Morning Bells (31 Jan 13)

Good Morning Friends.

Shisha aur Rishtey me sirf chhota sa farq he – Shisha Galati se toot jata he jabaki Rishtey galatfahmiyon ki wajah se toot jate he.

After opening with a slight positive bias, markets were once again stuck in a narrow trading range. With the RBI monetary announcement out of the way investors remained cautious ahead of the outcome of US Federal Reserve's monetary policy decision. Participants also preferred to stay light on their position ahead of the F&O expiry tomorrow.

Strong cues from the Asian markets also were unable to lift the sentiment on Dalal Street. However, the benchmark indices managed to eke out slim gains led by the Realty, Consumer Durables, Oil & Gas and the Banking stocks.

On the other hand, the Capital Goods index was the top loser (down 1.2%). Among the other top losers were the BSE Power index and the BSE Auto index declined by 0.7% and 0.5% respectively. The Mid-Cap and the Small-Cap index also ended in the red.

The results of the most anticipated brand study, The Brand Trust Report, India Study - 2013, are out and India has chosen its Most Trusted Brands. Crowning the list, Nokia, Samsung and Sony are India's three Most Trusted Brands this year. Nokia leads for the third consecutive year, while Samsung and Sony have both moved up two ranks from last year to occupy the 2nd and 3rd slots. BMW has made significant progress with a climb of twenty ranks to become India's 4th Most Trusted Brand. 

Tata slips three positions as India's 5th Most Trusted after being in second place in the previous two years. Godrej is India's 6th Most Trusted Brand and has moved up five ranks from last year and Reliance ranks 7th having gained three positions over 2012. Bajaj slips to 8th rank moving one down from the previous year, Airtel maintains its position at 9th and LG is India's 10th Most Trusted brand, losing seven ranks from last year.

Sebi today restrained three stock brokers, including Angel Broking, from taking up new assignments for a period of two weeks for being allegedly involved in fraudulent and unfair trade practises in the shares of Sun Infoways.

The market regulator has prohibited Angel Broking, Allwin Securities and Bharti Thakkar India Securities from taking up any new assignment for two weeks. It also suspended erstwhile N C Jain (presently known as NCJ Shares and Stockbrokers Ltd) for a period of one week.

Market behaviour for most parts of January indicates that the broader market has experienced a bout of profit taking. It got masked by the strident performance of some of the large caps, particularly from the IT and the oil and gas sector, so we did not saw much correction in the Nifty or the Sensex. But midcap index performance month-to-date is flat to negative.

With the RBI policy event over this is a very crucial phase for the market and we also have the F&O expiry tomorrow. If the market is able to hold onto its levels in the next couple of days, then we are set for a slow upward move for the market leading up to the Budget.

Otherwise, profit taking bout might get a little more serious between now and the Budget and we may see the market as a whole correct, individual stocks also experiencing that profit taking before the expectations leading up to the Budget start building up and then we see the rally build up. If the Budget meets the expectation of the market sentiments then we are in for some good time, otherwise market could see some more profit taking beyond that.

Most Important –

Now focus is shifted to general Budget next month. In the backdrop of high twin deficits, moderation in inflation would only provide a ‘limited space’ for monetary easing, as per RBI. While the stance of monetary policy has shifted more decisively towards addressing growth risks, the central bank clearly wants to see more structural action from the government towards managing the fiscal and current account deficits. In this context, the upcoming budget (especially steps that would revive private investments) would be critical in determining the possibility of another rate cut in the March policy review.

Rate cut of 25 bps was expected but Cash reserve Ratio (CRR) cut was a bounty which was bit of a pleasant surprise. Surprisingly, yesterday market did not react positively but there has been huge inflow in FII numbers over last few days. According to my hypothesis, our domestic players, particularly large insurance company like Life Insurance Corporation of India (LIC) they are creating liquidity to participate in government disinvestment.

On one hand, Foreign Institutional Investors (FIIs) are buying but that is met with supply from domestic institutions, so the market is not moving up. But, I think these reforms are very positive, the monetary policy easing, the interest rate cutting down. Governor has been always cautious and conservative, but he has very clearly mentioned that if current account deficit and inflation improves then one can expect more rate cuts. On fiscal front, the government is taking several steps towards reforms, like diesel price hike and cut in subsidy of LPG and fertilizer, so I am positive and optimistic, I think growth will come back. It may come back later in this calendar year, but market will look positively. So, the undercurrent is bullish. The market looks fairly positive for next 6-12 months.

Gainers – RIL, TCS, Wipro, Tata Steel, ONGC, Coal India, HDFC Bank, Maruti Suzuki were among gainers in Sensex and Nifty.

Losers - Infosys, Bharti Airtel, SBI, NTPC, ITC, Tata Power, Tata Motors, Sun Pharma, Dr Reddys Lab, L&T, Bajaj Auto, M&M were the major losers in Sensex and Nifty.

On Domestic Front -

Indian consumers are more worried than they were a year back, according to brokerage firm Credit Suisse's consumer survey, which shows a continuing decline in consumer optimism. Reasons: high inflation and a slowing economy.

On Global front –

Union Finance Minister of India P Chidambaram will launch a new promotion campaign here from Monday to woo European investors to India as the government struggles to reverse an economic slowdown, rein in fiscal deficit and avert a possible downgrade by the rating agencies.

Chidambaram will attend a roadshow on investment opportunities in India hosted by Deutsche Bank and Barclays Bank in Germany's financial centre and will hold discussions with leading representatives of European companiesand institutional investors.

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

As informed profit booking took place at higher levels. Market also seems choppy today with a bit volatility ahead of F&O expiry. Bull will try to pull Nifty above 6100 while bears will try to take advantage of profit booking and will try to drag Nifty 6000. Only leading companies Q3 no.s can support market before expiry.

Now all eyes will be on Q3 Nos from ICICI Bank and BHEL. Auto and cement stocks will also remain in focus as companies from these two sectors will unveil monthly sales data for January on Friday.

The INDIA VIX on NSE was down 0.62% and ended at 14.38 against previous close of 14.47.

FNO PCR is 0.91 against previous close 1.00.

Indian Rupee against USD appreciated 0.46 paisa and was trading at 53.30 against its previous close 53.76.

S&P 500 (US) was trading down at 1506.74 down 1.10 then its previous close at the time of writing M Bells.

(MG’s Note – Closely watch S&P as to my personal view S&P above 1500 a bit risky for global market.)

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

The outlook for the near term remains a bit cautious. If The Nifty cracks below the 6000 psychological mark and stays there for a considerable period of time it is likely to see a bearish movement. 

Y’day’s fall told us that market seems fatigue and hesitating to move up but still its not time for making short The short positions should be built below 6000 because still market holding its psychological level of 6000. And after a breather right now market can move up only on liquidity which will alone drive the market.

Nifty is in range of 5935-5990-6040-6090-6150 for current week.

Resistance – 6098 – 6085 – 6070 and Support – 6042 – 6028 - 6014

Opening - seems flat and then one can expect a bit choppy movements ahead of F&O expiry.

========================  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.)

Oil & Gas –

The first meeting of the newly formed Cabinet Committee on Investment today failed to break the logjam over defence clearances to oil and gas activities in 39 offshore areas, including Reliance Industries  ' producing KG-D6 fields.

The CCI headed by Prime Minister Manmohan Singh asked the ministries of petroleum and defence to sort out differences on allowing exploration and production particularly in Krishna Godavari basin. The CCI, which was constituted to expedite the clearance for infrastructure projects of Rs 1,000 crore or more, took up the issue of defence ministry declaring 6 blocks in KG basin including KG-D6 producing fields and one in NEC or North East Coast region (RIL's gas discovery area of NEC-25) as "No-Go" areas and putting stringent conditions on 32 other blocks.

With gas price hike to US$8/mmbtu expected to go through, key beneficiaries Reliance Industries and ONGC have seen investor interest building up. While RIL will see benefits from FY15 onwards, ONGC and Oil India’s nomination blocks will see immediate gains. Furthermore, recent partial de-regulation of diesel prices will result in marked reduction in under recoveries leading to improved profitability.

ICICI Bank – (Result on Friday 31 Jan 13)

Country's largest private sector lender ICICI Bank is set to declare its results for the third quarter of financial year 2012-13 on Thursday. Analysts on an average expect profit after tax of the bank to grow by 20 percent year-on-year to Rs 2,077 crore in the quarter.

Net interest income (NII) is seen going up by 29 percent to Rs 3,499 crore from Rs 2,712 crore during the same period, according to CNBC-TV18 poll.

SBI –

State Bank of India has cut base rate by 5bps from 9.75% p.a to 9.70% p.a with effect from 4th February, 2013.

L&T –

Larsen & Toubro (L&T) signed a contract with PETRONAS Carigali Myanmar (Hong Kong) Limited in Yangon, Myanmar for executing an offshore engineering, procurement, construction, installation and commissioning project valued at over US$ 100 mn.

The order enlarges L&T’s footprint in the competitive hydrocarbon upstream market in South East Asia, and has already been included in L&T’s order inflow disclosure.

Titan Industries –

Titan Industries Ltd has posted a profit after taxes of Rs. 2037.30 mn for the quarter ended December 31, 2012 as compared to Rs. 1639.10 mn for the quarter ended December 31, 2011.

Total Income has increased from Rs. 24648.40 mn for the quarter ended December 31, 2011 to Rs. 30398.10 mn for the quarter ended December 31, 2012.

BHEL –

Bharat Heavy Electricals Limited (BHEL) has achieved a landmark in the South-East Asian region by commissioning a 100 MW hydro power generating set in Vietnam. The first unit of 100 MW was successfully commissioned at the 2x100 MW Nam Chien Hydro Power Project in Vietnam.

BHEL had made its maiden entry in the rapidly growing Vietnamese Hydro Power Sector by winning the contract for Nam Chien Hydro Power Project in Vietnam. The order had been placed on BHEL by Nam Chien Hydropower Joint Stock Company of Vietnam, a joint stock company, with Song Da Corporation, one of the largest companies under the Ministry of Construction and Petro-Vietnam, the state-owned giant Oil and Gas group, as major stakeholders.

Oil India -

The government will offload its 10 percent equity in Oil India (OIL) on Friday which may fetch the exchequer up to Rs 3,000 crore. The decision was taken at a meeting of the Empowered Group of Ministers, headed by Finance Minister P Chidambaram, y’day.

"Proposal has been cleared. Disinvestment will take place on February 1 through OFS route. Roughly we will raise Rs 2,500-3,000 crore," Petroleum Secretary G C Chaturvedi said.

According to sources, shares will be offered at a discounted price. "Price has been determined. It has been communicated to stock exchanges," Petroleum Minister Veerappa Moily told reporters after the EGoM meeting. The Government has proposed to sell 10 per cent stake or 6.01 crore shares in the petroleum exploring company OIL through offer for sale (OFS) route.

MSX-SX (with Financial Technology) –

MCX-SX, India's new stock exchange, will begin trading of cash equities and equities derivatives on February 11, according to a statement on Monday.

MCX-SX has been gearing up to launch equities trading since last year, and will compete against more established rivals Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE).

Stocks that can show good strength in coming days –

GMR –

Availability of coal and gas to fire extant and upcoming power projects, (2) monetization of Mumbai airport’s real estate and (3) sale of some of its assets can help to meaningfully reduce leverage (Rs 15300 crore debt against Rs 13300 crore of equity in 1HFY13).

GVK Power & Infrastructure –

Increased availability of gas could help to improve plant load factors (PLFs), revenues and profits of its power segment, (2) monetization of real estate at the Delhi airport and (3) entry of investment partners (or buyers) of some of the operating road projects can help GVK to reduce its consolidated debt burden of Rs 15500 crore (1HFY13) and increase its equity valuation

Adani Power –

A small increase in A tariff hike of Rs 0.50/kWh to offset costs in the Mundra power plant could add Rs 37 to current estimated fair value of Rs 111. We do not think a review of the PPA may be feasible. Nonetheless, reduction in fuel costs by around 20% through higher blending of low-cost coal could accrue Rs 26 to our fair valuation.average tariffs (Rs 0.25/kWh) across its projects can add 140% to our current estimated fair value of Rs 33. (2) pooling of coal prices can reduce costs by Rs 400 crore (and increase our estimated fair value to Rs 53) and (3) ramp up of Bunyu coal mine production to 10 mtpa can double the fair value estimate of APL.

Lanco Infratech –

A sustainable merchant tariff of Rs 4.0/kWh could add Rs 6 to our fair value estimate of Rs 12. In addition, allowing cost-plus tariff at Amarkantak could add Rs 3 to fair value estimates; utilization of 90% at Kondapalli could add Rs 2 to our fair value estimate.

==================== 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)

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

=============== HOT SHOT ===============

Keep eye on following stocks, if Nifty shows strength then these stocks can give you reasonable return in very short term –

Be on board for next clue.

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

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

MG Blog (Total +25,650) –

Cash = +9,650.00

FNO = +16,250

Billionaire Club

TOTAL = +51,000

Today’s MG Mantra –

Its day of FNO expiry and volatility is part of it.

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.