Investment calls in current market

Hi friends !!!

After a lackadaisical budget , all eyes are on RBI's credit policy review of April. Many market experts are expecting a rate cut in the April review itself. With inflation showing little signs to cool down, rate cut decision may take some more time.

A rate cut will definitely lead to a significant rally in Banking, Infra, Power and Realty shares.

In the current market I found good investment opportunities into the following shares :-

1. Tata Motors (DVR)

Globally DVR's trade at 12 to 30 % discount to the parent shares. However, after a tepid response to the DVR issue situations have changed recently. Tata Motors DVR has risen sharply after company posted a strong Q3 performance. It is still available at 45 % discount to the Tata Motors share price offering investors significant room to earn good returns. One can invest at the current levels.

Target - 180 in medium term

2. Dena bank

A PE of just 4.4 and price to book ratio of 0.89 makes Dena Bank the most attractive Public Sector Bank valuation wise. One can enter at current levels. With rate cut on horizon, it offers significant upside as compared to any other Public sector banks.

Target - 115 in medium term

One can also consider Petronet LNG, TCS and LIC Housing at current levels.

RK Global Research on Infosys

30th Sept, 2011

“Acquisition forefront, the company has acquired Gen-I Technology of New Zealand in Q1FY’12, giving the company ready access to 3,300 of Gen-I’s clients (BFSI, Energy, Sovereign, Healthcare & Rural) in APAC region. The transaction has been completed and will see an impact on the revenue by Q2FY’12E by close to USD12 mn. Moreover, the company is in an advance stage to buy an US company in the public services & healthcare space which has a turnover of USD300-350 mn. The buy price for that firm could be anywhere between USD450-650 mn. This will be a very big step for Infosys; public services and healthcare especially is an area where its competitors such as Cognizant & TCS have been very strong. Hence, it is certainly an area where Infosys will also like to gain strength and we believe this will strongly rationalize the revenue segregation.”

“Acquisition forefront, the company has acquired Gen-I Technology of New Zealand in Q1FY’12, giving the company ready access to 3,300 of Gen-I’s clients (BFSI, Energy, Sovereign, Healthcare & Rural) in APAC region. The transaction has been completed and will see an impact on the revenue by Q2FY’12E by close to USD12 mn. Moreover, the company is in an advance stage to buy an US company in the public services & healthcare space which has a turnover of USD300-350 mn. The buy price for that firm could be anywhere between USD450-650 mn. This will be a very big step for Infosys; public services and healthcare especially is an area where its competitors such as Cognizant & TCS have been very strong. Hence, it is certainly an area where Infosys will also like to gain strength and we believe this will strongly rationalize the revenue segregation.”

“Seemingly alarming impact of INR depreciation on earnings is actually polarized by the IT services sector. Also, there are meaningful gainers, like Infosys, from the depreciation of INR against major currencies. All three IT services firms under our coverage will get big positive impact from INR depreciation, and is expected to emerge gainers. The sensitivity of the revenues of firms like Infosys stands at 40-50 bps of benefits (Q2FY’12E) & 100-200 bps (FY’12E) per ~1% depreciation of INR. The INR depreciation (if it sustains) could help in off-setting price pressure, which the industry may face going forward. Moreover, cost-rationalization approach by Infosys) using the US$/` rate, which currently stands at `49.16/US$ and expected to ravel through `47/US$ by Nov’/Dec’ FY’12) will greatly benefit in the present times of global uncertainty. The company can garner more from its off-shoring activity and US$ denominated contracts,” says R K Global research

Stay Away From ADAG Stocks

30 Sept, 2011

Most ADAG firms touched 52 weeks low in markets today. Reliance Communications, Reliance Infrastructure, Reliance Power and Reliance Capital may continue to fall further and investors should avoid these stocks till the role of Anil Ambani or ADAG is cleared from the 2G spectrum inquiry. Three top officials of Reliance ADA Group – Gautam Doshi (Managing Director, Reliance ADA Group), Surendra Pipara (Senior Vice President of ADAG and Reliance Telecom) and Hari Nair (Senior Vice President ADAG) - have been accused of conspiracy and abetment to cheating in the 2G scam. The trio is lodged in New Delhi's Tihar Jail. Once the matter is resolved and ADAG group comes out clear from the scam, all ADAG shares will rebound sharply.

Hexaware

29 Sept, 2011

Hexaware -

Price at suggestion (on 27th Sept, 2011) - 77.15
Target Suggested on 27th Spet - 84
Current Market Price - 86
TARGET ACHIEVED!! Book Profits.

On 27the Sept, our experts pointed Hexawar to touch 84. At that time Hexaware was at 77.15. The Stock is currently at 86 above the target suggested. We recommend to book profit at this level.

Views by IIFL

29th Sept, 2011

1. Tata Chemicals

Buy ; Target - 335

Current Market Price - 320.55

Duration - 7 Days

Technical call on this scrip published in 28th Sept report. The RSI is indicating a positive crossover with triple bottom formation which supports buying argument in the counter.

2. Union Bank of India

Buy ; Target - 265

Current Market Price - 249.15

Duration - 4 days

Another Technical call by IIFL with a very short term horizon of 4 days. Otherwise, investors suggested to stay away from PSU stocks for next couple of months keeping fundamentals in mind.

3. NMDC

Market Performer; Target - 242

Current Market Price - 228.05

Duration - 9 Months

IIFL has increased rating of NMDC from Sell to Market Performer. The stock is trading at 5.5x FY13 EV/EBIDTA, which is marginally higher than its peers. They believe that NMDC should trade at a premium to its peers considering the high quality reserves and the low cost operations. NMDC has been on the lookout for resources globally as domestic capacity expansion has been slower than expected and new mining licenses in the country are hard to come by. The company recently managed to ramp up its production from the two mines to 28,000-30,000 tons per day from its earlier production level of 21,000-22,000 tons per day. IIFL has upgraded volume estimate to 30mn tons in FY12 and 34mn tons in FY13, factoring in higher production from Karnataka.

DLF

29 Sept, 2011

Price at suggestion (on 22nd Sept, 2011) - 203
Target Suggested on 22nd Spet - 217
Current Market Price - 224.45
TARGET ACHIEVED!! Book Profits.

On 22nd Sept, our experts pointed DLF to touch 217. At that time DLF was at 203. The Stock is currently at 224.45 above the target suggested. We recommend to book profit at this level.

Real Estate Stocks to Outperform post Eurozone crisis

27 Sept, 2011

Real Estate stocks have been hammered and many are trading at 50-70 % discount from highs witnessed few years back. When the markets rallied, real estate did not participate and when markets have fallen, realty stocks have been battered. Most companies have huge debt and are witnessing a drop in sales. Companies have seen poor results due to interest burden on the loans taken. To make matters worse, RBI has hiked rates making loans costlier.But some companies have good land bank. Companies are selling land to reduce debt. Once Eurozone crisis ends, outlook for the sector is expected to brighten. Rate hikes seem to end and RBI may cut rates to spur domestic growth of the economy. Property rates are also expected to appreciate in both tier I and tier II cities. Once the firms reduce Debt burden and boost sales, expect the stock prices to outperform broader markets.

Top picks - DLF and HDIL