Wednesday, 30 October 2013

Morning Bells (30 Oct 13)

Good Morning Friends.

Winning your goal is not toughest victory but winning your patience to achieve that goal is the toughest one.

Oh Lala – finally Nifty closed at 2013 High. It was a fantastic day and we bang of RBI result.

The RBI also raised its policy interest rate for the second time on Tuesday. The central bank lifted its policy repo rate by 25 bps to 7.75%, while the banks' cash reserve ratio was held at 4%.

Usually, the Indian equity market witnesses selling pressure when the RBI hikes rates. Market participants seem to have cheered RBI's move to hike repo rate by 25bps as the move came with a deduction in MSF rate by 25 bps.

Marginal Standing Facility (MSF) rate was cut by 25 bps to 8.75% as the currency has clawed back some ground.  MSF rate is an overnight borrowing rate for banks, which eases the cost of funds for lenders, fuelling credit growth. The RBI had jacked up the MSF by 200 bps in July as the rupee has sharply weakened against the US Dollar. It rolled back 75 bps of that in its September 20 review and another 50 bps earlier this month.

The rally was led by the interest rate sensitives like the Banking, auto and the realty stocks among the other major contributors were metals, power, consumer durables and the capital goods stocks.

RBI Policy meet outlook –
It is assumed that RBI outcome will be next trigger for market but I strongly believe that market may still remain in mid-size range, say from 5980 to 6235. My belief is simple – if RBI does what experts are expecting then it may decline few more points as Govt. is trying its best to increase FII inflow and y’day’s clearance for 13 FDI is part of that that may keep downside limited while if RBI give it a pass then market may cheer but again upside is capped to 6235 or max 6350. So overall if we see it creating trading range till next big trigger. Also Govt. may go for Kirit Parekh’s recommendation on OMCs which is also positive for market.

In above thought the only disappointment is that few experts feel that to control inflation at rapid speed ahead of election in 5 states, market may lose its steam in short term and market may breach the range in downside.

Well about experts and market, the market expects RBI to increase the repo rate by 25bps as both retail and wholesale inflation have gone up since August. One basis point is one-hundredth of a percentage point.

So overall today could be a highly volatile day as bears and bulls both would try to take advantage of this event. What if, if I tell you that RBI can deliver a balance output, mean RBI can hike repo rate as well as can give some liquidity freedom to bring more liquidity into the market.

So overall don’t try your luck without any proper information as option prices are already up. Best idea could be short straddle in select banking stocks.

It was a firework in market after RBI’s move but as Nifty closed to its 2013 high risk has been grown, I say risk in the market is now much higher than returns and the macro data still continues to point on the downside.

So as soon as Nifty will reach in the range of 6235-6350 or say would be above 6250 I would like to lighten up my positions and would be in market with strict SL.

Today it would be last day of event when Govt. would review Kirit Parekh’s report on fuel price hike. If govt. agree with the recommendations then OMCs to rally and market will hold its upbeat breath else it would find lot of difficulties even in touching 6300.

Overall, ahead of expiry its better to take only small positions or be sideline if you are not sure about movement.

Again I would like to remind you all here, a correction is on card but some of event driving the market, specially FII liquidity is driving it, once it will come to profit booking or at half, we may see significant correction.

Overall, right now I don’t see any big problem in next series.

MG’s Nifty trading range –
R – 6240 – 6290 – 6350 (To hit new high, close should be above 6230-35)
S –6120 – 6070- 6020 – 5980 (Trend Changer level 5950)

30 Oct – Result – Bata India, BharatiAirtel, DLF, Havells, IDBI Bank, Jindal Steel, LIC Hous. Fin., Lupin
31 Oct – Result – Adani Enterprise, Allahbad bank, BOB, BOI, UBI, Dr. Reddy, FRL, IDFC, Jubilant Food, SesaSter, Titan,

OI Activity –

(Stock that can see some good moves either side)

Maruti –
Maruti Suzuki was in top gear, the stock surged by 9% after reporting a better than expected net profit at Rs6.7bn for the quarter ended September 2013.

Ceat –
Ceat zoomed higher by 6.5% to close at Rs182, extending its previous day’s 6% rally, after reporting twenty-fold jump in consolidated net profit at Rs77 crore for the quarter ended September 2013.

Tata Steel –
Tata Steel’s Long Products business today announces restructuring proposals to help strengthen its competitiveness. The proposed changes affect predominately management and administrative functions at sites in Scunthorpe, Teesside and Workington and could lead to the loss of around 500 jobs.

About 340 positions could be affected in Scunthorpe, 90 in Workington and 40 in Teesside.

The proposals come amid a prolonged downturn in demand for some of the key products made by the Scunthorpe-based business, including the UK market for construction steel, which is about half of 2007 levels.

Karl Koehler, CEO of Tata Steel?s European operations, said: “European steel demand this year is expected to be only two-thirds of pre-crisis levels after falls in the past two years.

Tata Communication –
Tata Communications Ltd has posted a net Profit after taxes, minority Interest and share of proflt/(loss) of associates of Rs. 803.60 mn for the quarter ended September 30, 2013 as compared to net (Loss) of Rs. (2742.40) million for the quarter ended September 30, 2012.

 Total Income has increased from Rs. 43027.70 mn for the quarter ended September 30, 2012 to Rs. 49919.50 mn for the quarter ended September 30, 2013

Infy –
Infosys has reached settlement that will end an investigation into its use of US visas, according to reports.

Report said that the settlement with the US Attorney's Office for the Eastern District of Texas could be announced as early as Wednesday.

Earlier , Infosys had disclosed that it had received a federal grand jury subpoena seeking records related to its sponsorships for B-1 business visas.

Infosys reported it was co-operating with that probe.

BhartiAirtel –
Today it will announce its Q2 Nos., analysts on an average expect lacklustre earnings from the company as it is a seasonally weak quarter.

However, seasonal fall in India mobile revenues should be offset by higher rupee growth of African revenues, largely due to rupee depreciation and that will drive consolidated revenues, feel analysts. The rupee has seen a 11 percent depreciation during the quarter.

OMCs –
Kirit Parekh committee is going to recommend immediately hike fuel prices including diesel by Rs 5/l, focus on deregulating prices, Kirit Parikh will make to the government on October 30.

The expert group set up under the chairmanship of Dr Kirit Parikh is likely to submit its report on Pricing Methodology of Petroleum Products to the government on October 30, and the street says it'll be surprised if action is taken on most of the recommendations.
In the run upto five assembly polls and the 2014 general elections, Kirit Parikh is likely to recommend an immediate Rs 5/l diesel price hike followed by a fixed subsidy cap of Rs 6/l to the oil marketing companies IOC , HPCL and BPCL . "This would imply freeing of price of diesel beyond this cap on subsidy. In future, oil companies should be permitted to revise the above the subsidy cap on their own," writes Parikh in the summary of his report.

Calling for deregulation of diesel in one year's time, Parikh says, "The expert group recommends that the fixed subsidy of Rs 6/l be reduced gradually and removed through monthly revisions over the next one year."

Government sources indicate that the decision on NMDC buyback is likely to be taken by next week. The government is considering a buyback in state-controlled mineral producer NMDC. The company is likely to take the final decision on this by next week.

The NHPC buyback was announced recently and this is part of the government’s backup plan since the offer-for-sale (OFS) route is not going through. None of the companies that have been scheduled, for instance Coal India , Indian Oil are willing to go ahead with OFSs and hence the government is relying on buybacks in NHPC , NMDC as well as Coal India . It has invited bankers for presentations for the NMDC buyback and is likely to be a 10 percent buyback.

Oct PL = -2000 + 5000 (Loss in Ashokley 17.5CE) = -6600

Open Call –

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