Morning Bells (4 Mar 13)

Don’t love someone who is beautiful but love someone who makes your life beautiful.

The Finance Minister presented a rather non-eventful budget given that fiscal deficit targets were vocally communicated earlier. Market was disappointed with evident populism in the budget through higher social scheme allocations despite headroom. The math for achieving 4.8% fiscal deficit in FY14 looks vulnerable to slippage. Further, it was also not a budget which can really revive the sagging economy. Absence of key reform measures such as GST implementation was also dejecting.

The fall in the stock market post Budget can be partly blamed on the market’s own irrational expectation from Mr. Chidambaram. The market was also spooked off on confusion regarding treatment of Tax Residency Certificate (TRC) as a necessary but not enough proof to benefit from Double Tax Avoidance Agreement (DTAA). Government clarified on TRC issue; however it failed to cheer the market. Quarterly GDP number of 4.5%, released post market hours on Thursday also contributed to some nervousness.

Markets have corrected ~6% over the past month largely on back of deteriorating domestic macro scenario. A global risk-off may further accentuate selling pressure in near term. However, with indices at oversold levels, a lot of beaten down large-caps may attract investors.

As promised, the Finance Minister has confined the fiscal deficit to 5.2 per cent in FY13 and as expected, this arithmetic achievement is in line with his topmost agenda of averting a country rating downgrade. This transient appeasement of rating agencies, however, is the result of substantial Plan expenditure cuts across ministries in the last few months, a by-product of which is slower GDP growth in H2 FY13. No wonder, the Q3 FY13 GDP growth figure just released stands at a dismal 4.5%. While many of our expectations were met (read our pre-Budget note), one can’t help feel that the Budget has missed out on several counts. For one, it failed to address the problem of the Current Account Deficit, which admittedly was a bigger worry for the FM compared to fiscal deficit. Secondly, the FM’s steps to encourage financial savings left a lot to be desired. In times of falling savings rate, the need was a substantial increase to Section 80C. This would have also made gold relatively unattractive. Instead, he’s only offered an additional interest deduction up to Rs1 lac for those first-time home loan takers up to Rs25 lacs, besides Rs2,000 tax credit to income brackets up to Rs5 lacs.

Not much was done for equity investments either. Rather than simplifying the Rajiv Gandhi Equity Savings Scheme (RGESS) for the debutante retail investor community, he’s merely increased the investment amount and time under the said scheme. Sure, Securities Transaction Tax was reduced but was accompanied by introduction of Commodity Transaction Tax.

Gainers – TCS (up 3.2%), Infosys  (up 2.6%), Wipro  (up 1.4%) and Bharti Airtel (up 0.5%) were among gainers in Sensex and Nifty.

Losers - Reliance Capital (down 10.4%), Reliance Infra (down 9.1%), Reliance Power (down 9%), DLF (down 7.9%) and Hindalco Inds (down 7.6%) were the major losers in Sensex and Nifty.

Sectoral – IT up 2.4%, Mphasis (up 4.3%), Satyam Computer (up 3.4%), TCS (up 3.2%), Infosys  (up 2.6%) and Wipro  (up 1.4%) while losers were Financial Tech (down 8.7%), Sasken Communication (down 3.2%) and OFSS (down 2.6%), Auto Index were down 0.8%, Hindustan Motors (down 4.2%), Swaraj Mazda  (down 4.2%), Hero Motocorp (down 1.8%), Tata Motors  (down 1.5%) and Maruti Suzuki (down 1%), Oil & Gas were down 4.5%, Hindustan Oil (down 24.1%), Shiv-Vani Oil (down 13.7%), Great Offshore (down 10.9%), Jindal Drilling (down 9.2%) and Gujarat Nre Coke (down 7.8%), Realty were down 8.6%, HDIL (down 13.7%), Unitech  (down 13%), Peninsula Land (down 11.2%), Ansal Props (down 8.5%) and DLF  (down 7.9%).

BUDGET –

Market gave its verdict on Budget 2013-14, leading to 1.5 percent fall in stock indices on Thursday. Corporate India will have to bear the cross of higher taxes and certain surcharges. However, 2013-14 Budget also presented few positive initiatives like  a road regulator, faster production of coal through public-private partnership (PPP) projects and lowered borrowing by the government.

RBI: Reserve Bank of India governor D Subbarao on Sunday said a growth rate of 5-6 percent is not sufficient for the economy, which has the potential to grow at double-digit rate provided some issues are addressed.

"If we do the right things, we can get back on the track of the double digit growth," he said at a IIT-Kanpur Alumni meet .

Pointing out some of the long-term challenges for the growth, Subbarao said there was a need for stable and predictable macroeconomic environment, removal of infrastructure deficit, skill improvement and job creation. He said there is also need for raising agriculture productivity, and improvement of social sector outcome.

FMCG -

The move will hit companies like ITC  and VST Industries  in the short-term as volumes are likely to get impacted. However, the companies almost always are able to pass on the duty hike on to customers, and so there is unlikely to much impact in the medium-to-long term.

Last year, the government had levied a 10% retail price-based excise on cigarettes longer than 65mm.

ITC shares closed unchanged at Rs 294.80 on NSE, while rival VST Industries ended down 0.2% at Rs 1600.20. Godfrey Phillips was down 0.5% at Rs 3,015.80.  

That apart, there was not much positive coming out of the Budget for the FMCG sector. The companies were hoping for a clear timeline for GST implementation. However, that didn't happen.

AutoMobile -

Increase in tax of imported Completely Built Units (CBU) is likely to promote domestic auto manufacturers, hike in excise duty on sports utility vehicle was completely unanticipated.

However there still not absolute clarity on what category of SUVs will face higher excise duty.

Banks –

The fact that that the interest subvention has been extended to private sector banks is a good news because private sector banks have been given a level-playing field vis-à-vis the public sector banks.

So, the issue is that so far private sector banks were not able to do this kind of business at all because there was no level-playing field. In that sense it is a positive enabling factor. (Chanda Kochhar, CEO ICICI Bank)

On Domestic Front –

Budget 2013: Clarifying the government's stance on the Double Taxation Avoidance Agreements (DTAA), the Finance Minister P Chidambaram said in an exclusive interview to CNBC-TV18 that Mauritius should not be the preferred route of investment.

"Investment comes from over a 100 countries, so I don't think Mauritius can or should be the preferred route for investment. There are other routes for investment but Mauritius does give a certain advantage to the investor today. If the advantage is enjoyed by genuine Mauritius resident or businessmen, then we have no complaint," he elaborated.

On Global front –

Global market trading firm.

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

Overall trend is down, Nifty may move closer to 5550-5600 level in days to come. Going forward, only global cues will be seen as a trigger for any bounce back.  Reserve Bank of India (RBI) policy will be the next domestic trigger, there one can expect 25 bps cut based on the Budget.

The INDIA VIX on NSE down 0.8% and ended at 14.06 against previous close of 14.86.

FNO PCR is 0.79 against previous close 0.78.

Indian Rupee – Rupee dropped for a second session on Friday. The partially convertible rupee ended at 54.90/91 per dollar, after hitting 54.9425, its lowest since January 9.

S&P 500 (US) was trading at 1518.20 up 3.52 then its previous close at the time of writing M Bells.

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

Now we are in New series so not much to say here, will just follow the trend. Short term range 5550 – 5650 - 5835 – 5940.

Note it – 5650-55 can give small support to Nifty, if broken then next support comes around 5565.

Intraday Resistance – 5805 – 5772 – 5740 and Support – 5086 – 5663 – 5627

Weekly/Monthly Resistance – 6047 – 5963 – 5841 and Supports – 5634 – 5550 - 5428

Opening – Seems a bit positive as FM clears some Tax Treaty worry and also global market is trading firm.

========================  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.)

Shares of Suzlon plunged by 30%, Shares of Pantaloon Retail have nosedived 15% Reliance Infra and PNB and SBI have lost over 7% each.

Maruti-

Car market leader Maruti Suzuki India Limited sold a total of 109,567 units in February 2013. This includes 11,612 units of exports.

State owned Banks –

Some public sector banks are likely to see higher tax outflow. It was after the government clarified in the Budget that banks cannot claim double tax allowance on provisions made on rural loans and written off bad loans. CNBC-TV18’s Gopika Gopakumar, reports.

The government has come out with a clarification in its Budgetary fine-print with regards to the tax exemption claimed by banks for bad loans. Currently banks claim tax exemption on all written off loan accounts and provisioning made against rural loans. This deduction limit is currently capped at 10 percent of the rural loans and 7.5 percent of the gross total income.

Tata Motors –

Tata Motors  is set to slash prices of its Indica hatchback and Indigo sedan as its battles falling sales in the domestic market.

The prices could be reduced by as much as Rs 50,000 and the minimum price cut on passenger cars (excluding Nano) will be around Rs 29,000, CNBC-TV18 reported on Saturday quoting a company official.

The price cut move is to give value proposition to customers on Tata products and make Tata vehicles more attractive, the official said.

However, the fact is that the company's passenger car sales are on a slide, faster than the overall industry slowdown.

For instance, Tata Motors' sales in February plunged 70 percent year-on-year to just 10,613 units.

While the passenger car prices are set to see a cut, the prices of its utility vehicles will go up with immediate effect.

Tata Motors will hike UV prices by around Rs 50,000 to offset the hike in excise duty announced in the Union Budget. The Finance Minister had announced that the excise duty on SUVs will go up to 30 percent from 27 percent.

Thus, the price of Sumo and Safari will go up by Rs 35,000 and Rs 50,000 respectively, the official said.

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

Hexaware – Place order for March 80PE @1 to 1.2 (max 4 lots) first buy 2 lots and then buy another 2 lots at 20 paisa below. SL 0.5 TG 2.5+ (Remember its Positional, Active from 26 Feb 13, not executed yet)

Cairn India – Bought 280PE @4 (max 2 lots) SL 2.5 T1 6 T2 8 (Active from 1 Mar 13, Book 1 lot at T1 and balance on T2)

=============== 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 Since Jan 13 (Total 36,850) + Mar 13 = +00.

Billionaire Club Since Jan 13 (Total 67,700) + Mar = +00

Today’s MG Mantra –

New series, everybody scared, follow the trend and make tons of money.

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.