>Daily Market & Technical Outlook (ICICI Direct)

Key points
Market outlook — Open flat to positive on mixed global cues
Positive — Rupee expected to gain
Negative – FIIs, MFs selling


Market outlook
Indian markets are likely to open flat to positive, taking cues from Asian markets. The SGX Nifty was trading 15 points up in the morning. Other Asian markets were also positive in the morning despite the US markets falling around 3% on an average. The Japanese government announced that it was prepared to unveil a new stimulus package, which bucked up the confidence in Asian markets. The rupee is expected to gain from Asian stocks gaining

■ The Sensex has supports at 9510 and 9330 and resistances at 9710 and 9820. The Nifty has supports at 2960 and 2920 and resistances at 3120 and 3160

■ Asian stocks rose as Japan prepared to unveil a new stimulus package and confidence among South Korean manufacturers rose. The Nikkei gained 72.8 points, or 0.9%, to trade at 8,308.8. The Hang Seng advanced 169.1 points, or 1.3%, to trade at 13,625.5

■ US stocks tumbled on Monday as two major US automakers took a step closer to potential bankruptcy and a spate of European bank rescues heightened concerns over the financial system's health, putting the brakes on a recent run-up. The Dow Jones lost 254.16 points, or 3.27%, to 7,522.02. The S&P 500 tumbled 28.41 points, or 3.48%, to 787.53. The Nasdaq fell 43.40 points, or 2.81%, to 1,501.80

■ Stocks in news: DLF, NMDC, Tata Power, Grasim, Kamat Hotels, Cadila Healthcare

To see full report: OPENING BELL 310309

>Daily Calls (ICICI Direct)

Sensex: We said, "Doji can be a potential turning point for the short term, if we see a strong trading below its low at 9913," Index opened gap-down below 9913, and lost nearly 5% for the day. Bankex lost more, down 8.5%. Metals and Realty also lost more than 7%. A/D ratio turned negative, at 1:2.

The action created a bearish Evening Doji Star pattern, confirming Friday's Doji as a short-term turning point as argued. It also broke both Blue and Green channels. Gap-down area at 9902-13 is now a new technical resistance. Though pull-back to Green channel is possible, break of low at 9520 would continue weakness.

To see full report: CALLS 310309

>Daily Derivatives (ICICI Direct)

Derivative Comments

• Nifty April futures shed 2.02 million shares in OI accompanied by a narrowing of discount to 10 pointsindicating closure of long positions in the Nifty. A similar trend was also seen in FII Index futures wherein there was a net sale of Rs 995 crore along with a drop in OI by 3.77%

• The options data suggests maximum addition of OI in the 3200 Call option, which added 14261 contracts with rise in IV from 33.35 to 34.48. The highest volume was registered by the 3100 Call followed by 3000 Put. The OI addition in 3000, 3100 and 3300 Calls was 8411, 4713 and 8488 contracts. All these Call options saw an upward shift in IV. On the other hand, unwinding of contracts was seen in Puts ranging from 3000 to 3200 wherein some short covering was seen in 3100 and 3200 while profit booking by Put buyers was seen in 3000 Put. Maximum addition in Put option was seen in 2600 adding 10673 followed by 2700 adding 7352 contracts. The drops in IVs with rise in volumes indicate Put writing in these Put options. Moreover, an addition of 4865 contracts in the 2900 Put was accompanied by a fall in IV from 39.34 to 38.97. This along with good volumes further suggests that this level could act as a decent support for the Nifty on a closing basis for a couple of sessions.

To see full report: DERIVATIVES 310309

>ICICI Bank (ANAND RATHI)

Value, with lots of negatives cooked in; Initiate at Buy

■ Buy. We initiate coverage on the ICICI Bank with a Buy and a target of Rs430. We expect on-going fundamental improvements and adequate NPA coverage to lead to stable RoEs over FY09-11. We believe the subsidiaries have value, and are not reflected in the stock price.

■ Fundamental improvements underway. The bank has been slowing asset growth and placing greater emphasis on protecting margins, improving productivity and maintaining credit quality. These measures would improvement fundamentals.

■ Subsidiaries have value, not reflected. Key subsidiaries of the bank (in life insurance, general insurance, asset management and the securities business) are leaders in their businesses. In our view, the current price does not reflect the value of the subsidiaries, which we estimate at Rs105.

■ Adequate NPA coverage. At 51%, ICICI’s NPA coverage is not the best, but should hold it in good stead when asset quality is under duress. The coverage ratio is expected to be +50% over FY09-FY11, with net NPAs at ~3.2% in FY10.

■ Valuation. Our fair value of Rs325 (standalone bank) is based on the two-stage DDM (CoE: 15%; beta: 1.3; Rf: 6.5%). We value its subsidiaries at Rs105 a share. At our target price of Rs430, ICICI would trade at 1.1x FY10e ABV. Its target multiple is at a 40% discount to HDFC Bank’s and a 5% premium to the sector.

To see full report: ICICI BANK