Tuesday, September 29, 2009

Will This Impact Markets In Near Future?

http://www.rttnews.com/Content/TopStories.aspx?Id=1077094&Category=Top%20Stories&SimRec=1&Node=B1

Iran Developing Second Uranium Enrichment Plant Capable Of Making Nuclear Bomb 9/25/2009 9:51 AM  ET
(RTTNews) -  International Atomic Energy Agency (IAEA) has confirmed Friday reports that the Iranian government has disclosed to the UN nuclear watchdog the existence of a second uranium enrichment plant. 
The news, alarming the international community, comes a day after a historic UN Security Council meeting unanimously adopted a resolution calling on states to prevent the spread of nuclear weapons, promote disarmament and reduce the risk of nuclear terrorism.
IAEA spokesman Marc Vidricaire told reporters that Monday, Iran informed in a letter sent to the Vienna-based UN agency chief Mohammed ElBaradei that "a new pilot fuel enrichment plant is under construction in the country."
Details about the location of the facility, the status of its operations, or the type and number of centrifuges it was running, were not revealed in the letter, but said additional information would be provided "in an appropriate and due time." 
Iran reportedly admitted to the site after finding out that Western intelligence agencies knew about the project. 
The new facility, located on a military base near the holy city of Qom, south of Tehran, is big enough to house 3,000 centrifuges, the diplomat said, quoting intelligence reports.
That is sufficient to manufacture bomb-making material, but not enough to power a nuclear reactor, he added.
The IAEA has sought from Tehran specific information and access to the nuclear facility as soon as possible.
Tehran, which boasts of its increasing nuclear capacity from time to time, claimed Tuesday that it has developed a "new generation" of high capacity centrifuges for enriching uranium and is testing them. 
Ali Akbar Salehi, the head of Iran's nuclear energy agency, told a press conference that its Natanz enrichment plant can enrich uranium with "more than five times the output capacity" of the earlier standard centrifuges. 
Iran is facing the threat of a fifth round of sanctions from the Security Council to pressure it to stop uranium enrichment. The Islamic nation denies accusations that it is seeking to develop nuclear weapons, and insists that uranium enrichment is meant for peaceful purposes.
Ending more than a year of deadlock on Iran's talks with the international community, the Islamic republic and six world powers are set to discuss on October 1 a package of proposals put forward by Tehran.
It is not clear whether Iran agreed to talks on its disputed nuclear program or the discussions will be confined to global nuclear disarmament.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ai3EnM4PPHP8 
Iran Fires Short-Range Missiles in ‘Deterrent’ Tests (Update2)
By Ladane Nasseri



Sept. 27 (Bloomberg) -- Iran fired short-range missiles as part of a military maneuver and said it will give a “crushing” response to any armed aggression.
Iran “successfully tested a multimissile launching system,” state-run Press TV reported. “A number of missiles including the homemade Fateh and Tondar” models were launched both simultaneously and consecutively, the report said.
The exercises may increase tension over the Persian Gulf country’s nuclear program. Iran’s Revolutionary Guards Corps said yesterday it would conduct the war games to maintain the “deterrent capacity” of the armed forces.
The military plans to test medium-range missiles, such as the Shahab 2 missile, later today as well as improved long-range Shahab ones tomorrow, General Hossein Salami, head of the air force, told Press TV.
“The message is that of security,” Salami said. “We will respond to any military action in a crushing manner.”
Today’s exercise, called Prophet IV, will assess “recent technical developments and tactical progress” in surface-to- surface missiles, Salami said, according to a report on the Guards’ official Web site.
The maneuver is also aimed at “practicing management of long-term preventive and defensive operations,” he said.
'Greedy Nations’
“The range of our missiles is in no way a threat for the neighboring countries,” Salami said. “It is a message for certain greedy nations that seek to create fear, to show that we are able to give a swift and suitable answer to our enemies.”
Iran two days ago confirmed the development of a second uranium enrichment facility in the country, a move condemned by the U.S., U.K. and France.
The enrichment activity is at the center of western concerns about Iran’s nuclear program. The process isolates a uranium isotope needed to generate fuel for a nuclear power reactor, though in higher concentrations it can be used to make a weapon.
Iran will continue to enrich uranium at a low level of 5 percent concentration or less, said Ali Akbar Salehi, the head of the country’s Atomic Energy Organization, according to a report on the Iranian Labour News Agency. Iran also said yesterday that it will allow the United Nations International Atomic Energy Agency to inspect the enrichment facility, located outside Tehran on the road to the holy city of Qom.


Military Option


Iranian officials have rejected criticism for failing to mention the plant’s existence until two days ago, arguing that it’s only required under IAEA regulations to inform the agency 180 days prior to introducing nuclear material in the site. President Mahmoud Ahmadinejad said Sept. 25 the facility is “18 months away from operation.”


At a Sept. 25 news conference concluding the G-20 summit, U.S. President Barack Obama said that diplomacy was his preferred option to halt Iran’s nuclear program, though he didn’t rule out military action. Top Israeli officials also said last week that use of force against Iran remains an option.


Iranian officials are set to meet Oct. 1 in Geneva with representatives of the five permanent UN Security Council members and Germany. The group is seeking to determine whether Iran is willing to limit its nuclear activities, which several western nations claim are aimed at developing weapons.


Obama said yesterday he remains open to “a serious, meaningful dialogue” with Iran.


The country first must “cooperate fully” with international arms inspectors and “take actions to demonstrate its peaceful intentions,” the president said in his weekly radio and Internet address.


http://www.xinhuanet.com/english/ylhwq/index.htm Special Report: Iran Nuclear Crisis


India raises nuclear stakes
By James Lamont in New Delhi and James Blitz in London
Published: September 27 2009 22:30 | Last updated: September 27 2009 22:30
India can now build nuclear weapons with the same destructive power as those in the arsenals of the world’s major nuclear powers, according to New Delhi’s senior atomic officials.


They said India had built weapons with yields of up to 200 kilotons, which would be considered a “proper strategic deterrent” by the global community. A nuclear weapon above 50 kilotons is considered high yield. India’s enhanced capability gives it a considerable edge over Pakistan, its nuclear-armed arch-rival.
Read this news on FT.com - http://www.ft.com/cms/s/0/d63f3a70-ab90-11de-9be4-00144feabdc0.html?nclick_check=1


http://online.wsj.com/article/SB125417342102747375.html?mod=rss_whats_news_us 
New Sanctions Against Iran Seem More Likely 



http://www.rttnews.com/Content/TopStories.aspx?Id=1077094&Category=Top%20Stories&SimRec=1&Node=B1 Iran Developing Second Uranium Enrichment Plant Capable Of Making Nuclear Bomb 


U.S., Allies Seek New Ways to Sanction Iran http://online.wsj.com/article/SB125417342102747375.html?mod=rss_whats_news_us


Iran's missiles are ‘ready to destroy Israel’ http://www.timesonline.co.uk/tol/news/world/middle_east/article6851981.ece


Iran May Quit Nuclear Treaty If Geneva Talks Fail (Update1) 
By Ali Sheikholeslami

Sept. 29 (Bloomberg) -- Iran may end its participation in the global nuclear Non-Proliferation Treaty if talks this week fail to resolve the international dispute over the country’s atomic development, a member of the parliament’s National Security and Foreign Policy Committee said.

The West has always had a “carrots and sticks” approach to Iran, said lawmaker Mohammad Karami-Rad, who urged the powers to “end their excuses and negotiate on significant issues,” the state-run Islamic Republic News Agency reported. “If Iran remains under Zionist pressures and U.S. bullying and if the 5+1 talks fail, the parliament will take clear stands, such as quitting the NPT,” he said, referring to Israel and the five permanent members of the UN Security Council plus Germany
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFWYTVL7C4ag



Monday, September 28, 2009

GAIL (India) Ltd, has begun discussions with Canada's InterOil Corp. (IOC) on the purchase of a stake in the latter's liquefied natural gas project in Papua New Guinea, a person familiar with the matter said Monday.

The Indian state-run firm has joined a growing number of Asian firms keen on acquiring a strategic stake in the next big liquefied natural gas project in Papua New Guinea to secure future supplies.

"The discussions are at a preliminary stage...It's going to be a strategic investment. Gail plans to ship LNG back to India from Papua New Guinea," said the person, who declined to be named.

China National Offshore Oil Corp. and India's Petronet LNG Ltd. (532522.BY) have also expressed interest in joining the project, which has been proposed by Liquid Niugini Gas Ltd., a consortium of companies including InterOil, and approved by the prime minister of Papua New Guinea.

"InterOil's CEO has met the GAIL team two-three times...They've offered GAIL a 2.5% stake in the project and an equivalent commitment of LNG," the person said.

But GAIL is keen to secure a larger portion of the plant's LNG output to supply to its customers back home.

"GAIL wants at least 10% of the total gas from the project. It's open to negotiate for a bigger stake as well," he said.

GAIL's investment in the project will ultimately depend on the size of its stake in the $5-$6 billion project, he said.

PNG-owned Petromin PNG Holdings Ltd., which has a stake in the LNG project along with InterOil, said in April that China National Offshore Oil Corp. had signed an agreement for "commercial cooperation" in the development of the proposed project.

A separate Exxon Mobil Corp.-led LNG project in Papua New Guinea is considered the more advanced, as it has clinched preliminary gas sales agreements with customers in China, Japan and Taiwan.

Saturday, September 26, 2009


Weekly Technical View by Tanmay G Purohit:
Nifty (4958) closed flat to end the week as it fell 17 points and even after breaching the psychological 5000 mark intraweek, last 3 sessions it has not been able to sustain above the 5000 level. Nifty still doesn't show any weakness and more upside may be possible but market participants may keep positions light as next week is short (just 3 days in the week to trade) with one more extended weekend as Friday is also a holiday. 30 September is the date for many hedge funds investors worldwide to apply for redemption and if redemption pressure is high owing to best rally since 1991 for Indian indices, many funds may not become aggressive and volumes may dip a bit because of lower participation. Next month we will witness Q2 results also which will confirm if the recovery mode for economy is still on, INFOSYS and HDFC are to announce results on 9th and 13th October respectively going by recent data. Advance Tax payments were higher by more than 14% for corporate India and if the results are up to the mark, our economy may well have started the booming process once again. But for now the best looks to be discounted by the market going by 73% rise in Sensex this year so far and current P/E above 22 gives a feeling of overstretched markets. Current rally is fueled by liquidity but liquidity is one thing which goes out on first instance of panic itself, so even if the up-trend may continue, one needs to remain cautious at higher levels. 
Nifty crucial support level is at 4700 and if it closes below that level for 2-3 days successfully we may infer that the correction has started, until that one can stick with the positions, especially traders. Pharmaceutical stocks have come into big limelight on Friday as BSE Healthcare Index was up 5% and GLENMARK can be value-pick at current levels.
Supp 4900/4825/4732 Res 5040/5120/5188
Glenmark Pharmaceuticals has raised Rs 413 crore through QIP http://www.business-standard.com/india/news/glenmark-pharma-raises-rs-413-cr-through-qip/74374/on
Glenmark looking for partner on R&D front http://profit.ndtv.com/2009/09/26171425/Gelmark-looking-for-partner-on.html
Glenmark Mulls Initial Share Sale of Generics Unit http://online.wsj.com/article/SB125387526987240693.html?mod=googlenews_wsj

Obama Accuses Iran Of Hidden Nuclear Plant, Demands Tehran Come Clean http://www.rttnews.com/ArticleView.aspx?Id=1077210
Moscow holds the line on Iran sanctions http://www.atimes.com/atimes/Middle_East/KI26Ak04.html






Last Week Recap Of Technical View:
Nifty (4976) rose 3.03% week-on-week but shows little exhausting signs with volumes rising at fast pace and breadth deteriorating. Monsoon worries are on backburner now as the Met Dept has clarified regarding rains not being a problem. Advance Tax figures are very healthy for corporate India with 18% rise and global market rally is helping indices here travel at fast speed but F&O data suggests otherwise. Total F&O Open Interest at Rs 116,551Cr is one of the highest in many recent months and Put Call Ratio at 1.70 is alarmingly high. It is a long weekend and next week we will have just 4 sessions including F&O expiry may be a roller-coaster. The rollover is one of the lowest so far and for such a high overall OI this suggests top is near. Nifty P/e 22.41 gives a feeling the best is already priced in and the top may be near though no sign of weakness is visible yet.  Nifty has completed 46 weeks from panic lows of last October and 28 weeks from March lows, but day-wise we are approaching important turn dates where a major top might be formed. The correction never happens when we want it, but it will be sudden strike and many can get stuck at higher levels so caution is advised and a very selective approach should be adopted.

Nifty View:- Given current strength of Nifty and as shown in below daily graph, it trades in a rising wedge which indicates tiring out of the trend. But here too Nifty may overshoot and test around 5200 levels before starting a correction, the probable move is shown in graph. Going by this there is still 200-300 point upside left in Nifty to play with, but if Nifty is to break down of the wedge and cut 4700 comfortably, the up-trend may get over in my view and a healthy correction can start.
Supp 4887/4773/4700 Res 5048/5160/5225

Positive stocks - SHANTHI GEAR, MRPL, IRB, SKUMAR NATIONWIDE

Thursday, September 24, 2009

Promoters in Stake Sale Mode as Indices hit new yearly highs:-
Last week RELIANCE raised Rs 3188 Cr from treasury stock sale and yesterday SUZLON, JPASSO and CIPLA sold a combined $531million of stock (nearly Rs 3000 Cr); it seems even promoters are taking advantage on the best rally in Indian stocks since 1991 so why can’t a retail investor? Nifty P/E at 22.61 tells us the best is already seen and most of the good news is built in. And as times are good, all are trying to make hay while sun shines. We have seen a flurry of QIPs and now IPOs have also started, one more RELIANCE group IPO is coming up - RELIANCE INFRATEL. Last time around RPL gave way to correction from 12600 to 8800 and RPOWER all have "fond" memories as Sensex crashed from 21000 to 7700, is it Deja Vu? Just go through the ET Cutout below, you will easily understand what I am trying to say here. FII and MF figures daily are gut-wrenching as they are turning in big buyers but who looks under the hood? It is just QIP/Stake Sale/Preferencial Allotment/IPO and no money to secondary market. Is it that we are so overstretched that even FIIs and MFs dont like to invest through listed route? Questions are many but answer may be one and that is "YES", so when will the market correct? It is a very difficult question to answer but time may be near. We as investors need to turn cautious now, and if one was following this blog, we have made a lot since index was near 8000 itself so after doubling our money it is best to come in healthy cash levels. F&O total OI is at Rs 119000 Cr which is highest after Dec 2007 levels and yesteray late selloff was just a trailer in my view, the big picutre is yet to emerge. So my advice is to take profits and remain cautious, correction may not happen immediately but anyway it won't send us an email that it is going to come!






Finance Minister Pranab Mukherjee today said the country’s GDP growth might exceed 6 per cent in the current financial year, but a rising fiscal deficit was not sustainable in the long term.

Sunday, September 20, 2009

IGL (INDRAPRASTHA GAS LTD) CMP Rs 165:-
EPS Rs 12.32 Book Value Rs 48.81

About the company:
Incorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited ). The project was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the backing of strong promoters – GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) – IGL plans to provide natural gas in the entire capital region.
The transport sector uses natural gas as Compressed Natural Gas (CNG) , while the domestic and commercial sectors use it as Piped Naural Gas (PNG).

CNG:- The next generation auto fuel:-
Compressed Natural Gas (CNG) is a fossil fuel substitute for gasoline (petrol), diesel, or propane fuel. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill (natural gas is lighter than air, and disperses quickly when released).
IGL has more than 130 stations in NCR and its network is distributed between Motherstations, Mega stations, Daughter Booster Stations and Online Stations which are conveniently made to avoid as much rush as possible at busy hours.
 
PNG - The most convenient next generation kitchen fuel:-
PNG or Piped Natural Gas is natural gas that is piped to homes and establishments. It is considered as a safe fuel as it reduces possibility of leakage, it is lighter than air. With its narrower range of ignition there is in-built safety in PNG installation and round-the-clock customer support which is necessary in case of unfortunate accidents. The billing is made based on meter reading of gas consumed and natural gas can also be used for water heating, space heating and air conditioning. 

Further catalysts:-
IGL is spreading fast as it now has 10 CNG outlets outside Delhi (6 in Noida, 2 each in Ghaziabad and Greater Noida). IGL’s sales volume CAGR has been impressive at 13% over FY05-09, led by 3.5x growth in CNG vehicles and 5x increase in domestic PNG customers. However, a large portion of the market is untapped and offers huge growth potential for IGL. Key growth drivers for CNG within National Capital Territory (NCT) would be new buses specially sourced for the Commonwealth Games, private vehicles, taxis, callcentre SUVs, LCVs and replacement of existing fleet. PNG growth is likely to be on account of a huge untapped domestic market. The conversion to CNG in NCR has been just around 15% so far and as government becomes more aware of environmental cleanliness, more and more vehicles are going to be converted which can be a major booster for IGL.
From where the gas can come?
As IGL is tapping other cities like Ghaziabad, Noida, Greater Noida, it is going to need more and more gas to comply with the rising demand of CNG. The demand will rise more in case IGL bids for authorization in Gurgaon and Faridabad also. The recent contract with RIL wherein the company can draw additional 0.3-2.1mmscmd from RIL’s KG-D6 block, will help sustain incremental growth beyond APM gas allocation of 2mmscmd at present.

Three-wheelers, Four-wheelers and Six-wheelers are already running on CNG but now IGL is testing using CNG in Railways to run diesel locomotives which, if successful, can be a major business winner for IGL. Strong promoter background like GAIL and BPCL is a special combination as GAIL is experienced in laying pipelines and BPCL has a big network for marketing, both being government companies, the growth potential is very high for IGL.

Technical Outlook:-
INDRAPRASTHA GAS stock shows a rounding bottom pattern but given current overstretched valuations in overall market the stock may see some downside of 10-15% also if broader markets start correcting. The stock should be accumulated from 1-2 year point of view with targets above Rs 250 in mind.




http://www.blonnet.com/2009/08/25/stories/2009082551880200.htm IGL looking for a pact with Reliance for city gas distribution

Saturday, September 19, 2009


Weekly Technical View by Tanmay G Purohit:
Nifty (4976) rose 3.03% week-on-week but shows little exhausting signs with volumes rising at fast pace and breadth deteriorating. Monsoon worries are on backburner now as the Met Dept has clarified regarding rains not being a problem. Advance Tax figures are very healthy for corporate India with 18% rise and global market rally is helping indices here travel at fast speed but F&O data suggests otherwise. Total F&O Open Interest at Rs 116,551Cr is one of the highest in many recent months and Put Call Ratio at 1.70 is alarmingly high. It is a long weekend and next week we will have just 4 sessions including F&O expiry may be a roller-coaster. The rollover is one of the lowest so far and for such a high overall OI this suggests top is near. Nifty P/e 22.41 gives a feeling the best is already priced in and the top may be near though no sign of weakness is visible yet.  Nifty has completed 46 weeks from panic lows of last October and 28 weeks from March lows, but day-wise we are approaching important turn dates where a major top might be formed. The correction never happens when we want it, but it will be sudden strike and many can get stuck at higher levels so caution is advised and a very selective approach should be adopted.

Nifty View:- Given current strength of Nifty and as shown in below daily graph, it trades in a rising wedge which indicates tiring out of the trend. But here too Nifty may overshoot and test around 5200 levels before starting a correction, the probable move is shown in graph. Going by this there is still 200-300 point upside left in Nifty to play with, but if Nifty is to break down of the wedge and cut 4700 comfortably, the up-trend may get over in my view and a healthy correction can start.




Nifty Weekly graph:-



Supp 4887/4773/4700 Res 5048/5160/5225

Positive stocks - SHANTHI GEAR, MRPL, IRB, SKUMAR NATIONWIDE

Last Week Recap Of Technical View:
Nifty (4829) rose on all days of the last week as it gained 3.19% week on week after it broke out above 4730-mark and touched 4889 as high of the week and new 2009-yearly high. Nifty shows no sign of weakness yet but being selective is the need of the hour as the participation is spreading fast to mid and small cap stocks but all may not be having so strong fundamentals as they show from price movement. One has to avoid euphoria and stay in only such scrips that can be long-term value buys. 
The index for industrial production expanded 6.8% from a year earlier in July, after a revised 8.2% increase in June, data from the Central Statistical Organisation showed Friday. RELINFRA being investigated about  power purchase transactions, accuracy of meters and steep increase in capex and operating expenses and the stock may remain soft on this news. HDIL premises raided by IT officials on accusations that the company earned additional income of Rs 350-400 Cr on which no tax was paid and the company has been asked to pay tax of Rs 100Cr and even after bad performance from the company, the management has seen salary increase by nearly 10times which doesn't go well on corporate governance front. 
Nifty is showing a lot of strength but all heavyweight index stocks are not showing gains, only RELIANCE moving up while other heavyweights being silent won't help in the long run and Adv/Dec ratio on weekly basis is bad, so aggressive players may wait for a dip towards 4600 to take positions. 

Supp 4768/4670/4600 Res 4908/4998/5048

Positive stocks - UNIPHOS, SANGHVI MOVERS, SHANTHI GEAR

Wednesday, September 16, 2009

Q2 advance tax collections point to robust recovery
Anindita Dey / Mumbai September 16, 2009, 0:48 IST
Advance tax collections for the second quarter of the current financial year (2009-10) have shown robust growth of 35 to 40 per cent across industries, reinforcing the government’s hopes of a sooner-than-expected recovery.
Although total tax collections are yet to be officially collated, Mumbai’s large tax payer unit has collected Rs 2,628 crore in the second quarter against Rs 895 crore in the last quarter.
The second quarter is significant, since companies or banks pay almost 45 per cent of the total annual tax payable. The first quarter accounts for 15 per cent.
“Second quarter collections give a rough indication to the Central Board of Direct Taxes whether or not the tax departments will be able to meet the annual target for the financial year, which is definitely good for this year,” said an official source.
 
ADVANCE SIGNALS
Second installment of advance tax (paid on Sept 15)
Company20082009% Change
SBI1500183822.53
RIL683115769.40
Tata Steel1000400-60.00
DICGC7738509.96
ICICI Bank575501-12.87
HDFC Bank31542534.92
TCS81220171.60
Ambuja Cements175150-14.00
Bank of Baroda25541261.57
BPCL0312
NA
Union Bank10820792.00
L&T15021040.00
Bank of India90269198.89
Asian Paints508570.00
Tata Motors60130116.67
Ultratech41125204.88
M&M17.5112540.00
Central Bank of India9179-13.19
IDBI Bank2062210.00
Tata Power1475435.71
Lupin1750195.00
Tata Chem6160-1.64
Dena Bank304550.00
Idea273218.52
Bajaj Auto9017089.00
Videocon Industries253020.00
Lubrizol India1020100.00
Sterlite Tech620233.33
Indian Hotels500NA
Figures in Rs crore
The target for direct tax collections for 2009-10 has been fixed at Rs 3,70,000 crore, roughly 10 per cent higher than Rs 3,38,212 crore last year.
Most industries, especially automobile and infrastructure companies like Tata Motors, L&T and Reliance Industries, have done well.
The income-tax department, however, thinks even if all the banks have reported a quarter-on-quarter growth, their total tax payout has fallen if the advances are compared with the first quarter.
For instance, India’s largest bank, State Bank of India, saw second quarter advance taxes at Rs 1,838 crore, 78 per cent more than Rs 1,068 crore paid in the first quarter  If total tax payment projections are calculated on the basis of the first quarter payout, which is typically 15 per cent of the annual pay-out, annual tax works out to Rs 7,120 crore (that is, Rs 1,068 crore/0.15).
Add in second quarter collections, which comes to Rs 2,906 crore, and the annual payout falls more than Rs 600 crore. Assuming the second quarter accounts for 45 per cent of annual tax collections, the pay-out for 2009-10 works out to Rs 6,457 crore (that is, Rs 2,906/0.45).
Similar calculations for other banks show the same result.

Monday, September 14, 2009


Where is market headed?
From A K Prabhakar
19000 or 12000 In Sensex in next 6-8months
This has become the most difficult question to answer, as majority of analyst feel market has fully priced in all future positive while negative like ballooning budget deficit, monsoon, fragile global recovery fully on stimulus package, lack of reforms and RIL-RNRL conflict. We will see analyze all below
                                     
Economy
Positives:

  • Stable government at centre with less of coalition pressure and continuation of policy in these difficult times of global turmoil and global recession.
  • Globally many countries have managed to come out of recession and are showing positive growth, and India also has managed well it’s slow down with 2 stimulus package and election spending.
  • NELP policy of India started to benefit the country with Reliance KG-D6 basin and CAIRN starting to produce Oil & Gas which would balance Indian trade and more availability of gas would secure fuel for energy starved country.
  • India Auto industry has made best use of the vacuum created by global auto major where high cost + fuel guzzlers where replaced by fuel efficient mid price segment cars found bigger export market going by data available.
  • Indian IT companies have benefited from global recession as they have helped many companies to reduce cost and improve productivity and India is becoming Global hub for KPO-Knowledge process outsourcing with already BPO also picking up.

Negatives:

  • Corporate India profit was up 17% in Quarter ended April-June 2009 while sales dropping -5% and this has been possible mainly on account of cost cutting measure and AS-11 accounting standard where many companies reversed their Forex provisional loss into profits (41% higher other income) and this Quarter result will miss this advantage.
  • Banking was one industry which showed excellent results and now that sector would be watched keenly with Bond prices moving up and Banks unable to lend and total banks investment in last 4month is 1lac crore in MF liquid scheme.
  • Trade internationally has not picked up and Baltic Dry Index is showing signs of weakness and for 11months in a row our exports has fallen but our trade deficit also narrowing down which can be mild positive.
  • Government budget deficit likely to push interest rate higher and government at this stage where monsoon is below normal cant withdraw welfare scheme and it has to increase rural spending to compensate and improve rural economy.

Fundamental View: Nifty50 12month trailing P/E is 21.70 and Sensex 12month trailing P/E stand @21 while BSE500 P/E is 21.21, with most of the Mid & Small cap stocks catching up, pockets of value is fast diminishing. If India grows @ 10-15% then risk to reward would not favor bulls in short to medium term and market has almost doubled in one year from low of 7693 a day before Diwali where I had said it is goanna rain in Indian stock market and introduced Compact15. IIP data has been positive after RIL gas was made available and other discovery which would come stream would add to India’s growth.
 
Reforms: Market gave thumb-up on UPA winning election by hitting upper freeze on both exchange on hope of faster reform and after 100days in power things have not moved but very short time to judge the performance,  in my personnel view Government seem to be in no urgency and adopting policy of Aam adami which won them election. Labor reform/Legal reform/Land reform are very important. Economic downturn has given way to labour unrest. The past year has seen a rising incidence of labour strife in India, with strikes at Hyundai, Mahindra & Mahindra, Nestle, banks and oil companies. The dissatisfaction varied from delayed wage negotiations to appointment of contract workers to summary dismissal. Jet Airway Pilot strike, Hyudai, M&M, MRF strike has put breaks and clarity in labor reform has become important, Ramalinga Raju and  Nithari case shows delay in our legal system and loopholes as justice delayed is Justice denied and Land has been centre of controversy. Added to these there are many micro and macro reforms which needs urgent changes.

Protecting Domestic Industry: Many countries, after recent recession, have understood the importance of domestic industry in development of economy and the most prominent change has been from USA which was the biggest consumer, containers dispatched to US would always come back empty. But now even USA is protecting its own industry as it takes strict policy against outsourcing in new Obama Administration and even affecting Chinese industry as just a day ago US imposed duty on imported tyres from China to discourage more imports. India has also seen drop in exports for 11months in a row due to global downturn but our industry must be protected more to avoid such things from happening again.

Foreign Relations: In recent past, our relations with our neighbours have become worse as terrorist activity around border and recent Chinese incursions into Uttarakhand border have made policymakers think twice about how to protect border area. History tells us that India has not had a friendly relationship with any neighbours and we have more foes than friends now, even Nepal after recent Maoist changes, is not a very good friend as it was before that. Massacre of Indians in Australia is one more case in point where India has lacked the strict policy stance, the message should be loud and clear to the outside world that India won't tolerate such things. Sterner stance on black money in Swiss accounts is not developing due to much of red tape and obvious political difficulties, but US has unearthed the names of tax-evaders through UBS, why can't India do it?

Technical aspect of market:
Nifty and Sensex has given a break-out from the trading range and trading near highest level of 2009 and many Index stock have made all time new high and clearly trading above all average short & long term all indicating strength but Derivative data suggest otherwise. Running correction normally has a unique way of moving higher creating new highs before market correct as we have seen during November 2007 to January 2008. Any weakness in Nifty comes below 4400 only till then this market correction are normal.



 
                   Nifty                                      Sensex
14EDMA=4715                                           15851
50EDMA=4530                                          15226
100EDMA=4327                                         14495
200EDMA=4107                                         13708

Derivative Outlook:
PCR=1.39 highest since January 2008
Overall Open interest is 1, 03,365crs almost near peak of January 2008
VIX- is low which indicate implied volatility is low and any direction market takes would be with vigor.

History: Last year the final phase of correction started during Sep 2nd week and ended before Diwali and Hindu inauspicious month has made local investor book profit. Hedge fund will know the amount of redemption by end of this month and traditionally they book profit in October for redemption.

Risk: Many retail investors have invested seeing the huge return equity market has given in last one year and their expectation is very high from market and with Derivative position very high after January 2008 leverage trader can soon feel the pain. But excess correction and pessimism led to this rally where chance of excesses on positive side would create bubble and risk to reward ratio is not favorable in my view and holding cash level above 60% would do good.

Conclusion: Everyone is aware of all the facts and figure and confusion is all around and caution is seen on both sides, bullish on long term no one has any doubts after 5-6 years markets will be more than double from here but is the pain over. Economic recovery has been on stimulus and continuing stimulus for long with create excess and can lead to more problems latter.  Many talk of V-Shape recovery while few talk of W-Shape recovery, the problem comes only if this recovery is W as the correction could be deeper and this time recovery will not happen so fast as it did before and for a recession which is worst in 80years things can turn worst before it can get better. Times have changed and world is better equipped to deal with help of past history but investor avoid being euphoric in next few week advance tax figure will be known and results also will flow in next 30-40 days this quarter would be important to judge if there is real overall growth and Global Hedge fund allow their clients withdrawal once a year and all maturity will be known end of this month.

Economic downturn sees an upsurge in labour unrest http://www.business-standard.com/india/news/economic-downturn-sees-an-upsurge-in-labour-unrest/370012/ 

 

Saturday, September 12, 2009


Weekly Technical View by Tanmay G Purohit:
Nifty (4829) rose on all days of the last week as it gained 3.19% week on week after it broke out above 4730-mark and touched 4889 as high of the week and new 2009-yearly high. Nifty shows no sign of weakness yet but being selective is the need of the hour as the participation is spreading fast to mid and small cap stocks but all may not be having so strong fundamentals as they show from price movement. One has to avoid euphoria and stay in only such scrips that can be long-term value buys. 
The index for industrial production expanded 6.8% from a year earlier in July, after a revised 8.2% increase in June, data from the Central Statistical Organisation showed Friday. RELINFRA being investigated about  power purchase transactions, accuracy of meters and steep increase in capex and operating expenses and the stock may remain soft on this news. HDIL premises raided by IT officials on accusations that the company earned additional income of Rs 350-400 Cr on which no tax was paid and the company has been asked to pay tax of Rs 100Cr and even after bad performance from the company, the management has seen salary increase by nearly 10times which doesn't go well on corporate governance front. 
Nifty is showing a lot of strength but all heavyweight index stocks are not showing gains, only RELIANCE moving up while other heavyweights being silent won't help in the long run and Adv/Dec ratio on weekly basis is bad, so aggressive players may wait for a dip towards 4600 to take positions. 

Supp 4768/4670/4600 Res 4908/4998/5048

Positive stocks - UNIPHOS, SANGHVI MOVERS, SHANTHI GEAR



Last Week Recap Of Technical View:
Nifty (4680) fell 52pts week on week as it consolidated between 4735 and 4576 through the week. India's economy grew 6.1 percent in the June quarter from a year earlier, roughly in line with forecasts as government stimulus helped spur demand, but a poor monsoon threatens to erode growth later in the year even as it drives prices higher. The difficult task facing RBI is the probability of inflation as India's consumer price index rose 11.89% in July Vs 9.29% rise in June. The Centre expects a shortfall of 45-50 lakh hectares (lh) in the total kharif paddy area this year but Monsson worries are starting to recede as during this week, country as a whole received rainfall 4% more than normal. For the period 1 June to 2 Sept, monsoon has been 23% below LPA against 25% last week. 
RIL-RNRL ADAG group stock out-performed market RNRL, R-POWER, REL.CAP, REL.INFRA and RCOM after Government diluting its stand on the Krishna-Godavari (KG) basin gas row in the Supreme Court. Auto and Cement companies posted strong numbers for August. Maruti exports grew more than 150% and M&M is trying to make presence in US, so India is emerging like an auto manufacturing hub for the world. Crude Oil cooled down last week which infused fresh strength into oil marketing and refining stocks - BPCL/HPCL/IOC/GAIL/MRPL to name a few. OIL INDIA IPO has also helped sentiment in those stocks and being attractively priced, investors can think of subscribing to OIL INDIA IPO. India exports have declined for 10th consecutive month on the back of falling global trade as indicated by more than 35% fall in Baltic Dry from its recent high also and trade deficit is narrowing which is a good sign if we can have trade surplus. 
We have completed just one week of September and already total OI is at Rs 87240 Crs which is an alarming level. Mid and Small cap stocks are outperforming the large caps and in case Nifty doesn't sustain higher levels, a big crash may happen soon as stocks will fall on their own weight. Nifty has taken support at trendline near 4570 and after rangebound movement looking to get over, it may try to breakout above 4730 once again. Indices have been sideways in a broad range after elections for nearly 3 months so now any trend emerging may have a rapid move. Nifty breaking out above 4730 can target 4850-4900 but FII selling is not abating and one should be cautious at higher levels. Break of 4550 to be negative for short-term trend. Fair strategy may be coming to 50-60% cash and take bets on the remaining 40% part so that opportunities won't be missed and high cash level can provide chance to buy at lower levels.

Supp 4585/4510/4450 Res 4740/4849/4900
Value buys - MRPL, UNIPHOS,  SKUMAR, IDBI BANK, CAIRN, TATA COMM,  IGL

Friday, September 11, 2009


S&P: New Report Outlines Risks To South Asia Corp. Rtgs In 2009

The following is a press release from Standard & Poor's: 

SINGAPORE (Standard & Poor's) Sept. 11, 2009--Although forward-looking indicators suggest that economic activity is now improving, operating conditions for the corporate and banking sectors in India may remain challenging in the near term, albeit to a lesser extent than that faced by the corporate and banking sectors in other regions, said Standard & Poor's Ratings 
Services in two recently published report cards, titled "Country Risks, Challenging Economic Conditions To Drive Rating Actions For South Asian Corporates In 2009", and "Indian Bank Ratings Are Resilient To The Cyclical Downturn". 
Currently, there is a strong negative bias in the ratings across the sector, with almost three-quarters of the rated portfolio now either on a negative outlook or on CreditWatch with negative implications. This is due to the negative outlook on the sovereign ratings on the Republic of India (BBB-/Negative/A-3), challenging operating conditions, and the weakened 
financial profiles of the rated entities. 
     "More than two-thirds of Indian corporate credits are rated at speculative-grade level, with leverage in most sectors within the region increasing substantially in the past few years, mainly due to debt-funded acquisitions and large capital-expenditure programs," said Yasmin Wirjawan, credit analyst at Standard & Poor's. "Their financial risk profile could be under pressure should the global economic recovery be slower and shallower than the current expectations assume." 
     Within the backdrop of the economic slowdown, the Indian banks--particularly public sector banks--took advantage of one-time regulatory forbearance from the bank regulator, the Reserve Bank of India (RBI), to restructure a large proportion (estimated at 3% by June 2009) of their troubled loans, and avoided classifying them as nonperforming loans (NPLs). "If economic conditions remain tight, we expect that a significant proportion of these restructured loans may slip into NPLs over the next two years," said Standard & Poor's credit analyst Ritesh Maheshwari. He added, "We expect 
declining margins in India's banking sector to stabilize, with a slightly downward bias, as the lending spreads have widened and pricing is more risk-based." The liquidity situation has been comfortable since November 2008, as a result of the loosening of the RBI's monetary policy. The sector's capitalization is adequate, but is slipping due to steady growth. The banks' standalone credit profiles have some tolerance for deterioration in asset quality and earnings compression. Indian banks are facing a cyclical downturn after more than six years of upturn, and Standard & Poor's Ratings Services expects the banks' asset quality to worsen moderately from historically low NPLs. Mr. Maheshwari said, "We currently rate the key banks the same as sovereign rating on India and, in line with the sovereign outlook, the outlooks on all the banks are negative."