Morning Bells (12 Jun 13)

Good Morning Friends.

Hope is one of the God’s greatest gift to all of us, Because it’s magic always inspires us, to keep trying, learning, loving & living.

Y’day was the day of Indian currency, Indian Rupee was the talking point among market participant as it fell down to life time low and breached 59 against USD which put FIIs under pressure to offload their holding in Debt. market and market witnessed sharp cuts on Tuesday with the Nifty closing below its 200-daily moving average, which was placed at the 5794 mark.

The rupee, which has weakened around 5% from May 28, continued its negative run. Once again the rupee stunned markets by weakening to a record low of 58.98 against the dollar. However, suspected intervention by the Reserve Bank staunched the rupee slide off its record lows.

The decline was led by metals, realty, banking, power and oil & gas stocks. Selling was seen even in mid- and the small-cap counters. In fact both indices fell 1.6% and 1.8% respectively.

Gainers –

by Wipro, Bajaj Auto, Cipla, Gail India and Hindustan Unilever were among the major gainers in Sensex & Nifty.

Losers -

RIL, Infosys, TCS, ONGC, JSW Steel, M&M, NTPC, HDFC, Tata Power, Hero MotoCorp, Coal India, BHEL, L&T, Maruti Suzuki, ICICI Bank and SBI were among the major losers in Sensex & Nifty.

Jindal steel was top loser and it fell down around 24% and touch 190 levels but in later part it recovered from days low.

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.

Domestic Front –

OMCs may hike Petrol price by 1.5-2 Rs a litre -

Oil marketing companies are planning to increase petrol prices by Rs 1.5-2/litre w.e.f Friday midnight, according to reports.

Reports stated that a hike in petrol prices is along the expected lines as OMCs are hit by Rs 20,000 crore of under-recoveries.

Rupee scenario –

The Indian rupee on Tuesday hit a record low at 58.98 against the US dollar to close the day's trading at 58.39 compared with 58.14 ended on Monday. The local currency however, recouped its early losses after the Reserve Bank of India (RBI) had intervened to stem the local currency's sharp decline, traders said.

It was learnt that the central bank asked some state owned banks to sell US dollars when the local unit was trading at 58.95/USD. Banks including Union Bank of India, Canara Bank , SBI , Syndicate Bank and others were selling the greenback, traders observed.

Many believe, if RBI intervention happens repeatedly check rupee's slide to 59, it has to be assumed that the central bank is protecting a particular level at 59/USD.

MG’s view – So if this happens then we can say in short term Rupee can stabilize here. But another view according to experts is below -

According to Forex experts the currency is likely to be hammered more on the back of more FIIs removing their money from the debt market.

"The numbers support something around USD 3-3.25 billion so far and that is money that is being repatriated" according to Pradeep Khanna, HSBC Group. He says more FIIs are likely to further offload to the tune of USD 1.5-2 billion, which may cause damage to the rupee. (MoneyControl.com)

FIIs have been selling in the Indian bond markets and taking money back to invest in the US and Japanese bond markets. Yield on the 10-year 7.16% benchmark G-Sec has risen from 7.12% to 7.32% in the last week or so.

Worry about Rupee Fall -

We have already discussed this points during the day on FB, just recall –

A weak rupee can revive a number of past woes - upset the easing inflation trajectory, raise the current account deficit financing concerns, raise repayment burden on external debt and up the currency risks for offshore borrowers and companies having high debt of foreign currency will go in deep loss, OMCs will also come under pressure.

Another Breaking new from JSPL –

The Central Bureau of Investigation (CBI) has filed an FIR against the Jindal Group in the coal scam. The FIR names Congress MP Naveen Jindal and former Minister of State for Coal Dasari Narayan Rao.

The FIR has accused Jindal and his company Jindal Power and Steel Ltd of misrepresentation of networth and concealing previous allotment. They are also charged with cheating and forgery.

The Congress MP's residence and head office in Delhi are also being raided in connection with the coal scam.

The Naveen Jindal group was allotted a total of 11 blocks, making it the single largest beneficiary of the controversial coal block allotment.

Global Front –

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

The two major events lined up ahead are the minutes of the Federal Reserve's Monetary Policy meet on June 18-19 and RBI's policy meet on June 17.

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

The INDIA VIX on NSE shot up 7.6% and ended at 19.49 against previous close of 18.11.

FNO PCR was 0.93 against previous close 0.94.

Indian Rupee – Rupee declined further to life time low by 24 paisa and was trading at 58.39 against its previous close of 58.15.

S&P 500 (US) was trading at 1629.65 down 13.16 then its previous close at the time of writing M Bells.

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

Finally Nifty closed below its 200DMA. We were talking it about since last week that if Nifty doesn’t close above 5940 chances are high to go on 200DMA which achieved y’day.

Market still under pressure and now 5700 is on card, or exactly 5675-5685 is next stop. Here 2 things can give small support to Nifty which is – RBI intervene Rupee so chances for further slide in June series is low and secondly market looks oversold, so some bounces are also on card but trend is down. So now one can use small bounces to exit their longs. Only close above 5940 is the trend changer i.e. we are close to a support level, which is in this region of 5,770-5,800 levels, we could see some amount of bounce back. But its not advisable to go out and start buying now.

It was also on dot that we have informed that there would be some bounces which will be short lived and can be used to exit. We saw it on Monday & Tuesday both day that Nifty turned green with 40-50 points but both time finally it closes in RED.

Opening – Seems flat or down. Nifty may remain in right range in first half.

========================  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 –

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.

Select List of companies can be affected by fall in Rupee -
1. Tata Motors
2. JPA
3. Jain Irrigation
4. Reliance Communication
5. Lanco Infratech

TM

TM currently in trading range of 289-302, for fresh position one need to wait for breakout either side. 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. 

In short - this is not right time for auto stocks like TM (having huge forex exposure), fall in rupee, fall in sales no.s and price hikes in diesel price are the main factor which put auto stocks under pressure.

IT Cos to gain from weakness in Rupee -

Even as the overall market remained weak, investors continued to buy IT stocks on Tuesday, amid hopes that the recent sharp depreciation in the Indian Rupee will boost margins of companies like Infosys , Tata Consultancy Services , HCL Tech , Wipro among others.

The Indian Rupee depreciated to a record low of Rs 58.98 on Tuesday, before recovering slightly to about 58.50 in afternoon trade.

Software service exporters earn most of their revenue in US Dollars and so expect margins will imporve in the April-June quarter.

Mahindra Satyam -

The Andhra Pradesh high court today gave its nod for the merger of Mahindra Satyam and Tech Mahindra. The court's decision paves way for the creation of the fifth largest IT company in India, following TCS, Infosys, Wipro and HCL Tech.

It is a great relief for Mahindra Satyam. It has been long pending for more than a year because a bunch of unsecured lenders have challenged the amalgamation process in Andhra Pradesh High Court. They have been asking the Andhra Pradesh High Court to settle the issue of Rs 1250 crore receivables from Mahindra Satyam before the merger process is initiated.

Jain Irrigation –

The depreciating rupee will take a heavy toll on companies with large foreign debts. In an interview to CNBC-TV18, Anil Jain of Jain Irrigation Systems said that he expects a notional forex loss of Rs 50-55 crore in the first or second quarter due to the weak rupee. 

Jain said the company was also looking to upgrade its credit rating to 'investment', which would mean an interest savings per annum of around Rs 30-40 crore.

The company’s forex liabilities stood at USD 230 million to be repaid over the next 10 years, he adds.

Speaking on their forex earnings, he said that after deducting USD 100 million loans to be repaid from their overall exports revenue of USD 150 million, he expected their net foreign exchange to the tune of USD 50 million.

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.

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

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

June 2013 = +13,900 – 4000 = +9,900

Today’s MG Mantra –

If Nifty shows strength and give bounces as seen oversold, one can initiate short positions for very short term.

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.

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