Morning Bells (18 Feb 13)

Good Morning Friends.

To resolve a dispute, two people are required, while to forgive and forget, one is sufficient.

So lacklustre sessions for almost 2 weeks, now seems to out for time being as now market is gearing up for budget. The week was eventful as far as data flow was concerned but uneventful in terms of movement of indices as the Sensex and Nifty shed ~0.5%. IIP for the month of December contracted 0.6%. The macro economic data hurt hopes of a recovery in economic growth but strengthened the case for a rate cut by RBI.

A raft of results also kept market players busy. Some hit the bull’s eye others missed the target. Disappointing results from the index heavy weights like SBI, Tata Steel and JSW Steel dampened the sentiment. FII flows continue unabated this year.

The January jubilation witnessed in the indices seems to have got wiped over the last couple of weeks as the indices fell to levels last seen on the last day of 2012. On Friday, the Indian market ended on a negative note once again amid constant selling pressure across sectors. Traders preferred to remain on the sidelines ahead of the G-20 meeting in Russia.

Gainers – Tata Motors  (up 6.6%), HDFC Bank  (up 4%), ONGC (up 2.5%), Hindustan Unilever (up 2.1%) and TCS (up 1.2%), HCL Tech  (up 4.1%) were among gainers in Sensex and Nifty.

Losers - Reliance Capital (down 10.3%), Reliance Power (down 7.9%), Dlf  (down 7.7%), Maruti Suzuki (down 7.4%) and Larsen & Toubro (down 5%) were the major losers in Sensex and Nifty.

MG’s view on Budget -

Most of experts are hoping for their gains i.e. market friendly budget but my sense is that this budget would be more for common man & basically will be focussed on pending reforms, yes as general election is there in 2014 and this would be last budget where Govt. can announce reliefs for common people.

Surprisingly Mid-Caps have fallen 10-40% in last two weeks. (Blue chips are drifting lower but second line shares went down much sharper.) Street has been expecting a lot from the Budget both in terms of policies and reforms and probably India the Budget is overhyped.

On Domestic Front –

1. After being stuck in a narrow trading range for majority of the day market did show some signs of revival in the late afternoon trades led by the Auto, Banking and the FMCG stocks. Markets cheered the news that the Andhra Pradesh High Court has ruled that French drug multinational Sanofi Aventis will not have to pay taxes in India for a deal with Hyderabad-based vaccine firm Shantha Biotechnics.

However, the upswing was short-lived as the index was unable to breakthrough in the positive terrain as every rise was used to offload position. The Oil & Gas, IT, Capital Goods, Telecom and the Healthcare stocks were among the top losers.

2. Indian Oil Corp (IOC), the country's largest fuel retailer by sales, has hiked petrol price by Rs 1.50 paisa per litre and diesel prices by 45 paise per litre with effect from midnight tonight.

As per government data, fuel retailers are currently suffering a revenue loss of 1.23 rupees a litre on retail sales of petrol. IOC says the revenue loss on diesel sale to now fall to Rs 10.27 per litre. It sees the FY13 revenue loss on subsidized fuels at over Rs 86,000 crore. 

The government had said last month it would allow fuel retailers to raise the price of subsidised diesel by 0.40 rupees-0.50 rupees a litre every month and asked bulk buyers to pay market rates.

On Global front –

1. A raft of results also kept market players busy. Some hit the bull’s eye others missed the target. Disappointing results from the index heavy weights like SBI, Tata Steel and JSW Steel dampened the sentiment. FII flows continue unabated this year.

2. According to experts US markets could continue to grind higher from current levels, as per their view better US earnings have been supportive for equity markets.

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

Union Budget 2013 will be closely watched as this would be the present UPA Government's last full Budget before general elections. This Budget would be presented by P Chidambaram, who returned as head of the Finance Ministry after a gap of about four years.

Though Chidambaram understands the market better than any of his predecessors, a major cue driving the market is liquidity. One can trust him to deliver a market-friendly Budget, if foreign institutional investors (FIIs) pull out, the effect of the Budget is not expected to last beyond 48 hours. So, unless the Budget is exceptionally good, the markets might continue to correct, particularly if there are negative global cues.

The market would be rangebound. On the lower side it could be about 5840, not really below that and on the higher side, surely not beyond the 6000 level. Only after the Budget the market may see a good move but till then, it would be a small range like this.

As suggested short term trend is down. Now one can expect some fireworks with the Budget coming up towards the end of the month that may offer opportunities for the market to breakout of this range hopefully on the upside. But if the Budget proposals are not up to the market’s expectation, then there could be a breakdown as well. So probably that will be time when market will come out from narrow trading range to either side.

Regarding downward journey, Nifty will find good support nearby 5840 – 5820 – 5780, so one can also expect firm sentiment next ahead of budget.

Once again if there’s dip till 5840 mark then for cash segment this downside can be used to buy, people who have missed the rally in 2012 can join the party mean one can watch 2 levels, 5840 & 5780-5800-5820, these tri levels can be watched carefully and one can initiate fresh longs in this range, as all seems good support and hopefully market can bottom out from here. They can keep SL 5870 itself.

The INDIA VIX on NSE was slightly up 0.15% and ended at 15.24 against previous close of 15.09.

FNO PCR is 0.80 against previous close 0.87.

Indian Rupee – weakened further against USD and closed 10 paisa lower and was trading at 54.22 against its previous close of 53.92.

S&P 500 (US) was trading at 1519.79 down 1.59 then its previous close at the time of writing M Bells.

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

Technically, Nifty faced stiff resistance at the 50 DMA which was placed at 5960 mark. The near term support for the index is seen at the 5820 mark, which is also the 100 DMA. On the upside the 50 DMA could emerge as strong resistance zone near 5960 levels.

Nifty is in range of 5780 – 5820 (100 DMA) - 5840 - 5900-5950-6040-6150-6190 for current series.

Resistance – 5952 – 5926 – 5906 and Support – 5860 – 5834 - 5814

Opening – Again seems flat and under pressure.

========================  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.)

Mid-Cap Trauma (Fallen 10-40% in just 2 weeks) –

Unitech: Down 19% -

Firm took a beating following a Network 18 expose on the CBI prosecutor colluding with the 2G scam accused and Unitech boss Sanjay Chandra to weaken the trial proceedings.

DB Realty: Down 39% -

Shares of the Mumbai-based realtor were among the biggest losers in the mid-cap space on renewed concerns relating the 2G scam trial, in which the company’s key officials are involved.

HDIL: Down 18% -

Sale of shares by promoter Sarang Wadhawan last month sparked rumours about the financial health of the company. And while the company has denied the talk, market does not appear to be convinced. 

Opto Circuits: Down 30% -

Rising debt in the books of the company and working capital crunch is pressuring the company’s margins, leading to concerns about the company’s profitability

Financial Technologies: Down 19% MCX: Down 15% -

Many investors had recently built positions in these two stocks, betting that the equity trading platform on MCX-SX (part of the same group as Financial Technologies and MCX) would get off to a flying start. But equity traded turnover in the first few days have been way short of market expectations

Bombay Dyeing: Down 19% -

The stock got hammered after the Maharashtra government informed the Bombay High Court that the textiles major had obtained approval for using a mill land in central Mumbai for commercial development "illegally and unlawfully" with the connivance of a government officer not vested with the authority.

Jain Irrigation: Down 18% -

Heavy interest cost coupled with a dramatic fall in EBIT margins from 26% to 16% in the December quarter dampened investor sentiment for the stock.

STOCK OUTLOOK -

GAIL India –

GAIL (India) Limited registered a turnover (net of Excise Duty) of Rs. 12,474 crore in the third quarter of FY 2012-13 as against Rs.11,260 Crore, a 11 percent increase over the turnover in the corresponding period during the last financial year. GAIL’s Net Profit for the third quarter of the FY 2012-13 increased by 18 percent to Rs. 1,285 crore against Rs. 1,091 crore in the corresponding period previous year. The Gross Margin increased by 19 percent to Rs. 2,156crore in the third quarter of the current financial year against Rs. 1,816 crore in the corresponding period last year. The Profit Before Tax increased  by 16 percent to Rs. 1,859 crore in the third quarter of the current financial year against Rs. 1,598 crore in the corresponding period last year.

Mahindra Satyam -

Mahindra Satyam, a leading global consulting and IT services provider, today announced the acquisition of a majority stake in Complex IT, one-of-the largest SAP consulting providers, in Brazil.

This acquisition will focus on developing solutions for the rapidly expanding Enterprise Solutions market within Brazil. Mahindra Satyam and Complex IT will be going to market with proprietary solutions for large manufacturing, financial and consumer services companies in the market. This initiative marks another important milestone in offering Mahindra Satyam’s customers a global delivery capability in Latin America.

Hero Moto -

It has not been an easy ride for Hero Motocorp . Two years after severing ties with its erstwhile Japanese partner Honda, the company has not only lost market share in the motorcycle segment this fiscal but is seeing pressure on profitability. Also, the wage negotiation talks with its workers at Gurgaon have so far failed to yield results.

This is the moment of reckoning for Hero Motocorp, which would even test the astuteness of the Munjals who have assiduously built the country's largest two-wheeler company over 25 years.

PFC –

State-owned Power Finance Corporation (PFC) is going to launch its second tranche of bonds issue of Rs 100 crore on Monday, February 18, 2013, with an option to retain an oversubscription upto the residual shelf limit of Rs 3,890.25 crore.

It is tax free bonds issue of face value of Rs 1,000 each in the nature of secured, redeemable, non-convertible debentures, having benefits under section 10(15)(iv)(h) of the income tax act, 1961.

According to prospectus filed with the SEBI, the Central Board of Direct Taxes (CBDT) authorised the company to raise bonds aggregating to Rs 5,000 crore in fiscal 2013, out of which company raised an amount of Rs 410 crore on a private placement basis. In December, PFC already raised Rs 699.75 crore through Tranche 1 of bonds issue.

Tata Motors –

Brokerages remain bullish on Tata Motors , despite, the India's largest commercial vehicle maker, reporting disappointing earnings for the third quarter.

The company's Oct-Dec quarter consolidated net profit halved to Rs 1,628 crore (analysts expected Rs 2,250 crore), while revenue rose a modest 2 percent to Rs 46,090 crore (analysts expected Rs 47,277 crore). The profit was lower on the back of a huge loss in the domestic business and lower profit at JLR.  

Margins in both JLR and the standalone business declined, with the operating margins coming in at a paltry 2.2 percent.

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

Be on board after 11AM for new calls.

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

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

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

MG Blog (Jan+25,900) + Feb Ser. = +6500

(Adani Ports = +4200)

Billionaire Club (Jan +51,000) + Feb Ser. = +11,500

Today’s MG Mantra –

Market remain in a range, only hope for short covering ahead of budget, so one can enjoy the small bounce which can be used to book profit and lighten up your portfolio on safe side.

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.