Morning Bells (25 Jun 13)

Good Morning Friends.

Difference between Mrityu & Moksha – Saanse khatma ho jaye aur Tammana baki rahe to Mrityu, aur agar Saanse baki rahe par Tammana khatma ho jaye to Moksha.

Nothing has really changed in market sentiment and that’s most of text from y’day’s MB are part of today’s MB, as I still readers and followers to read it repeatedly and you will get essence of market mood.

I am quite impressed by Rahul, who have elaborated the subject like currency’s role in today’s market, is really a sensible article. He’s pointed out various issues; I have ready it 3 times and would love to read more times.

(Woh kahate he ki jab kuchh samajh na aaye to samasya ko bar-bar padhane se kai bar hal nikal aate he)

Well it was just 2 days back when had suggested to exit specially from banking sectors, y’day heavy institutional selling was witnessed in stocks such as HDFC Bank and ICICI Bank. So, weakness in the banks, realty and capital goods, to a certain extent, will push the market lower further.

So once again, nothing has changed, Nifty has breached its support level 5630 and closes below 5600 mark which is sign of another 100-150 point fall from 5630. So trend is down, I was expecting a small bounce ahead of expiry as huge short were built up and they can be liquidate any time before expiry.

Market-

So finally we entered into expiry week. Global markets triggered by comments from the Federal Reserve overnight. The Fed said it would start scaling back its stimulus measures later this year if the economy is strong enough. There was nothing new in this statement but the huge built up of leveraged positions is what led to the cascading fall across asset classes. On Dalal Street, the Nifty hit a two month low while the Sensex tottered near its 26-month low. This is the biggest single-day intraday fall for benchmark indices. The fall was precipitated amid a sharp depreciation in the Indian currency against the dollar.

The rupee hit an all-time low of 59.97 per dollar in the spot market while it struck 60.17 in the futures segment.

The dollar has been strengthening against a basket of countries with high current account deficits on improving US economic data. With India having the second largest current account deficit in the world, in absolute terms, it faces the risk of further depreciation.

FII -

Well sad news for our market is FII increased its exposure to its offloading from Indian market.

Foreign instituitional investors (FIIs) offloaded about Rs 2136 crore worth equities on Thursday, highest since May 13, 2011 ( Rs 3706.4 crore), according to data by Securities and Exchange Board of India (Sebi)

Thursday saw the Sensex tank over 500 points, its steepest crash since February 27, 2012. What triggered this sharp fall was US Federal Reserve chairman Ben Bernanke’s decision to taper the country’s monetary stimulus program- the quantitative easing 3 (QE3).

CURRENCY OUTLOOK (By our friend – Rahul Singh)

The Rupee’s as you know has its historic low – 59.27. Exporters see this as an opportunity to make India the world export powerhouse by de-bottle-necking manufacturing infrastructure. Were as the weaker currency makes imports costlier, especially of foreign oil on which India heavily relies, and will stoke already high consumer inflation.

New Delhi is attempting to ease corporate concerns, saying it will take measures to curb the widening current account deficit as imports outpace exports.

Let’s try to explore the reason behind the free fall:
1)- Dollar Trading at 3 Year High : Crude is trading at 3 year high at 84.3 USD/bbl, US stock market are at life time high, Strength in USD indicating recovery in US economy. Housing market is recovering. Job situation is improving and Fed finally indicated to end QE. Gold which was safe heaven for investors has been quiet volatile off late, so investor looking for the stable and non volatile instruments has again turned their attention to USD. So the Dollar Index has been strengthening one of the reasons Rupee is depreciating at rapid pace.

2)- FII Selling heavily in Index Futures: FII has sold 4100 cores in Index Futures from start of June series, this is a hedging move as FII has pumped in 15 Billion Dollars from the start of Year, and also cash market buying has come to standstill in past trading sessions. FII net sales was 4000 crore in last two days, so be careful and on the contrary DII's has invested 2000 crore net in the same period. You could easily comprehend that if the DII would not have been there then this free fall would have resulted in below 5500. Going forward if rupee continue to depreciate then chances are high that these support from DII will not continue, so one sided selling affair will be there and we could expect levels of 5400/5500.

3)- Demand for Gold and Oil importers: India has to import crude oil to meet the domestic requirements. There has been continuous demand for the green back from oil importers, the biggest buyers of dollars in the domestic currency market, purchasing the rupee lower. Oil and Gold imports account for 35% and 11% of India’s trade bill respectively. Gold import hit 162 tones in May, another record twice monthly average of 2011.

4)- No Green Shoots in Indian Economy: Indian Economy is still not out of woods, Consumer and Food inflation is still at highs, Fiscal Deficit is large, IIP is almost flat and Growth concerns still Lingers. The Rating agencies also putting pressure to make India from current of BBB- with negative outlook to JUNK status if Fiscal and current deficit are not brought under control.

To conclude at a satire note Rupee at 58,59…60…Let us thank Congress and PM Maun Mohan Singh for this slide entry. Oh God! Please save this country.

(I Loved the statement - MG)

I hope this will somehow help other to better understand the rupee volatility and it's affect on market. If you want to put some light on any other topic please let me know.

Gainers –

Losers -

Sectoral –

Domestic Front –

Global Front –

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

Weak fundamentals, dismal earnings, high company debts and a prolonged political logjam deterred companies from posting positive returns for FIIs on their investments.

What came as a double whammy was the depreciating rupee that saw its all time low of 59.93 against the dollar- a figure far higher from the average dollar rate of 51.80 for the past two years (May 2011-May 2013). This translates into a 15 percent loss for the FIIs on currency conversion based on the current exchange rate of rupees 59 per dollar.

It is also important to state here that now investors or big lenders are not fuelling to existing stocks instead they prefer new markets.

Most global markets were funded for long by cheap liquidity from various countries monetary stimulus programs- the United Kingdom’s long term refinancing operation (LTRO), the United States’ quantitative easing (QE) and Japan’s bond buying program. Banks across the globe used this liquidity to invest in various asset classes to earn quick returns rather than lending it to borrowers to kickstart the economy as expected by respective central banks.

So in short, Indian market is losing its shine for foreign investors and seems India may have been the biggest growth story in the beginning of last decade after foreign institutional investors flocked Indian markets. However high current account deficit, sharp decline in Indian rupee, contraction of GDP from 9 percent to 5 percent, policy paralysis and many such factors have taken tall on India’s shining image.

FII inflows to taper going forward as developed markets like US and Europe are likely to bounce back. Given the unprecedented fall in rupee, now Reserve Bank of India is also unlikely to extend any further rate cuts.

About FII investment, we have got, almost about USD 14 billion from January 2012 and it could be reverse, and that’s why now most of experts expects market may fall 15-20% further, while I guess I was the first one who started annoying and giving repeated warning for bigger fall when Nifty was trying to hit 6000 mark.

The INDIA VIX on NSE was up 10.40% and ended at 21.01 against previous close of 19.03.

FNO PCR was 0.92 against previous close 0.83.

Indian Rupee – Rupee gained by 47 paisa and was trading at 59.27 against its previous close of 58.85.

S&P 500 (US) was trading at 1583.82 down 8.61 than its previous close at the time of writing M Bells.

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

Finally Nifty also breached 5630, and now if it doesn’t hold on closing basis then we may see 5500 or precisely 5477 around level sooner or later. There onward 5200 is also on card.

Opening – 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.)

TM -

Rupee signalling a small bounce, so TM is also expect a bounce, chances to touch 292 levels are high.

JP Group stocks fell down sharply on Uttrakhand tragedy-

Stocks of JP Group are in the top losers today. Jaiprakash Power Ventures is sitting at a lifetime low with cuts of approximately 15 percent. JP Infratech is sitting at a lifetime low of just about Rs 23. That entire group has cracked quite a bit in the day’s trade.

The flash floods in Uttarakhand forced JP Power to shut down its power plants in the region. This caused the stock to fall by 14 percent on the bourses. Tulsian explains that this news coupled with concerns regarding the debt in the company’s books and the prospects of plans to add thermal power capacity caused the stock’s steep fall on the market.

==================== 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 820CE – @6.5 TG 10+ Updated SL 5 (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 = -8500-5000 = -13,500

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

June 2013 = +9,900 – 8500 = +1400

Today’s MG Mantra –

Current correction seen in the Indian equity market is not due to domestic reasons but widespread negative sentiment globally, more pain can be seen in coming days so its better to sit on cash, or enter for small trade only and that too for intraday.

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.