Morning Bells (04 Oct 12)

Good Morning Friends.

We believe Goodluck will do some day something!... But we don’t know Goodluck is also waiting that we do something someday.

So Friends main Indian stock indices saw a lacklustre session and Index closed with slender gains as market players remained on the sidelines after seeing the indices to 15-month highs. Investors are also cautious ahead of quarterly corporate earnings season. Infy will be the first big company to announce its results on October 12

New from another reform is a high-level committee headed by HDFC Chairman Deepak Parekh, today recommended increasing electricity charges and rail fares. Suggesting big-ticket reforms to attract investment in the infrastructure sector, also pitched for 100 per cent foreign direct investment (FDI) in the telecom sector. The limit at present is 74 per cent.

The panel also suggested raising prices of natural gas. These recommendations are aimed at attracting Rs 51.46 akh crore for funding infrastructure sector during the 12th ive Year Plan (2012-17), said the report which was presented o Prime Minister Manmohan Singh earlier in the day. (Report MoneyControl.com)

FM has also done quite a lot, now all eyes on GAAR, first thing which he did after his appointment as finance minister was to appoint the Shome Committee and told them to submit the report by Sept.30, its done. Committee recommended, first GAAR should be postponed. Secondly, GAAR should not be applied across the board, and third, GAAR should not be applied where there are tax treaties and introspective taxes should be used only to set right certain things and not settle scores. So if the government accepts it, and seems Govt. is in the mood to accept it, otherwise why appointed this committee? So if recommendations get incorporated then that will be hugely positive for market.

Also good news is that currency is getting strengthened; the rupee gained for a fourth consecutive session on Wednesday to touch a new five-month high. The initial leg-up has happened in both the currency and the stock market on the back of the reforms. And currency seems to continue to get more upside. It would be good sign because inflation as well as the deficit, there is room for improvement because the currency has strengthened and approx 70-80% of the import bill is oil.

In another event Brokerage house CLSA has reiterated its 'sell' recommendations on retail chains Titan, Pantaloon Retail and Shoppers Stop, saying the profit margins would be under pressure in the foreseeable future because of sluggish economic growth. CLSA has also downgraded Infy and Infy tanked y’day.

On Global front the eurozone debt crisis continues to act as a major overhang for the global economy. The US economy too seems to be losing some steam while China too is grappling with a deeper-than-anticipated slowdown

Spain is another worry on global front, Spanish Prime Minister Mariano Rajoy is desperately hoping that solution will emerge and save him from a Catch-22 situation - the pressures of the regional elections in his birthplace of Galicia on October 21 and accepting the bailout package from the ECB at the EU summit in Brussels on October 18. (Report MoneyControl.com)

This week Auto and Cement stocks will remain in focus as companies from these two sectors will announce their monthly sales volume data for September.

So once again, October series is full of promises and various actions globally. This is also month of corporate earnings so market will remain full of thrill. On global front any move from China to support its economy will be an added positive, particularly for commodities.

So next stimulus could be from China, Markets are now focusing on whether China will inject more stimuli by way of more infrastructure spending or a rate cut.

MARKET OUTLOOK –

Market will remain in tight range because markets have consolidated, broken out above 5700 and Nifty seems heading slowly towards 5800-5850. The move is slow and reason is simple, we saw 50-100 point gains in a single session, big gap ups last series and that cannot be happen all the time.

Market trend remain buy on dips, so small correction could be used to make fresh entry at lower levels till 5600 is not broken out.

As told close above 5740 will lead to break 5800, could be 5830-5850. So probably I expect in the next two-three days we see another 50-70 points get added to the Nifty.

So probably Oct series is going to remain in 200 pts range, First attempt could be close above 5740 then Nifty will enter to crucial range 5740-5775, I will say watch it carefully and if something comes boosting then we can head 5830-5850-5900 else market can take back from this range to test 5650-5600 mark. So development in upcoming days will confirm the mood of market. But as far as I see it’s a around 200 pts series.

NIFTY –

Bulls are trying to break strong resistance or say crucial range of 5740-5750 but not getting success which putting investors sideline.

Vix is up 1% to 16.5 and Nifty PCR 0.93.

Resistance 5740 – 5771 - 5830 and Supports 5714 – 5683 – 5672 - 5614.

Opening seems positive say around/above our first resistance level, thought SGX Nifty is down.

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 can decide stock move either side.)

My top pick for next 3 months are – Cement, Infra & Banks (after small correction in banks) – yes not blindly to any stock, in select good stocks only.

Brent crude - can clipped to 105$ and could remain in the range 105-111 for Oct. series.

KFA – Seems troubles are just behind of stock, after failing to assure its lenders with any 'concrete' solution for restructuring of debt (Company has total loans of around Rs 7,000 crore.), Now management has declared partial lock-out till Thursday. I had already warned to stay away from stock times being till aprx 20% correction. Since past 3 sessions there’s no buyer for stock. So one should wait till Diageo deal finalization.

Banks – Govt. has decided to give interest subsidy of 2% a year to all state owned banks for farm loans upto Rs 3 lakh in 2012-13. Finance Minister proposed to continue the interest subvention scheme for providing short term loans to farmers at 7% p.a in FY13. Public sector banks (PSBs) generally charge 9% rate of interest on farm loans. Lenders can now claim for 2% back from the government of India while disbursing such loans at 7%.

Keep eye on Dhanalaxmi Bank and YES bank for short to midterm bet.

IT – Investors are entering to mid-cap IT industries on expectation that it will outperform in near future while large cap seen some pressure y’day while IT heavyweight seems under pressure.

Infy - Shares of Infosys Ltd. fell on Wednesday after CLSA's sales team said that the stock could drop as much as 40% from the current levels and announced a price target of Rs. 1566.

Insurance and Pharma – FII now eying on further reforms in sectors like insurance and pharma, so next big earnings can come into both sector.

OPEN CALLS –

(One can also find open calls under our "Call History" section)

Nifty 5900CE - @31 for TG 55+ SL 15

TM 300CE - @3.75 for TG 4.5-5+ SL 2.25

DhanBank - @55 for TG 70 SL 45

Jindal Photo - @145 for TG 160+ SL 130

PFC - @187 for TG 198+ SL 176 (short to midterm bet)

Titan - @260 for TG 265++ SL 247 (After CLSA we need to close position with minimum profit today as nothing wrong with stock but report will put unnecessary selling pressure)

Note – One can also find Morning Bells at MudraGuru.blogspot.in (every time to find it on single click rather than to scroll here) One can also find live calls during market hours here.

Today’s MG Mantra –

Since all are talking for correction and big crocos can take advantage so it would be wise to keep strict SL for all your longs and wait for close above 5740-50 mark to book part profit.

Have a Profitable day – MG

Disclaimer – I have shared my view as per my limited knowledge; please use your own skills before making a wise decision.