Morning Bells (11 Jun 2013)

Good Morning Friends.

It is true that every effort can’t be converted into success, but it’s equally true that success doesn’t come without efforts.

Despite global cues being healthy, the Indian benchmark equity indices witnessed immense selling in the banking, realty, metals, capital goods and healthcare stocks.

The rupee plunged to hit a new lifetime low against the dollar on Monday on fears of a rollback in global stimulus. The rupee-dollar touched a record low of 57.97 in the spot market while it hit a lifetime low of 58.17 in the futures market.

With the RBI reluctant to support the rupee, outlook on the currency has turned bearish, and raised fears of foreign investors reducing exposure to Indian equities.

Today's major laggard -- banking -- witnessed strong selling pressure. A weakening rupee threatens to endanger the fall in inflation. It also elevates current account deficit concerns posing another barrier for the Reserve Bank, which meets on June 17 to take a call on interest rates.

The focus of India indices seems to have suddenly shifted from the next big event of Reserve Bank of India policy latert this month to rupee's sharp and rapid depreciation against dollar. Most experts agreed that trend for markets and stock specific investments will now be defined more by rupee’s movement against dollar.

Gainers –

Reliance Industries, Infosys, TCS, ONGC, JSW Steel, Bajaj Auto, Mahindra & Mahindra, NTPC, HDFC and NTPC were among the major gainers in Sensex & Nifty.

Losers -

ata Power, Hero MotoCorp, Coal India, BHEL, Larsen & Toubro, Maruti Suzuki, ICICI Bank, SBI, Tata Motors and Sun Pharmaceutical were among the major losers in Sensex & Nifty.

Stocks like Hindustan Construction Company, Shree Renuka Sugars and Opto Circuits plunged 12-23 percent.

Sectoral –

As warned Banking and rate sensitive stock were on sellers RADAR, banking - witnessed strong selling pressure.

Oil marketing companies bore the brunt of the rupee weakness while IT stocks gained on the back of a stronger dollar. The top IT gainers include HCL Technologies, Infosys and Wipro.

Domestic Front –

Advani Resigns from 3 Main posts -

In a shocker today, L K Advani resigned from all positions including National Executive, the Parliamentary Board, and the Election Committee. Bhartiya Janata Party (BJP) had skipped the three-day deliberations of the party in Goa over the weekend citing health reasons. This was the first time Advani had stayed away from the national executive and the office bearers' meeting prior to it.

Narendra Modi tweeted on Monday that he urged Lal Krisnha Advani not to quit from BJP. "Had a detailed conversation with Advani ji on phone. Urged him to change his decision. I hope he will not disappoint lakhs of Karyakartas," said Modi. 

RBI Penalises Axis, HDFC Bank & ICICI Bank –

The Reserve Bank has imposed a monetary penalty on Axis Bank, HDFC Bank and ICICI Bank for violating Reserve Bank of India instructions. The details of the penalty are:

Bank	Penalty amount (` in lakh)
Axis Bank Ltd.	500.10
HDFC Bank Ltd.	450.00
ICICI Bank Ltd.	100.10

Global Front –

Moody's Investors Service says that its Asian Liquidity Stress Index (Asian LSI) declined to 25% in May from 27% in April, reversing two months of rises.

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

Now next big triggers CPI, WPI Inflation on 12 and IIP on 14 or 15 and then RBI monetary policy review on 17^th.

In short market is purely for short term traders where one can trade only for intraday or for 1-2 days only.

The INDIA VIX on NSE was surge 4.38% and ended at 18.11 against previous close of 17.35.

FNO PCR was 0.94 against previous close 0.98.

(Note – PCR is also reducing mean going up which shows selling pressure in cash market too)

Indian Rupee – Rupee declined further by 1.09 Rs. and was trading at 58.15 against its previous close of 57.06.

The rupee is trading at record lows on fears that the Fed may cut its bond purchase programme on robust US nonfarm payroll and weak Chinese data.

This is raising fresh concerns on how the government will service its current account deficit, which hit a record 6.7% of gross domestic product in Q3 FY13.

To aggravate the situation, FIIs have sold over $2.5 billion in domestic debt over the last 12 sessions. In the first week of June, they sold Rs. 7,600cr ($1.35bn) owing to the weakness in the Indian unit.

It may also weaken the Reserve Bank's resolve ahead of its policy meet on June 17. The weak rupee may force the RBI Governor to turn cautious about cutting interest rates further after easing monetary policy by 0.75% in 2013.

S&P 500 (US) was trading at 1642.74 down 0.64 then its previous close at the time of writing M Bells.

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

As informed for fresh longs Nifty need to close above 5940 last week itself which Nifty failed to sustain the levels, now market moving towards weakness and may take small supports at various levels 5880 / 5820-40 / 5785. Below 5785 which is 200 DMA it could be a trend changer in short term.

But this week is action packed so market can give some bounces which can be used to book profit or exit i.e. we will see some good rallies also but these rallies are likely to be short lived.

By that time I will also reach to my old warning about Nifty outlook in which I had informed at the beginning of June series that second half of series is not safe for longs and rate sensitive stocks would be on sellers RADAR - “If weakness continue then rate sensitive stocks will lead, specially banks will be on sellers radar.”

Opening – Seems flat or down as weakness in currency has opened new gate for sellers secondly somehow Nifty just closed above 5880.

========================  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.)

A word of advise –

Since Rupee hit record low or say lifetime low, now my sense says - stay away from rate sensitive sectors as banking and auto as RBI is unlikely to provide a repo cut after steep fall in Indian currency. IT and pharma companies which generate majority of their revenues through exports would now be back in favour.

Also stay away from the companies with huge foreign exchange debt like oil marketing companies and companies like Bharti Airtel, Renuka Sugar, JP Associates and Jet Airways as it will be seen quite negatively by the market.

Logic is simple - A one unit movement in the rupee against the dollar impacts under-recoveries (loss incurred due to sale of fuel products on government rates) by around Rs 9000 crore.

TM

Weakness in Rupee put pressure on stock even on whole auto stocks, time being its suggested to stay away from auto stocks. If you are short keep SL 302 and watch the level 289 as first major stop for fall and then 281 as ultimate SL for near term. Unless and until you don’t see any significant recovery in Rupee.

MSX –SX -

Adding yet another milestone to the recent and rapid spate of developments at MCX Stock Exchange (MCX-SX), the Exchange launched its dedicated debt market segment. MCX-SX also announced that the Equity and Equity derivatives segment turnover has crossed Rs. 1,000 crore and turnover of derivatives on its flagship index ‘SX40’ has crossed Rs. 500 crore mark.

RCom & Rel Jio -

Reliance Jio Infocomm Ltd. and Reliance Communications Ltd. announced the signing of a definitive agreement for sharing of RCOM’s nationwide telecom towers infrastructure.

Under the terms of the agreement, Reliance Jio Infocomm will utilise upto 45,000 ground and rooftop based towers across RCOM’s nationwide network for accelerated roll-out of its state-of-the-art 4G services.

The agreement provides for joint working arrangements to configure the scope of additional towers to be built at new locations to ensure deep penetration and seamless delivery of next generation services.

This agreement follows the inter-city optic fiber sharing agreement already signed in April 2013 as part of a comprehensive framework of business co-operation between Reliance Jio Infocomm and Reliance Communications

ONGC –

State-owned Oil and Natural Gas Corp ( ONGC ) on Monday jumped its own embargoes to announce a USD 2.5-billion buyout of Videocon Industries Ltd's stake in a giant Mozambique gas field even as the deal was said to be in works.

ONGC on Monday evening issued a statement saying its overseas arm, ONGC Videsh Ltd (OVL), together with Oil India Ltd ( OIL ) have "signed a definitive agreement with Videocon Mauritius Energy Ltd. to acquire 100 percent of (its) shares in Videocon Mozambique Rovuma 1 Ltd for USD 2475 million."

Opto Circuites –

Opto Circuits shares collapsed 27 percent to Rs 20.80, amid speculation that financiers may have dumped shares of the company pledged with them.

The stock has been steadily going downhill since August last year, as the company's earnings growth started coming under pressure. The fall got accentuated last week after the company's disastrous fourth quarter numbers, which saw net profit plunging around 95 percent.

Market talk is that operators with a huge exposure to the stock may have pledged the shares to borrow money and were unable to put up additional margin because of the steep fall.

So far in 2013 alone, the stock had fallen over 80 percent.

The management said it was working to address working capital issues and sell stake in subsidiaries. But the market does not appear to be convinced.

Reliance & ONGC Revenue may grow on falling Rupee –

State-owned Oil and Natural Gas Corp ( ONGC ) and Reliance Industries ( RIL ) will reap windfall profits from the rupee dipping to an all-time low as they will earn more on selling natural gas in US dollars.

ONGC and RIL bill their consumers like fertilizer plants and power stations in dollars. So every time the rupee dips against the dollar, their earnings go up.

At current production of less than 15 million standard cubic meters per day, RIL would get over Rs 43 lakh per day more from rupee decline compared to when the rupee is at around 50.

For ONGC, it would mean over Rs 1.42 crore a day gain on about 50 mmscmd of gas output. Sources said the windfall to ONGC is courtesy the Oil Ministry, which changed the pricing of domestically produced natural gas from the rupee to the US dollar in 2010.

New Banking Licence -

The first committee of the Reserve Bank of India (RBI) does an interim scrutiny by September-October.

On the new bank-licence clarifications announced by the RBI on Monday and the stocks that might be impacted Mahindra and Mahindra (M&M) & Tata Capital and L&T Finance .

On the PSU side - Power Finance Corporation (PFC) & Rural Electrification Corporation (REC)

have a good chance of getting bank licences. However, since the process is long-drawn it is not a very near-term trigger. But when the licences are issued, it will be a big positive for those that do get the licences.

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

Union Bank – 230CE @4.75 TG 7+ SL 2 (Max 2 lots)

(Booked loss at 1.5 = -6500)

TS 310CE – @5.5 TG 10+ SL 288 in Cash (Max 1 lots)

(Booked loss at 3.5 = -2000)

HDFC 860CE – @12 TG 20+ SL 9 (Max 2 lots)

=============== INVESTMENT BASKET ===============

(Stock in this section is with view of 3 months to 1 year)

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

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

MG Blog Fronm Jan 13 to April 13 (Total 58,800)

June 2013 = -8500

(Booked loss in Tata Steel and Union Bank)

Billionaire Club from Jan 13 to May 13 (Total 1,22,200)

June 2013 = +13,900 – 4000 = +9,900

(Booked loss in Rcom future = -2000, Booked loss in Lupin Future = -2000)

Today’s MG Mantra –

Instead of good start Nifty losing steam in second half and specially after 2.30, so be carefull after EU opening today.

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.