Tit - bits

Key indices ended with modest gains on Wednesday. The S&P BSE Sensex closed 290.36 points up or 0.86% at 34,247.05. The Nifty50 ended the day, at 10,116.15 up 69.50 points or 0.69%.

Meanwhile, the World Bank said on Monday, 8 June 2020 that India's economy will shrink by 3.2% in the current fiscal. The COVID-19 pandemic coupled with multi-phased lockdowns imposed to curb its spread has resulted in a severe  blow to the Indian economy. The global economy, will shrink by 5.2% this year due to the massive shock of the coronavirus pandemic and the shutdown measures to contain it, the World Bank mentioned.

The BSE Mid-Cap index rose 0.81% and the BSE Small-Cap index gained 0.92%. The market breadth was positive. On the BSE, 1525 shares advanced while 1025 shares fell. A total of 157 shares remained unchanged.

The Federal Reserve kept interest rates unchanged on Wednesday and indicated it does not expect to raise them through 2022.

The Fed also expects the U.S. economy to contract by 6.5% in 2020 before expanding by 5% in 2021.

In the US, the traders took profits out of names benefiting from the economy reopening and rotated into mega-cap tech stocks. As a result S&P 500 closed 0.5% lower at 3,190.17, while the Dow closed 282.31 points down, or 1%., to close at 26,989.99. The Nasdaq Composite, meanwhile, moved up by 0.7% to 10,020.35, marking its first-ever close above 10,000.

Looking at the overall scenario I'll suggest two calls: one short and one long:

#Sell Dabur India Ltd at around Rs. 461/462, for short term targets of Rs.431/404. SL: 470.
Rationale: 

• There is a general  weakness in demand for discretionary goods for this packaged consumer goods maker due to Covid-19 induced nationwide lockdown.
• Dabur was among the first few FMCG companies to suspend operations at its manufacturing units before the nationwide lockdown, actually kicked in. On March 23, Dabur halted operations at roughly 60-70% of its manufacturing plants in India. It has 12 manufacturing units in the country.
• The nationwide lockdown is likely to have a significant effect on the business operations of David India Ltd, both in terms of sales and production.

#Buy the shares of Cochin Shipyard Ltd at around Rs. 267/268, for short term targets of Rs.327/351. SL: Rs.255.

With effect from May 6, 2020, the company started its operations at the main unit at Kochi with entire permanent workforce. The Kochi unit alone contributes more than 90 per cent of the turnover of the company in a year. Hence, there will not be a major impact on its financials even though Mumbai and Kolkata operation remained closed. These two units wil open only after the restrictions are over. 

To catch up with the lost production days, the second and fourth Saturdays have now been declared as normal working days until further notice. Henceforth there would be six working days in a week.

However, there were no production activities from March 23, 2020, to May 5, 2020. Also, there has been a reduced scale of production in outsourced manpower to a certain extend due to reduced migrant labour availability and restricted work arrangements which has reduced the scale of production.