Morning Bells (20 Mar 13)

Good Morning Friends.

Beautiful fact about the World - Once they stop talking to you, they start talking about you..

Oops, another turbulent day in just 3 weeks, it was 3^rd day in past 3 weeks when market went down sharply. Nifty ended below the 5750 mark. While the RBI obliged to support the government’s growth agenda by cutting Repo rate by 25 basis points, the tone remained hawkish. The DMK drama took the market and Parliament by storm resulting in a market collapse which saw the Nifty ending near day’s low plunging over 100 points in intra-day trade.

The Dravida Munnetra Kazhagam (DMK), the state political party of Tamil Nadu on Tuesday announced that it has withdrawn its support to the UPA government and pulled out five of its Central ministers over the issue of alleged human rights violations of Tamils in Sri Lanka.

DMK chief, M Karunanidhi, however, kept a window open of returning to the alliance, saying it was ready to reconsider it if Parliament adopts a resolution before March 21 incorporating the two amendments he had suggested to be moved on the US-backed resolution at the UN Human Rights Commission.

RBI Monitory Policy -

With political developments, the Reserve Bank of India’s monetary policy meeting turned out to be a complete non-event as market participants completely ignored the reduction of key interest rates. The RBI in its mid-quarter monetary policy review on Tuesday cut the repo rate by 25 basis points to 7.5% for the second time since the start of the year. The Cash Reserve Ratio (CRR) was kept unchanged.

Welcome to Repo Cut -

The Reserve Bank of India in its mid-quarter policy review earlier today cut the repo rate by 25 bps to 7.5%. It left the cash reserve ratio unchanged at 4%. It also guided limited headroom to ease rates due to persistently high inflation.

Reactions to the RBI policy move were muted as the cut was on expected lines but the guidance does not seem to have perturbed the industry too much.

More Room is there -

The RBI has obliged on the Government’s call to the Central Banker to support its growth agenda by cutting Repo rate by 25 basis points. An improvement in trade deficit, drop in core inflation, achievement of 5.2% fiscal deficit and slowing growth prompted RBI to act. These front ended cuts in 2013 (50 bps in Repo and 25bps in CRR) are a welcome step and will help bring down interest rates in the medium term. Having said that, immediate monetary transmission on account of the Repo cut is difficult due to liquidity tightness in the system. 

Reaction –

A cautious Reserve Bank of India has cut the repo rate by 25 bps to 7.5% in its mid-quarter policy review. The move was in line with market expectations. It has also left the cash reserve ratio unchanged at 4%.

The repo rate is the rate at which RBI lends money to commercial banks. It is an instrument of monetary policy. Whenever banks have any shortage of funds they can borrow from the RBI. A reduction in the repo rate helps banks get money at a cheaper rate and vice versa.

What may not go down too well with the street is its guidance that rising inflation levels may constrict its headroom to ease rates further. It expects headline inflation in FY14 to be rangebound around current levels. “Even as the policy stance emphasises addressing the growth risks, the headroom for further monetary easing remains quite limited,” an RBI release said.

Food Security Bill –

The Union cabinet on Tuesday cleared the changes in the Food Security Bill which will provide food subsidy to the poor. The bill promises provides secutity under the Antodaya Anna Yogana by continuing supply of 35Kg of food grain per month per family. The new changes are based on the recommendations of the Parlaimentary Standing Committee.

The changes introduced to the existing bill include uniform allocation of 5 kg foodgrains (per person) at fixed rates to a third of country, scrapping the priority and general classifications of beneficiaries.

The cabinet has also deferred its decision on sugar de-control. The government was expected to discuss abolishing the levy-sugar mechanism, in which private mill owners are expected to sell a specified amount of sugar to the government at a regulated rate.

Gainers – Wipro, Bajaj Auto, Sun Pharma, Maruti Suzuki, Gail India and ITC were among top gainers in Sensex and Nifty.

Losers - RIL, Coal India, ICICI Bank, ONGC, Dr Reddy’s Lab, Tata Motors, Hindustan Unilever, HDFC Bank, Hero Motocorp, Cipla, SBI, L&T and HDFC were the major losers in Sensex and Nifty.

Sectoral – S&P BSE 0.7%, Consumer Durables index 0.3% and Healthcare index up 0.3%. were the gainers, Even the S&P BSE Mid-Cap and Small-Cap index was down 0.29% and 0.67% respectively.

On Domestic Front –

1.

DMK - DMK has pulled out of Congress-led UPA government , according to reports.

5 DMK ministers to resign shortly,  according to reports

"We are in complete support of the Tamils in Sri Lanka," DMK supremo reportedly said.

Earlier reports stated that DMK slammed the Centre for its "lukewarm" response on the Sri Lankan Tamils issue and said there will be no outside support to UPA.

DMK, an ally of UPA since 2004, has 18 members in the Lok Sabha with one Cabinet minister and four junior ministers. "

"DMK ministers to quit the government either today or tomorrow, M Karunanidhi said.

There are reports that DMK has also demanded the inclusion of the terms 'genocide' and 'credible independent international probe into the war crimes' in the US-sponsored resolution against Colombo at the ongoing UN Human Rights Council meet in Geneva.

Finally, BSE Sensex closed at 19,008, down 285 points over the previous close. It had earlier touched a day's high of 19378 and a day's low of 18939. It opened at 19345.

On Global front –

1.

European stock markets have extended losses in early trades on Tuesday ahead of the vote on the bailout measures which is scheduled for later today. But there have been rumors that the vote could be postponed to later this week.

Markets have declined sharply amid worries over the bailout plan for Cyprus, which includes a controversial levy on bank deposits continues to haunt the market.

Trading on the Cyprus Stock Exchange has been suspended for two days, the exchange said.

The FTSE index in UK was down 0.3%, the CAC index in France was down 0.54% and the DAX index in Germany was down 0.52%.

=====================  MARKET OUTLOOK  =====================

As told on Tuesday that PCR at 1.35 isn’t good signal for market, CPI also diluted hopes of rate cut and y’day we had seen the impact of that.

The INDIA VIX on NSE was up 5% and ended at 16.71 against previous close of 15.85.

FNO PCR is 1.18 against previous close 1.05.

Indian Rupee – Rupee weakened by 20 paisa and was trading at 54.37 against its previous close of 54.17.

S&P 500 (US) was trading at 1555.55 up 3.40 then its previous close at the time of writing M Bells.

=======================  NIFTY OUTLOOK  ========================

Technically, Nifty extended its weakness and closed below its 100-DMA (5,857), confirming a breakdown in the index after last week’s recovery. The undertone remains cautious and there is no point to taking any risky bets ahead of the RBI policy meet next week

As per current outlook Nifty range is 5600 on downside while upside is 6200.

Intraday Resistance – 5970 – 5917 – 5831 and Support – 5692 – 5636 – 5553 (Pivot 5777)

Weekly/Monthly Resistance – 6144 – 6057 – 5965 and Supports – 5785 – 5698 - 56006

Opening – Seems flat and market go range bound. On upside major resistance 5910 / 5925 / 5950 whiles support comes to 5750.

========================  STOCK OUTLOOK  ======================

(Stock outlook needs to watch stock movement carefully and then one can bet after having a look, I tried to put related info which will help you in taking positions.)

RIL –

Reliance Industries Ltd is planning to invest $1 mn a day with partner BP Plc to look for new reserves more than a mile below its biggest field, according to reports.

Reliance and BP plan to invest more than $5 billion in five years to develop discovered gas deposits in the KG-D6 block off India’s east coast.

==================== OPEN CALLS ====================

# Please remember when I make special remark with any position then one should need to take care of that else you can make loss instead of profit.

# Be with strict SL and don’t hesitate to book even small profit if Nifty doesn’t shows strength.

=============== INVESTMENT BASKET ===============

(Stock in this section is with view of 3 months to 1 year)

Mahindra Holiday – @334 TG 375+ (Active from 15 Dec 12)

Satyam Computer – @103 TG 130+ SL 112 (Active from 15 Dec 12)

(Book profit in your 50% holdings and keep balance with SL 119, on 18 Mar 13)

On Mobile – @44 TG 60+ Updated SL 39 Qty 2K (Active from 01 Jan 13)

============ PL Sheet (started from Jan 2013) ============

(If someone find any error in PL, please draw our attention)

MG Blog Since Jan 13 (Total 36,850) + Mar 13 = +12,200

Billionaire Club Since Jan 13 (Total 67,700) + Mar = +34,750 – 2100 (Loss in Hindalco CE) = +32,650

(-2100, Loss in Hindalco CE)

Today’s MG Mantra –

Market may seems range bound, go for cautious approach.

Have a Profitable day – MG

Disclaimer –

1. I have shared my view as per my limited knowledge; please use your own skills to make a wise decision before execution of trade or consult your financial advisor.

2. Those that don’t have patience and are not willing to book loss also in cases don’t enter this market.