Actionable ideas

Tech Mahindra (BUY, CMP Rs701, Target Rs775)

The stock has seen a sharp correction from a high of around Rs1,550 in October 2007 to a low of Rs575 on 22nd January2008. Thereafter, the stock has witnessed a smart pull back rally to Rs 814 levels in early February 2008. The stock hassince then been trading sideways in a range between 660-740 levels. The volumes have been picking up for the past fewdays, suggesting increased participation in the stock. We believe the stock has formed a strong base at the 650—660levels and looks set to move upwards for targets of Rs800-850 levels in the coming weeks. The daily MACD has generateda buy signal, although in negative territory. The daily RSI is also suggesting that the worst is over for the stock. Keeping inmind the above mentioned technical evidences, we believe that Tech Mahindra is set to show a smart rally to levels ofRs800. Traders can buy the stoc k between Rs688-700 levels with a SL of Rs675 for short term targets of around Rs775.

RCOM (BUY, CMP Rs582, Target Rs802)

Reliance Communication (RCOM) is expected to significant scale up its wireless and non-wireless operations on the back ofrobust pan India based subscriber growth. In addition to higher tenancy for its tower arm, we also expect 3G services tobe offered to its newly acquired GSM subscribers. Other value creation initiatives include: stake sale in FLAG subsidiary,further investments in its submarine cable business, DTH and IPTV foray. Reliance Infratel, the tower subsidiary of RComhas filed DRHP with SEBI to raise funds via an IPO. The company plans to dilute 10.1% stake, for an estimated amount ofUS$1.3-1.5bn valuing the company at US$13-15bn with plans to set up about 30,000 towers by FY09. With multipletriggers and robust earnings visibility riding on secular sector growth, we recommend a buy on the stock with a pricetarget of Rs802, an upside of 37.8% from current levels.