Morning Bells (17 Jun 13)

Good Morning Friends.

Happiness gives temporary satisfaction but satisfaction gives permanent happiness.

The rupee strengthened by almost 49 paise to 57.46 against the dollar. Wholesale price-based inflation fell to a three-year low of 4.7% in May on the back of softening in the price of manufactured as well as primary articles. Headline inflation, based on the Wholesale Price Index, stood at 4.89% in April as against 7.55% in the corresponding period of last year.

Banks stole the limelight in today's session. Market participants seem to have factored in the rating outlook change by Fitch, which has rated the outlook for 10 Indian financial institutions as stable. The list includes SBI, Bank of Baroda, ICICI Bank, Canara Bank, Punjab National Bank, Axis Bank and IDBI Bank.

Beaten down interest rate sensitives like realty, auto, banking and metals stocks were the top performers in trade on Friday.

Gainers –

Hindalco, Tata Motors, Maruti, JP Associates, Tata Power, Reliance Infrastructure, Reliance Industries, L&T, ICICI Bank, BPCL and Tata Steel were among the major gainers in Sensex & Nifty.

Losers -

IndusInd Bank, Hero MotoCorp, Hindustan Unilever, and Bharti Airtel were among the major losers in Sensex & Nifty.

Sectoral –

Consumer durables, capital goods and oil and gas stocks too lent support. Even mid- and small-cap stocks contributed to Friday’s rally.

RBI policy meet : A view –

There was hope for a rate cut in the backdrop of gloomy macro-economic fundamentals. Industrial growth hit a bump while recent inflation data has once again fallen within RBI's comfort levels.

This made a perfect blend for a rate cut but a weakening rupee pooped the party. The rupee started its fell off the cliff and touched an all-time low of 59 per dollar levels. However, RBI's intervention stemmed the flow bringing it to saner 58/$ levels.

Central Statistical Office, declared industrial productivity for April at 2.3% down from 3.4% in March on the back of a sharp slowdown in capital goods.

On Friday, headline inflation as measured by the Wholesale Price Index slowed for a fourth straight month in May to 4.7% from a year earlier. This is within RBI's comfort zone of under 5%.

So lets see as there are two camps on what might pan out, one is of the view that RBI might want to fuel an economy which, according to many, is running out of steam. While others say that RBI is more likely to sit on it for a while.

Will see what happens today at 11AM.

Domestic Front –

OMCs hiked Petrol prices by Rs. 2 a litre.

Oil marketing companies decided to increase petrol prices by up to Rs 2 per litre, excluding VAT, with effect from midnight.

Earlier on June 1, Oil marketing companies announced a 75 paise per litre hike in the price of petrol.

Since March, oil companies have cut petrol prices four times -- March 16 (Rs. 2.4), April 1 (Re. 1), April 16 (Rs. 1.2) --on falling global oil prices.  On May 1, petrol prices were cut by Rs. 3 per litre -- the highest cut in over five years. 

Every fortnight, oil companies review petrol price in line with global crude prices. The move follows deregulation of petrol prices since June 2010.

WPI Inflation at 4.87% –

The wholesale price index (WPI), India's main inflation measure, slowed for a fourth straight month in May to 4.7% from a year earlier. However, depreciating rupee and pressure on current account deficit (CAD) may prevent Reserve Bank of India (RBI) from cutting policy rates.

Analysts had expected Indian WPI to fall to 4.87% last month.

The initial print for WPI inflation is slightly lower than our expectation of 4.8%, partly reflecting the surprising decline in the diesel sub-index in month-on-month terms despite the price hikes undertaken in May 2013, Aditi Nayar, Senior Economist, ICRA, said.

The WPI rose an annual 4.89% in April. This is the second month in a row that inflation remained in RBI's comfort zone of 5%.

FM asks PSU Banks to cut lending rates :

Finance Minister P Chidambaram on Thursday said that it has called the heads of PSU (public sector units) banks towards the end of this month to pass on the benefit of RBI (Reserve Bank of India) rate cut to corporates and retail borrowers.

Although RBI has reduced the policy rates by 1.3% since January 2012, banks have lowered the lending rates by only 0.3%, the finance minister added.

Global Front –

IMF cuts US Global outlook growth forecast :

The IMF cut its US growth forecast for 2014 to 2.7% after 1.9% this year.

The economy will rebound in 2014, the International Monetary Fund said in its annual report.

It also credited the Federal Reserve's stimulus program.

IMf sees US CPI inflation at 1.8%.

Fed Meet –

There are rumour mills are churning reports that US Federal Reserve expects substantial passage of time between the end of bond-buying program and raising short-term interest rates. In this respect, the apex body plans to hold its benchmark lending rate low for a considerable amount of time after it scales down its QE program.

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

The two major events lined up ahead are the minutes of the Federal Reserve's Monetary Policy meet on June 18-19 and RBI's policy meet on June 17.

A weak rupee makes imports expensive, increasing inflationary pressure and also prompts foreign investors to sell Indian assets as their dollar returns are affected this in turn increasing the difficulty of financing the current account deficit.

I am expecting markets to be volatile this week, as focus would shift to Federal Reserve policy meeting as the markets still remain perplexed regarding the longevity of bond buying program. There were mixed signals during Bernanke's last testimony to the Congress, whereby the central bank seemed to be indecisive on the duration of QE program.

Bernanke once again failing to provide clarity on the monetary policy, we could see gold prices deriving strength and moving higher.

This week is also important as near term direction will be determined by the Iranian elections.

The INDIA VIX on NSE was down 5.6% and ended at 18.35 against previous close of 19.44. The last time the index surged this level was in June, 2012.

The volatility index also known as the fear gauge indicator is a measure of the amount by which an underlying index is expected to fluctuate in the near-term.

FNO PCR was 0.87 against previous close 0.81.

Indian Rupee – Rupee fall arrested now for some time, currently gained by 46 paisa and was trading at 57.52 against its previous close of 57.98.

S&P 500 (US) was trading at 1626.73 down 9.63 then its previous close at the time of writing M Bells.

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

Finally Nifty find support around 5700 level and rallied on Friday ahead of RBI policy on Monday and Fed policy meet, rally was lead by rate sensitive stocks.

As when Nifty was around 6100 I was not convenience by that up move, this time also I am not convenience by such rallies and have already informed you to use these bounces to make profit and exit you stuck positions. As this was just in hope RBI cut rates, but if not then will we see below 5700 level again?

3 Major support zone are there from where market rebound few times in past. 5665-5685, 5605-5630 and around 5500 level. So at first point of 5685 short covering started taking place and today we may see some GREEN after 6 straight trading sessions.

So don’t get too bullish, just use bounces to make exit and reduce your losses. Market need to close above 5940 for any further development. Short covering and short term buying in rate sensitive stock can push Nifty towards 5800 level but don’t get confused.

Opening – Seems flat and market may remain volatile as participant are still not sure what I RBI will do.

========================  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.)

TM

The Tata Motors' scrip was in top gear Friday. It rose over 5% after its UK-based subsidiary Jaguar Land Rover recorded a strong growth in retail sales in May. JLR posted retail volume growth of 12.3% year-on-year and 13.9% month-on-month at 32,477 units in May.

Still it need to cross 306 to make a decisive move further, its all depend now on RBI policy outcome.

M&M to buy 13.5% stake in CIE Automative -

The Mahindra Group (India) and CIE Automotive S. A. (Spain) announced today the signing of a global alliance agreement between Mahindra's automotive component businesses (held under its Systech Sector) and CIE Automotive (involving also its subsidiary Autometal).

The agreement will see the formation of a global automotive component supply network with combined annual sales of approximately Rs15000 Crores / Euro 2.2 Billion / USD 3 Billion with operations in North America, South America, Europe and Asia held through listed businesses in Spain, Brazil and India.

Infy : Asked investors to be patient -

NR Narayana Murthy, executive chairman of Infosys reportedly said that the company has overcome tougher and bigger challenges before.

At the company's AGM,  NR Narayana Murthy, executive chairman of Infosys said that the company has overcome tougher and bigger challenges before.

Murthy was quoted as saying, “his calling was 'sudden, unexpected and most unusual.'

The task of rebuilding a desirable Infosys will take at least 36 months, reports Murthy.

Murthy said that he felt nice to be back at Infosys after missing the 2012 AGM.

Infosys had announced average wage increments of 8% for employees in India and 3% for onsite employees.

Infosys' co-founder NR Narayana Murthy will provide strategic direction to the global software major on return as executive chairman, outgoing chairman KV Kamath reportedly said.

Media Segment –

The Indian Broadcasting Foundation has agreed to implement the Telecom Regulatory Authority of India's order on restricting TV advertisements to 12 minutes per hour from the prevailing 15-20 minutes. Depending on genre, this will lead to a reduction in advertising inventory by 20-40% and would culminate into an increase in ad rates.

Apollo Tyres -

Apollo Tyres continued to skid on day two, it declined by as much as 5.5% on Friday on concerns about a rise in debt levels post its $2.5bn acquisition of US-based Cooper Tire & Rubber Co.

==================== 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.

HDFC 860CE – @12 TG 20+ Today’s updated SL 5 after first hour trade (Max 2 lots)

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

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

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

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

MG Blog Fronm Jan 13 to April 13 (Total 58,800)

June 2013 = -8500

Billionaire Club from Jan 13 to May 13 (Total 1,22,200)

June 2013 = +9,900 – 8500 = +1400

(Booked loss at 1.5 = -6500, Union Bank – 230CE @4.75 TG 7+ SL 2 (Max 2 lots)

(Booked loss at 3.5 = -2000, TS 310CE – @5.5 TG 10+ SL 288 in Cash (Max 1 lots)

Today’s MG Mantra –

Utilize the opportunity, it could be very short lived say max till RBI announcement.

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.

============ Join MG on FaceBook ============

Join MG on FB for live update – www.facebook.com/mudraguru.india

Please make sure you need to send a message on FaceBook – “I am blog reader” as currently I am not accepting FB request from unknown person.