditional materials, companies are switching to aluminium packaging. This has benefited ESS DEE which is a leading player in this segment.

As per estimates, the global pharmaceutical packaging demand will increase at 6% annually to over US$ 34 bn in 2011.

As per Mckinsey, Indian pharma is set to grow from US$ 7.6 bn in 2007 to US$ 20 bn by 2015 (CAGR of 12%), thus resulting in a huge demand for packaging. Further, the shift of US pharma packaging from glass and plastic containers to unitised packs by 2012 would also lead to huge demand

 in order to de risk its dependence from the pharma sector, which currently accounts for 85% of the revenues, has entered into FMCG packaging in the last couple of years. The company aims to change the ratio to 50:50 going forward. It has already made a mark in the field of speciality laminates for chewing gum wrap, confectionary, frozen desserts and FMCG items like ‘Fevikwick’ for Pidilite. As per crisil fmcg Valued at Rs 855 bn in 2008,   is expected to touch Rs 1,400 bn by 2015

 looking at the Indian along with global pharma(particular USA) and fmcg growth in India stock is trading at cheap valuation and one can take in their portfolio.

MUTUAL FUND PICK

BIRLA SUNLIFE MONTHLY INCOME PLAN-BUY

This fund has delivered good return by managing good balance of high grade bonds and government securities and equity portfolio.

WEEKLY MARKET OUTLOOK

SUPPORT AT 4600/4500/4450

RESISTANCE AT 4770/4970/5050

Trend reversal or correction a million dollar question

11% correction so far from 5300 to 4700

Let’s paint the scenario to give answer of above question a trend reversal or correction by two way (1) technical analysis arguments (2) fundamental analysis arguments.

(1)  TECHNICAL ANALYSIS ARGUMENTS

All over global stock market and commodities are correcting with only appreciating is dollar index.

Still we (India) are trading above the 200 DMA and last higher bottom which are good.

As long as our  market are trading above 200 DMA and last higher bottom which are placed at 15300 and 4500 levels it is bullish and if Indian market along with global market stop correcting and start recovering then Indian market will definitely outperform the global stock market because our market charts have not much damage compare to others.

Strong support at 15300 and 4500 levels to watch out.

If global markets continue to correct then our market may breach support levels for temporary.

At this juncture we suggest two sectors and two stocks which can give you good return as per time series technical analysis.

Last years top performer was auto and banking sector

Last years top underperformer was telecom and fmcg

As per time series the rule is avoid last years top performer and buy last years top losers.

So we will avoid auto and banking shares and will add two stocks from telecom and fmcg.

Our two picks are

Bharti airtel from telecom sector.

Hindustan unilever from fmcg sector.

(2)  FUNDAMENTAL ANALYSIS ARGUMENTS

In India we have good corporate earning along with good GDP numbers unlike most countries last year.

India has political stability and growth visibility, this thing likely to continue to be one of the favored markets.

 Indian economy is domestic consumption story rather then export oriented so we will have our own growth story on the long run.

We believe that gold price are at higher levels and may not substation at this levels for now as dollar index has start recovering and will continue to recovery till 81 which will bring more correction in gold market .

We believe that falling gold price is good news for emerging market like India and china.

Hedge fund money will find another asset class(emerging markets) to park their money to earn good return.

If we remember in 2008 hedge fund have taken crude oil to $ 147 and then it fell to $32 and this money enter in to gold-due to sub-prime crisis and falling dollar index against major currencies.

Always remember money moves from one asset class to another asset class.

Dollar index to strengthen further and gold price will correct further and this will force hedge fund managers to exit from gold and find new asset class(emerging markets) to invest their money.

At this levels India and china offers good domestic consumption story with young generation will attract hedge fund money.

In short run market may move according to technical levels but in the long run it move along with economy and corporate earning.

Investments guru of world BENJAMIN GRAHAM says in short run stock market is voting machine and in the long run it is weighing machine.

We believe that there are ample opportunities available which can yield higher returns.

These have to un covered through research and meticulous stock selection.

In such scenario active portfolio management is likely to outperform passive strategies.

In India we will have good growth under insurance sector (particular ULIP) which will pump long term money in to Indian market.

Along with insurance sector online mutual fund will also help to tap the rural and urban money vary fast in long run.

Biggest Mistake Done By Common Investor Is

They Dont Buy When Stock Market Come Down At Value Buying Levels. 

We suggest investor our MID CAP PMS 1 AND 2 SERIES who has investment horizon of 1-2 years.

We suggest investor our 4ACE PMS who has investment horizon of 5 years or more.

CONCLUSION

So over all both on technical and fundamental arguments we believe this is not trend reversal and just a correction and trader and investor should find out value buying in market.

KEY NEWS TO WATCH OUT

8^th February Centre of Statistical Organization (CSO) will release advance estimates of GDP growth for 2009-10.

11^th February wholesale price indices (inflation) for month of January 2010

12^th February government will announce the industrial output data for the month of December 2009.