MARKET OUTLOOK
Nifty posted weekly gains after four weeks lower levels attracted some value buying in certain sectors like
Cement, IT and Autos. The support suggested last week between 4600 and 4700 managed to stay good as
Nifty bounced back after posting a low at 4675. Global sentiments sagged during the early part of the week
as markets feared sovereign collapse in 5 European countries, particularly Greece. Reports of EU bailout of
Greece managed to calm the nerves somewhat. Back home we had excellent news on the economy front as
IIP surged by record 16.8% in December. This was way ahead of expectations as were the growth posted by
Capital Goods sector. While on the face of it this is an excellent set of news for the markets but it comes
with the increased probability of interest hike fears as well as stimulus roll back in forthcoming budget. It
remains to be seen whether market focuses on the growth numbers or on the increased probability of
stimulus roll back. China has again raised the CRR by 50 bps on Friday after markets and that might also
play on the sentiments. Technically, things are looking a little better as Nifty heads towards 4900. Above
4840, next significant resistance is seen around 4910-30 and it might be crossed in one go. 4750 has
emerged as a strong support on the closing basis and it would be prudent to keep a close eye on closings
below 4750. IT, Cement and infrastructure space could see some positive bias while commodity stocks,
particularly the metals might play spoilsport.
Nifty has immediate intraday support around 4770-85 while resistance is likely around 4880 and then
around 4920.
INVESTMENT PICK
JUBILIANT FOODS
Present Price – Rs.230.95, Projected Price – Rs.275
Jubilant Foods Ltd ( JFL) is one of the largest and fastest growing international food brands in South Asia
with ~65% market share in the organized pizza home delivery segment in India. The exclusive Domino’s
franchise in India provides the company with substantial operational efficiencies over some of its
competitors who do not have the right to operate on a national basis.
JFL is also the master franchisee for Domino’s brand in Sri Lanka, Bangladesh and Nepal till 2024,
extendable till 2034. Its sub-franchisee operates 5 stores in Colombo. Over next few years, these non-India
emerging markets could also enhance the company’s business prospects.
Jubilant conducts ROI analysis based on projected sales and profitability to determine the financial
feasibility of a store. The average store opening time is between 35 and 45 days from the date of possession
of the premises. The company’s operating discipline and standardized internal processes have contributed
significantly to its growth. Employee training programmes cover every aspect of a store’s operation,
including receiving an order, pizza preparation, baking, cutting, routing, delivery, among others. The
company has been able to ensure that the average delivery time for an order is only 22.50 minutes.
JFL will sustain its revenue growth momentum and grow at 38.7% CAGR during FY10 - FY12E. We
expect the APAT to also grow at a healthy 100.0% CAGR during the same period. The ability of its
business model to generate free cash flows and gain significant operating leverage is the true value clincher.
We expect its cash flows to grow at a 67.3% CAGR over FY10 - 12E.
The time frame of the investment would be around 2-3 months.
NIFTY WATCH
The Market Index is in a correction. Momentum indicators suggest that the Index may have made a short
term low. A relief rally can be expected, although such an up move is likely to face resistance above 4900.
For Traders, the trade is to go long, and, buy. For the Nifty, keep a stop loss below 4780. This is a tight stop,
but if the market is not going up, then we want to be out. For Investors, it is wise to wait. We have the
budget, which is a big news event. Then we have the month of March which has a lot of volatility. We also
feel that the correction may have more downside. Therefore, fresh buying is not suggested now.