MARKET OUTLOOK
It was yet another listless session for the equities. Nifty failed to breakout on either side as it traded between
5090 and 5135. Metals were sluggish from the very beginning but heavyweights like Hero Honda, RIL and
HDFC kept the indices afloat. ITC, IDFC and cement counters also supported the indices. RIL was the
biggest gainer amongst the heavyweights as it gained almost 1.5% on improved volumes. IT stocks were
also under pressure and only TCS managed to close in the positive territory amongst the heavyweights.
Overall, most of the sectors witnessed mixed trend with the exception of Cement. Finally, Nifty ended the
day at 5116, up almost 15 points.
In the short term, Nifty has clearly marked breakout points at 5085 on the downside and 5140 on the upside.
Above 5140 Nifty could target 5220 in coming days. IDFC is again moving towards 166-167, the level that
has provided stiff resistance on past few occasions. Above 167 strong breakout is expected that could take
the stock higher to around 185-188. Century Textiles is likely to target Rs 543-545 and the pattern breakout
is suggesting even higher levels of around 570-575. RIL is showing accumulation pattern and is a strong buy
on dips candidate. Short-term targets of around 1045-1050 are seen while positional trades could fetch much
higher returns. Others that look positive are McLeod Russell, DLF, Aban, APIL, Educomp and Reliance
Cap (above 818).
INVESTMENT PICK
TIME FRAME – THREE to SIX MONTHS
JUBILIANT ORGANOSYS ( JOL)
Present Price – Rs.346.25, Projected Price – Rs.425
JOL has diversified businesses across pharmaceutical and nutritional products, pharma outsourcing services,
industrial & agriculture chemicals and polymers. JOL is well placed to address growth opportunities in each
business segment. Diversification, scale and vertical integration are JOL’s key strengths.
The major growth driver is increased traction in the contract manufacturing business through execution and
signing of new contracts, pick-up in radiopharmaceutical sales and disclosure on orderbook positions across
the businesses.
JOL has a leadership position in pyridine and its derivatives. The company has strong chemistry experience
of more than 25 years and offers a basket of 150 products, including various derivatives of pyridine and
picolines. In an effort to expand its product offering, JOL acquired a 100% stake in Specialty Molecules in
FY09 for INR200mn. Speciality Molecule has a strong position as the manufacturer of halogenated pyridine
derivatives that uses the niche technology of halogenation.
Jubilant’s acquisition of Hollister-Stier and Draxis has increased its presence in sterile injectables & non
sterile products and has given it entry into niche radiopharmaceutical segment. Its CMO business of North
America has secured new manufacturing contracts from 3 leading global pharma and biopharmaceutical
companies. Its DDDS business has renewed its agreement with Lily for a period of 5 years and signed new
Drug Discovery contracts with 2 pharmaceutical companies.
Through diversification, we think JOL has substantially de-risked its business model and seeded itself well
for growth opportunities across segments. Scale and vertical integration, particularly in industrial chemicals
and pyridines, have helped the company attain cost Competitiveness.
JOL is a play on multiple themes:
1. Pharmaceutical R&D and manufacturing outsourcing.
2. Growth opportunities in Pyridines; Vitamin B3 on account of cost competitiveness.
3. Expanding healthcare and generic opportunities.
On the technical front, the chart pattern is looking very attractive and it can be bought at
current levels and at all declines.
Narrow range markets ready for Big Move
The Nifty continues to move in a narrow range. As the Index continues to remain between 5050 and 5150,
the markets are getting ready for a big thrusting move. Remember, volatility moves in cycles. We have
periods of low volatility followed by periods of high volatility.
We should remember what the Nifty was doing prior to the presentation of the union budget! For four days
it remained locked in just 50 points of movement. Then, we had the big thrusting move. In the same way,
after the thrust, we now have the Nifty moving in a narrow range. Sooner rather than later, we will see the
Index move out of this range.
The direction of the breakout is unknown. It always is.But, we assume that [rices will breakout in the
direction of the trend. Currently, the trend is UP.
For Investors:
The 5100 or 5050 levels are not significant. The Nifty broke out from 4930 resistance and a minor
correction can take it back to this level. Therefore, the intermediate trend remains up while the Nifty is
above 4930
For Traders:
Intra day charts show a pivot level at 5050. Therefore, the trend is up while the Nifty closes above this level.
below it, the short term trend changes to down.
Where can the Nifty go to?
An up breakout should see the Nifty touch 5250 or even a test of 5300. That may not be the end of the up
move.
On the downside, a slide below 5050 may see the Nifty test 4930.