CEAT Ltd._BUY | CMP - 150; Target - 195

At the current price of Rs.155, CEAT Ltd., is trading at a P/E multiple of 3.3xFY10 earnings and P/BV multiple of 0.83. At this price, we recommend a BUY, with a price target of Rs. 195 , with an estimated growth of 30%. The price target is arrived at with EPS estimate of Rs. 54 and P/E multiple of 3.5 with a holding period of 12 months.

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Global cues 24 Aug 2010

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T20_24Aug2010

Global Markets
1. S&P continues to remain weak, with the earnings season over, there are no positive cues for the market S&P Chart
2. US dollar rose sharply in the global markets and acted very much against the crude prices Oil Chart
3. Dollar breaks above 50EMA & 100EMA, this is a key psychological level Dollar Chart
4. Gold consolidates yet again; showing subtle signs of turnaround Gold Chart

Economy
5. GST rollout to miss April 1, 2011, deadline
6. FY11 trade deficit seen at $120 bn
7. Rupee weakened to its lowest level in over a week, as losses in the euro and other regional currencies hurt sentiment
8. SEBI is considering a proposal to cap the number of company boards that an independent director can sit on
9. MFs stay cash-ready for possible bottom fishing
10. India will soon have an index to measure output of services that contribute more than half of its national income
11. Two-thirds of British companies intending to outsource jobs offshore prefer India over China
12. Crucial changes to the FDI policy announced by the Ministry of Commerce & Industry on March 31 have been stalled; RBI seeks ‘rationale’ for the changes

Indian Markets

13. Nifty broke above 5500 which was a significant level; this was a key milestone – optimism prevails Nifty Chart
14. FIIs & DIIs: FIIs remained net buyers to the extent of Rs. 9637.5 Cr (Month to date); DIIs sold Rs. 1482.1 Cr (Month to date)
15. Gold imports in India, the biggest consumer, rose 18.9% to 155.6 tonnes in the first six months to June ‘10

Sectors

16. Oil Ministry uncomfortable with Vedanta Group - Cairn deal and has asked ONGC, Oil India and Gail to cobble up a joint bid to rival the London-listed miner
17. Power Capacity addition set to scale new peak; 14k MW may be added this fiscal, major role by private sector

Stocks

18. GAIL - RIL deal on D6 gas allocation fall through; Reliance makes a turnaround from key support levels Reliance Industries Chart
19. PVR Pictures to invest INR 2bn ($42.55mn) to ramp up production PVR Chart

Quotes

20. "As long as we can make an annual 15 percent return on equity, I don't worry about one quarter's results." - Warren Buffett

Global cues 17 Aug 2010

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T20_17Aug2010

Global Markets
1. Weak economic data from Japan and worse than expected manufacturing report from the New York region pushed the S&P into negative territory S&P Chart
2. Oil steadies near 1- month low; awaits inventory, economic data Oil Chart
3. Dollar makes a smart rally past 200EMA; consolidates close to 50EMA – shows signs of weakness Dollar Chart
4. Gold consolidates around 50EMA and makes an uptick Gold Chart


Economy
5. Inflation falls to 9.97% in July ‘10; is in single digits for the first time since 5 months – considerable downturn in primary articles
Inflation
6. Government is planning to introduce Bills on the Direct Taxes Code (DTC) and the Goods and Services Tax (GST) by August 26, 2010
7. Price of ethanol fixed at Rs 27 a litre for blending
8. IRDA may cap fee on basic policies; traditional policies to face the heat
9. Government bond prices dropped on heavy selling pressure from banks / corporates and call rates also finished lower at 5.65%
10. Fixed Deposit rates all set to raise; Investors can wait a while before they put in their money
11. China may outperform India in H2FY2010: Merrill Lynch

Indian Markets

12. Nifty has been range bound for a long time; support seen @ 5345, resistance @ 5450 - 5500 Nifty Chart
13. FIIs & DIIs: FIIs remained net buyers to the extent of Rs. 5752.4 Cr (Month to date); DIIs sold Rs. 1262.5 Cr (Month to date)
14. India gold demand stays weak as prices hit 6-wk high; demand likely to pick up as festive season begins

Sectors

15. Cement firms July 2010 growth lowest since 2001; dispatch growth further slipped to 1.63%
16. AMJ 10 quarter results showed relative slowdown; Sales, margins, profit lose some momentum, as earlier stimulus effects lessened

Stocks

17. Vedanta readies financing for acquisition of Cairn; Plans to fund the deal through debt, Sesa Goa’s cash reserve Cairn Chart
18. Yes Bank raises Rs 665 crore from bond issues Yes Bank Chart
19. Sterlites Niyamgiri mining project illegal Sterlite Industries Chart

Quotes

20. "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." - Warren Buffett

Global cues 09 Aug 2010

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T20_09AUG2010

Global Markets

1. Trades above moving averages in a range bound manner with an upward bias S&P Chart
2. Federal Reserve to consider, and perhaps even adopt, additional measures to prop up a softening US economic recovery.
3. Oil makes a U-turn a notch below $84 levels; approaches $80 levels Oil Chart
4. Dollar stays close to crucial levels of $80 Dollar Chart
5. Gold makes a smart uptick, takes support @ 50EMA. Gold Chart

Economy

6. Tax code bill to retain most draft proposals, except in a few contentious areas such as taxation of special economic zones (SEZs), capital gains and unit-linked insurance plans (ULIPs).
7. India’s defence industry is poised at a landmark: 3 private & 1 public company will submit bids to develop a high-tech weapon system for the defence forces.
8. Projected inflation to fall to 6% by the end of this year, while most policy makers pegged it at 6%-6.5% by this financial year-end.
9. Oil spill shuts India's busiest port - Jawaharlal Nehru Port, threatens other coasts.
10. India's industrial output is expected to rise 8.4% in Jun ‘10 from a year earlier, with growth slowing after 8 months of double-digit increases.
11. Govt dilutes 25% to 10% public float norms for state-owned enterprises.

Indian Markets

12. Nifty continues to trade above 5450, a key support level – euphoria builds Nifty Chart
13. Clearly FIIs are driving this uptrend: FIIs remained net buyers to the extent of Rs. 3279.5 Cr (Month to date); DIIs sold Rs. 630 Cr (Month to date)
14. Gold traders trickled in as prices eased a tad below the $1,200 an ounce-mark; a weaker rupee, which makes the dollar-quoted asset expensive, weighed on sentiment.

Sectors

15. Auto sales at record 1,237,461 units in July, 2010.
16. Lending rates may go up from Oct ’10: Banks are likely to start raising lending rates at the end of Sep ’10 as they review their base rates.

Stocks

17. Telecom VAS provider One97 Comm Ltd plans to raise Rs 120 cr through an IPO by Sep ‘10, for expansion.
18. Glenmark settles patent dispute with Sepracor. Glenmark Chart
19. Govt. ties up with TATA Motors ahead of Common Wealth Games. TATA Motors Chart

Quotes

20. "Individuals who cannot master their emotions are ill-suited to profit from the investment process." - Benjamin Graham

Global cues 02 Aug 2010

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T20AUG02

Global Markets
1. Energy & Financials uplift market spirits; makes a jump above all moving averages S&P Chart
2. Oil crosses above $80 levels first time since May on the background of strong economy Oil Chart
3. Dollar clearly on a downtrend; no signs of turnaround yet, it is at crucial levels @ $80 Dollar Chart
4. Gold back on track, holding on to 100EMA Gold Chart
Economy
5. Export of goods from the country in Jun ‘10 jumped by 30.4% at $17.75 billion compared to $13.60 billion
6. SEBI may not accept the recommendation to raise the minimum net worth of asset management companies (AMCs) to Rs 50 crore
7. Liquidity is back on deficit mode: Call money rate past 6%; 10-year yield touches 3-month high
8. Pvt. Insurance cos., continue to clock profits, despite brewing ULIP controversy Q1 profit/loss of life insurers (Rs cr)
9. RBI to allow trading in currency options on spot US dollar-rupee on stock exchanges
10. Forex reserves up by $1.04 bn to $283 bn
Indian Markets
11. India Inc. posts good results and Nifty remains range bound with an upward tilt Nifty Chart
12. Clearly FIIs are driving this uptrend: FIIs remained net buyers to the extent of Rs. 17120 Cr (Month ending Jul ‘10); DIIs sold Rs. 4405 Cr (Month ending Jul ‘10)
13. Draft norms on health insurance policies and IPO norms for general insurance soon: IRDA
14. Basel III and the new financial order will come up for further discussion in Nov’10 when the G-20 meets
15. Shriram Group plans to buy Citi Financial: Group said it had begun the due diligence and expected to conclude the deal in a week
Sectors
16. Core sector grows 3.4% in June, coal biggest drag
17. Bankers see no immediate impact on auto & home loans, post the RBI rate hike
Stocks
18. L&T bags INR 6.5bn ($139mn) power plant order from Jaiprakash Group L&T
19. Yes Bank plans to raise INR 4.5-5bn($98-106mn) to fund its biz growth YES Bank
Quotes
20. “Fear is the foe of the faddist, but the friend of the fundamentalist” - Warren Buffett