Morning Bells (27 Sept 13)

Good Morning Friends.

Very true for market – Race can not be won by accelerating on Top Gear but it can be won only by changing gear on right time.

Welcome to October Series –

Sept. series had lot of ups and downs and I personally feel remaining series of this year will have lot of fun. So lets see how these 3 balance expiries take place.

It was a tame end to a volatile month. Many were believing that it would have wild swing on expiry but my thought was either first its going down till 5850 and then to move above 5900 or its going to attempt 5930 first then to settle below 5900. So second thought took place and call writer ate premiums very well.

Currency Moves –

India Ratings & Research (Ind-Ra) says the recent INR depreciation could increase oil subsidy by 0.1% to 0.4% of GDP in FY14 and this alone could push the fiscal deficit over 5.0% of GDP as against the budgeted 4.8%. 

“INR depreciation has resulted in a sharp increase in Indian crude basket price in INR terms. Despite an INR0.5/litre monthly hike in diesel prices, under recovery of three controlled fuels - diesel, liquefied petroleum gas and superior kerosene oil - is threatening the government’s FY14 fiscal arithmetic. Therefore, unless the price of diesel is hiked steeply or those of the three controlled petro products are hiked moderately, the government’s fiscal deficit is likely to cross 5% of GDP,” said Dr. Devendra Kumar Pant, Chief Economist and Head - Public Finance at Ind-Ra.

In the FY14 budget, Rs659bn and Rs650bn were set aside for the fertiliser and oil subsidies, respectively. When these amounts were allocated, INR was fluctuating between 53-54/USD. A sharp INR depreciation since May 2013 has substantially altered the budget’s fiscal arithmetic.

“OMCs’ under recovery will increase by INR1.50bn every day if Indian crude basket price rises by INR1,000/bbl. This would translate into an increase of around INR340bn in the government’s oil subsidy burden,” said Dr. Sunil Kumar Sinha, Director - Public Finance at Ind-Ra.  

Global Fears & Facts (Must read) -

USTreasury Secretary Jack Lew warned Congress on Wednesday that the United States would exhaust its borrowing capacity no later than Oct 17, at which point it would have only about USD 30 billion in cash on hand.

The fresh estimate adds another layer of pressure on lawmakers to raise the USD 16.7 trillion debt limit and comes as Congress struggles to pass a spending bill to keep the government funded beyond Oct 1, when the new fiscal year starts.

The fate of the debt ceiling is up in the air with Democratic and Republican lawmakers once again deeply divided over how to extend the Treasury's borrowing authority.

MG’s view – report says we are still not out of wounds and any rumours can make a knee jerk to whole global market. So we need to play for small range only till Oct. 17.

MARKET OUTLOOK –

On the derivates side, long rollovers were seen in the capital goods, metals and power stocks, while, the banking, real-estate and oil and gas stocks witnessed short rollovers. Pharmaceutical stocks, fast moving consumer goods (FMCG) and IT are seeing long side bias.

So now today will be a test day whether Nifty is declining first or giving attempt to 6000 first. Most probably weakness is there while in other hand liquidity is coming into the market and that is the reason market is holding its levels.

Above all scenario making a tight range for trade in current series which could be right now 5750-6050 i.e. 300 point range and from current levels its 100-150 points either side. So initially its not looking good for call spread. For a break out I think we need to wait till its not enter into 3^rd week when US senate meet will take place on Oct. 17. So around end of 2^nd week or entering 3^rd week we may start initiating call spread.

One of the reasons for my above view is - After two series of very high volatility we may stay in a tighter range than we are expecting. Also at this point upside seems limited with due reason till banking and oil and gas do not start signaling the positive trends, it will be very difficult for Nifty to cross 6050 on the upside.

MG’s Nifty trading range –

R – 5990 - 6030 - 6145 - 6180 - 6230

S - 5870 – 5850 - 5780 – 5750 – 5700

Nifty swing band is 5600-6100 and 4900-5600

STOCK OUTLOOK -

(Stock that can see some good moves either side)

On the derivates side, long rollovers were seen in the capital goods, metals and power stocks, while, the banking, real-estate and oil and gas stocks witnessed short rollovers. Pharmaceutical stocks, fast moving consumer goods (FMCG) and IT are seeing long side bias

Banking (Must read)-

PSU banks are expected to report substantial MTM losses on their non-SLR AFS investments in the current quarter as yields across maturities have hardened materially. We estimate our PSU Banks universe to deliver a near zero earnings CAGR over FY13-15. Don’t see any relent in the multiple headwinds bogging PSU Banks. Valuation to remain under pressure; so no case to BUY. Top Sells are SBI, BOB, Allahabad Bank and Andhra Bank in next series.

Wipro –

Wipro erased all it early gains and ended flat at Rs476. The stock was seen hitting intra-day high of Rs489 on the National Stock Exchange (NSE), ahead of its entry into 50-share Nifty index. Wipro will enter Nifty on September 27, 2013 replacing Reliance Infra, the stock was down 1.6%.

L&T –

Larsen & Toubro ended flat at Rs830. The company announced it has bagged new orders worth Rs26.83bn in the current month across various segments both in the domestic and overseas markets.

Company is reportedly planning to sell 26% stake in the Hyderabad Metro project and 50% stake in Dhamra Port project is close to Rs 4,200 crore.

The company is planning to list L&T IDPL in Singapore stock exchange via the trust route to raise another Rs 4,000 crore, says report.

ITC –

Something strange with ITC and we may know about it in future.

Shares of FMCG major ITC has seen a lot of insider sells in open market. The company’s top management has been selling a lot of shares in the last one month. Around 23 lakh shares have been sold by the management so far.
Read more at: http://www.moneycontrol.com/news/cnbc-tv18-analyst-markets/itc-top-brass-sells-around-23-lakh-sharessept_957387.html?utm_source=ref_article

CALL LOG –

Keep eye on – SesaGoa and Coal India and Steel segment (if Nifty goes flat to positive, stocks to show strength)

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