Saturday, January 8, 2011

Outlook on Bajaj Auto and GAIL.....

GAIL (India) was one of the top gainers of the week, gaining 2.30% and closed at 524.45. The shares of Gail India touched a new 52-wee k high of Rs 535.85 on 06 Jan 2011 on BSE.

The company has attracted the investors because; The Company has signed a cooperation pact with ONGC. As per the contract, GAIL will get the first right on all gas that ONGC will produce from any of its fields in future. But in case GAIL is unable to get a 'good' price within 30 days, ONGC will take back the marketing right. GAIL will also market some of the chemicals to be produced from the Dahej petrochemical complex being set up by ONGC Petro-additions (OPaL), a subsidiary of ONGC. GAIL has 19% stake in OPaL. The agreements will be initially valid for three years and can be extended thereafter after. This integrated effort of ONGC and GAIL shall also increase the availability of firm gas sourcing for infrastructure projects. The two companies also reached an understanding in swapping gas available to both the companies so as to optimize the logistics and costs.

Meanwhile, it has also expected to announce Q3 results. The board meeting of Gail (India) will be held on 18 January 2011 to consider the un-audited financial results for the quarter ended 31 December 2010 (Q3).so the street expecting good results from the company in Q3.

However GAIL is a defensive play and with volumes and tariff growth, it is likely to play out a growth story going forward.

On technical basis : The GAIL is trading in near the upper band (as per Band Bollinger), but one can take position with a loose Stop loss 502 and 492 and resistance will be around 540 & 558. Hence we advice traders to hold for the above levels.

Bajaj Auto was one of the worst performers during the week, down by 14.56% and closed at 1316. As interest rates are on the rise, auto stocks have come on a correction mode because higher interest rates would mean that it costs more for consumers to borrow money for buying a vehicle. Meanwhile, the company has reported a growth of about 10% in its monthly sales for December 2010, lower than street expectation. The company has sold total 2,76,803 units in December 2010 as compared to 2,52,004 units in December 2009. Motorcycles sales of the company grew by 11% to 2,43,675 units from 2,19,920 units, during the month under review over the year ago period, while sales of commercial vehicles of the company grew by 5% to 33128 units from 31575 units.

Adding to this some of the brokerage biggies has downgraded motorcycle and three-wheeled motorised rickshaw maker Bajaj Auto to "underperform" from "outperform" on this week.The brokerage said it believes that two-wheeler industry growth would moderate over FY12-13 while competition would intensify. The Stock’s current misfortune stems from two consecutive months of disappointing volumes, following record sales in the preceding six months. And also it has reported that delays of export shipments were the main negative impact for the company’s 7% drop in sales in December compared to the previous month

On technical basis Bajaj Auto has taken a down trend and closed below important support level.The trend is still negatively biased with support seen near 1239 and 1051 levels .On the other hand it may face resistance around 1374 and 1430, if its manages to break 1408 mark and hold above this level, then the next resistance will be around 1430 and Hence we advice traders to sell.


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