Morning Bells (29 Oct 13)

Good Morning Friends.

Problem is just the distance between Expectations & Reality. Either expect less and accept the reality or expect a lot and turn it into reality.

Finally the day has come for which market was eagerly waiting. So today no tech and no guessing instead trade as per facts and which are –

Expectations on the street are largely in favour of repo rate hike as RBI governor Raghuram Rajan's focus remains to be inflation and he would bet that the focus in going to be on inflation control.

After consolidating in a narrow trading range in the past couple of trading sessions, the Indian equity market slipped on Monday ending near days low on fears that the Reserve Bank of India (RBI) Governor Raghuram Rajan is likely to hike key policy interest rate by at least 0.25%. This will be the second increase in the repurchase or repo rate in nearly one-and-a-half months to curb inflation

The decline was mainly led by the FMCG, realty, metals, power and banking stocks.

Today I have added a short note on GAIL and on further development stock may see significant move either side in upcoming months.

Also read RBI section as I have my view on that.

RBI Policy meet outlook –

It is assumed that RBI outcome will be next trigger for market but I strongly believe that market may still remain in mid-size range, say from 5980 to 6235. My belief is simple – if RBI does what experts are expecting then it may decline few more points as Govt. is trying its best to increase FII inflow and y’day’s clearance for 13 FDI is part of that that may keep downside limited while if RBI give it a pass then market may cheer but again upside is capped to 6235 or max 6350. So overall if we see it creating trading range till next big trigger. Also Govt. may go for Kirit Parekh’s recommendation on OMCs which is also positive for market.

In above thought the only disappointment is that few experts feel that to control inflation at rapid speed ahead of election in 5 states, market may lose its steam in short term and market may breach the range in downside.

Well about experts and market, the market expects RBI to increase the repo rate by 25bps as both retail and wholesale inflation have gone up since August. One basis point is one-hundredth of a percentage point.

So overall today could be a highly volatile day as bears and bulls both would try to take advantage of this event. What if, if I tell you that RBI can deliver a balance output, mean RBI can hike repo rate as well as can give some liquidity freedom to bring more liquidity into the market.

So overall don’t try your luck without any proper information as option prices are already up. Best idea could be short straddle in select banking stocks.

MARKET OUTLOOK –

Well its assumed that market is in consolidation mode and eagerly awaiting to break its trading range. Most of experts now expect that Nifty losing its steam and can fall dramatically. Overall, it was a consolidation time for the market after a 6 percent rally witnessed in the previous three weeks but consistent inflows of foreign money kept a check on the downside.

Few also believe the market may surpass its January 2008 record of hitting 6357 on the Nifty and 21206 on Sensex in the next few days, may be by end of September quarter earnings season.

Meanwhile, FII were net buyers in October so far and bought more than Rs 13,000 crore worth of shares (including Friday's provisional figure) in current month, in addition to Rs 12,633 crore worth of buying in September.

MG’s Nifty trading range –

R – 6240 – 6290 – 6350 (To hit new high, close should be above 6230-35)

S –6120 – 6070- 6020 – 5980 (Trend Changer level 5950)

ECONOMIC EVENTS / RESULT CALENDAR –

28 Oct – Result – Dabur, JSW, Maruti, VIP

29 Oct – Result – JSW Steel, Sriram Transport, Tata Comm, Welspun Corp

30 Oct – Result – Bata India, BharatiAirtel, DLF, Havells, IDBI Bank, Jindal Steel, LIC Hous. Fin., Lupin

31 Oct – Result – Adani Enterprise, Allahbad bank, BOB, BOI, UBI, Dr. Reddy, FRL, IDFC, Jubilant Food, SesaSter, Titan,

OI Activity –

STOCK OUTLOOK -

(Stock that can see some good moves either side)

OMCs –

Kirit Parekh committee is going to recommend immediately hike fuel prices including diesel by Rs 5/l, focus on deregulating prices, Kirit Parikh will make to the government on October 30.

The expert group set up under the chairmanship of Dr Kirit Parikh is likely to submit its report on Pricing Methodology of Petroleum Products to the government on October 30, and the street says it'll be surprised if action is taken on most of the recommendations.

In the run upto five assembly polls and the 2014 general elections, Kirit Parikh is likely to recommend an immediate Rs 5/l diesel price hike followed by a fixed subsidy cap of Rs 6/l to the oil marketing companies IOC , HPCL and BPCL . "This would imply freeing of price of diesel beyond this cap on subsidy. In future, oil companies should be permitted to revise the above the subsidy cap on their own," writes Parikh in the summary of his report.

Calling for deregulation of diesel in one year's time, Parikh says, "The expert group recommends that the fixed subsidy of Rs 6/l be reduced gradually and removed through monthly revisions over the next one year."

NMDC –

Government sources indicate that the decision on NMDC buyback is likely to be taken by next week. The government is considering a buyback in state-controlled mineral producer NMDC. The company is likely to take the final decision on this by next week.

The NHPC buyback was announced recently and this is part of the government’s backup plan since the offer-for-sale (OFS) route is not going through. None of the companies that have been scheduled, for instance Coal India , Indian Oil are willing to go ahead with OFSs and hence the government is relying on buybacks in NHPC , NMDC as well as Coal India . It has invited bankers for presentations for the NMDC buyback and is likely to be a 10 percent buyback.

Govt. Clears 13 FDI proposal Worth Rs. 1258Cr. -

Government y’day said it has cleared 13 FDI proposals totalling Rs 1,258 crore and referred Axis Bank's proposal for increasing foreign equity amounting to about Rs 6,266 crore for consideration of the Cabinet. The Foreign Investment Promotion Board (FIPB), in its September 19 meeting, had also deferred decision on 8 FDI applications while two were rejected, it said.

Proposal of private sector lender Axis Bank, amounting to Rs 6,265.76 crore has been recommended for consideration of Cabinet Committee on Economic Affairs as the investment involved in the application is above Rs 1,200 crore.

The bank had sought FIPB's nod to increase the foreign equity from the existing 49 percent to 62 percent.

Proposals on which decision was deferred include Jubilant Aeronatics, Soma Tollways, M D Shajahan Bablu, Bangladesh, and Green Destinations Holdings, Mauritius. The Ministry also said that decisions on five proposals have been kept in abeyance.

GAIL -

State-owned gas utility GAIL India reported 7 percent drop in net profit at Rs 915.67 crore for the July-September quarter versus Rs 985.38 crore in the same period a year ago. Its turnover increased from Rs 11,664.37 crore to Rs 14,224.37 crore in Q2 of 2013-14 fiscal.

The government has capped GAIL's FY14 subsidy bill at Rs 1400 crore, which means that the company will not bear any subsidy burden in the second half of this fiscal year. Though this may be seen as a possible pre-cursor to no subsidy for GAIL in FY15. GAIL will have zero-subsidy burden for the rest of the year, but there is no official communication about FY15, so ICICI Securities is estimating Rs 1400 crore as subsidy for GAIL for next year, he explains. On the other hand, Niraj Mansingka of Edelweiss Financial Services expects GAIL to be out of subsidy net in FY15 on assumption that gas price will be raised to USD 8.4 from the current USD 4.2, which will reduce its subsidy for next year. However, both experts feel that the government might have reduced GAIL’s subsidy burden this year since gas price for the company escalated to almost Rs 1400 crore as Reliance ’s KG-D6 volumes fell. Meanwhile, Ahuja added that the broking firm has turned positive on GAIL after recent newsflow. Edelweiss also expects a valuation rerating in the stock.

(Source - MoneyControl)

MBC PL –

Oct PL = -2000 + 5000 (Loss in Ashokley 17.5CE) = -6600

Open Call –

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