TECH_SPEAK: newsletter

Nooresh Merani)

Monthly Range !!!

Huge range of roughly 100-400 in last 6-9 years . Will it breakout in 2010 ??. Lets c how it goes from here. Will be on our radar in coming months.

Short term charts suggest a move to 380 if its able to cross 352.

Continue to focus on midcaps / small caps for the next few weeks.

Gitanjali gems is being talked of in the markets to give a surprise 15 % move any time. Traders can keep a watch.

Tinplate, Suryachakra Power , Nucleus Software, Easun Reyrolle look interesting for next 3-6 weeks. Not much time to detail about the same but soon more updates on midcap stocks from tomorrow. For the record Easun reyrolle recently recommended at 89 to clients is now at 99 but still good.

TRADING IDEAS FOR WEEK

Nifty
Nifty range is 4940 to 5150, closing above or below, either side indicate trend.Closing above 5150 – Nifty can target 5280 and 5410.Closing below 4940 then Nifty can 4705 and 4575 with minor support at 4800

Reliance
Immediate range is 1040 to 1100 (closing basis) and intraday basis breakout above target 1149 and 1187.Below 1065 can test 1040 – weak only if closes below 1040.

Tata steel
Support at 563 –554 -545 can buy on dips with stop loss 545. Weak only if closes below 545. Close above 585 then can target 610-637 -711.

ICICI Bank
Support $ 864 – 851- close below 850 then can test 782. Now close above 887 would indicate bullishness up to 931 to 948.

DLF
Range 350 to 390. Closing above 390 can take 415 to 440 on upper side. Below 350 then 330 – 306 can be tested.

BHEL
2150 to 2280 is the near term range- break of either side could indicate near term trend.Buy on dips with stop loss 2150 and sell on bounce with stop loss 2280- should be the near term strategy.

INFOSYS
2325 to 2440 is the range, buy on dips could be profitable- one of the strongest stocks among the Nifty 50.

BHARTI ARTL
Bharti artl bouncing from lower level of 275 can target 325. A close above can take the stock to 340 to 357 levels. And close below 300 would end the uptrend.

REL. INFRA
Range 1082 to 1032, a close below either side could indicate the next trend. Above 1080 can take the stock to 1120 to 1155 and break of 1032 – can test 990 to 962.

Stocks that are indicating bullish for coming days

Manaksia
Fortis health care
GMR Infra
Hindustan Petroleum
LYKA labs
TV- 18

We have covered Jain irrigation in some of our articles before. We termed it as a conservative long term bet and we re iterate our stand. Many of would know of Jain irrigation as the country's largest drip irrigation systems maker or the World's second largest. However, there is a whole lot of things that is associated with this company. The company has been diversifying into various segments on a constant basis in a conscious manner. However, the largest revenue earner of the company will continue to be irrigation systems.

Other Business Divisions - Jain irrigation is a complete play on efficient agriculture, which India needs at the moment, when most of its agri produce levels are under threat due to the drought. The company's products include Hi tech agri input products, Micro irrigation systems, PVC piping products, Tissue culture plants, Industrial piping products, plastic sheets and Agro processed products.

More recently the agro produce division of the company is gaining more and more traction. The company has become one of the largest producers of dehydrated onions and mango pulp. More recently in the month of June, the company bagged a 158 crore order for the supply of mango pulp to Coca Cola in India and abroad. Clearly the Agro produce division of the company is set for a strong growth both in the domestic and export markets.

Micro Irrigation Systems - Though the agro produce division is showing signs of strong growth rates in the future, the focus is still on the company's MIS division. India is one of the least efficient country, when it comes to Agriculture. The Americans or the Chinese are more than twice efficient as our farming community. We use more than twice the levels of water and power and still come out only half the produce that the farmers from these countries produce from the same piece of land. The reasons are many but let us not get into it. This inefficiency in agriculture is the biggest opportunity for a company like Jain irrigations.

Government support - A company like Jain Irrigation or a wind power company like Suzlon or a Solar power company needs the support from government the most to grow. Without the various tax incentives and encouraging measure that the government came up with for wind power a decade ago, we would not have a Suzlon by now.

In that way Jain Irrigation is sweetly placed. Various state governments are actively promoting micro irrigation systems. In July, Haryana announced that it would subsidise 905 of the cost of MIS from the earlier 50%. In May, Himachal government awarded a 65 crore micro irrigation project to the company. In May of last year, the company signed an agreement with the government of Maharashtra for two projects worth 550 crore.

It is very much convincing that the future business outlook looks strong for the company and its now all up to the company to capitalize it.

Deteriorating financials - The company had guided that it would look at doubling its earnings in the current financial year. The company in the financial year FY 09 had reported net earnings of around 133 crore on a consolidated basis and in the FY 10 so far, the company has logged more than 100 crore in net earnings. Per the reports, the company has logged net earnings growth rates of more than 70% in the last 2 quarters, however this was really aided by the suppressed earnings in both these quarters of FY 09.

In the Sep qtr of FY 09, the company suffered exchange losses of around 22 crore which makes the growth rates of Sep qtr of the current fiscal attractive. Also, in the June quarter of FY 09, the company suffered exchange losses of 22 crore while it made profits of around 20 crore in the June quarter of FY 10. Hence the mouth watering numbers for the current fiscal and the impressive growth rates shown by the company is on back of the Exchange loss / gain disparity between the comparable quarters.

The company has also been bogged down by debt issues. Per the balance sheet of FY 09, the company had debt of more than 1800 crore. Per the income statement of FY 09, the company paid more than 180 crore for interest expenses, around 150% of the net profits posted. Moreover, the return on equity is on a constant decline over the last 3 years.

Peak valuations - The current valuations of the company looks very much un sustainable. Let consider the historical and the current valuations of the company based on previous fiscal's stand alone earnings. The company currently trades at a valuation of more than 50, the highest ever in the last 5 years, including the peak of the bull phase. The company usually has traded in a valuation rage of 25 to 40 in the last 4 to 5 years. However, the company currently quoting at a 50+ valuation, when the markets are still away from their highs indicate that the upside may be capped in the company. Also, the exchange loss - gain disparity fueled growth rates may not continue.

There is no doubt that the fundamentals of the company is strong. A look at the institutional holdings shows some of the most respected funds and investors invested into this company. Though the huge debt proposition, very high valuations and the masked growth numbers are concerns, there is a very good chance that the company would log healthy growth rates of around 30% and the investment in this company is more tilted towards the reward. It is highly likely that there can be a one bagger in this company in around 2 years time.

(A K Prabhakar)

http://www.3i-infotech.com/content/index.aspx 3IINFOTECH is a global Information Technology company which provides technology solutions to over 1,500 customers in more than 50 countries across 5 continents, spanning a range of verticals - Banking , Insurance , Capital Market , Mutual Funds , Government, with 8% of the revenue coming from ICICIBANK.

ICICI in talks to sell entire stake in 3IINFOTECH-Headline news

Carlyle and KKR have shown interest in buying ICICI’s 27% stake in 3i Infotech. A potential acquisition will also require the buyer to launch a mandatory 20% open offer, taking the total investment to Rs 800-Rs 900 crore, the person said on condition of anonymity. http://economictimes.indiatimes.com/infotech/ites/ICICI-in-talks-to-sell-entire-stake-in-3i-Infotech/articleshow/5312205.cms

ICICI has already appointed PricewaterhouseCoopers to advise it on the sale, the investment banker said.

Technically the stock has started to show strength with Rs.78 becoming strong support on closing basis the stock can give a target of Rs.120 and above in next 12-18months and with low interest regime I am happy with a return of 20-25% in a year anything above which would be excellent.

Caution: 3IINFO is our Diwali pick and many following me should be holding this stock, ICICIBANK wanted to exit non-core business and already they have sold stake in open market and LIC also brought sake so there is nothing new about this stock. Please take informed decision based on your own judgement.

(Ilango)