Sunday, February 28, 2010

Weekly Nifty Update 27 Feb, 2010 by Tanmay G Purohit
Nifty has closed positive (+77 points) at 4922 positive close 3rd week in a row and it was able to cross 4950-resistance intraday on Friday, though close came below that only. Monthly chart shows Nifty gained 40 points in February 2010 and in record books it would show Nifty was +0.82% in the month of 2010-budget. Nifty can go towards 5040 if it can sustain 4880 this week on a sustainable basis, Budget reaction was very positive but markets would open only on Tuesday after a 3-day weekend and that reaction would be more important, below 4850 caution advised. HINDALCO was once again top gainer this week with 8.5% rise followed by MARUTI, RANBAXY, REL CAP and L&T. HERO HONDA rose 15% in February while SIEMENS, ICICI BANK, AXIS BANK were up more than 10% each. ITC was big loser (-6.5%) this week after the stock fell due to more excise burden on cigarettes. BHARTI AIRTEL underperformed in whole month as it lost 11% after Zain acquisition.
Indian bank loans rose 14.8% on year as of Jan 29, the central bank's data showed and Deposits were up 17.1% from a year earlier. Steelmakers are eyeing short-term contracts as they foresee sharp rise in raw material costs – Steelmakers expect 70-80% rise in Iron Ore prices and 80-100% rise in Coking coal prices, Raw Material costs to be passed on to end-users. The National Stock Exchange will include KOTAK BANK in its benchmark Nifty Index, replacing GRASIM w.e.f. April 8; selling pressure in GRASIM may be seen while KOTAK BANK can see fresh buying as index funds change composition. Core infrastructure industries grew by a robust 9.4% in January against meagre 2.2% in the year-ago period reflecting the sound state of recovery in industrial production. India's food price index rose 17.58 percent in the 12 months to Feb. 13; lower than an annual rise of 17.97 percent in the previous week.

Union Budget effect: The budget didn’t have any big surprises in my view and even expectations were lower this time. Fiscal deficit has been addressed well and it should please many experts. It was a double trouble for car-makers as car prices would have to be raised and both Petrol and Diesel are costlier now.

Positive for:
SUN PHARMA, BIOCON, DIVI, RANBAXY – Weighted average deduction on in-house research and development to 200% from 150%.
POWERGRID, NTPC – Allocation to power sector doubled to Rs 5130 Cr
SBI – Agriculture loan waiver extended till 30 June 2010
IDBI Bank – Possibility of capital infusion as Government to infuse Rs 16500 Cr in FY11 in banks
IDFC, IFCI, REL CAP – More banking licenses from RBI
SUZLON – Excise duty exemption for wind turbines
Supp 4875/4790/4670 Res 4970/5062/5150

Relief to tax-payers in budget; petrol, diesel prices up
Car makers to hike rates after excise duty increase

Friday, February 26, 2010

India's Gas Highway - Tanmay G Purohit
The government is planning to boost use of clean fuel by reaching out to unserviced areas through a national gas highway. India's gas production has been ramped up after the D6 Block of Reliance Industries in the Krishna-Godavari Basin started to pump it out. The market of natural gas has so far been restricted only to a few metros and key towns. The government plans to build 500-600 km gas pipelines every year under the proposed national gas grid. The government is also proposing to set up an apex planning body and regulator, the National Gas Highway Authority, on the lines of National Highways Authority of India, which will oversee laying of major gas pipeline projects.
"It is envisaged that the National Gas Highway Authority would plan, develop, manage and regulate the gas highways and concentrate on planning the development of gas pipeline infrastructure, especially in remote and under-developed regions, leading to a national gas grid," Deora said in a written reply to a query. The government is planning to start gas supplies for transportation and cooking in 201 new towns by 2015.
Need for a Gas Pipeline Highway:-
  • The gas availability will ensure rapid industrialisation and help the growth of small and large units, apart from connecting households to piped gas supply.
  • With the recent find of natural gas in the Krishna-Godavari basin in the eastern offshore of the country, indigenous production is set to double, with natural gas emerging as an important source of energy. LNG infrastructure in the country is also being expanded. Current domestic gas production is estimated at 141.5 million standard cubic metres a day (mscmd).
  • At present, the bulk of gas consumption is accounted for by the western and northern states, while the eastern and southern states were lagging due to low gas pipeline density. The purpose behind expanding the existing pipeline network is to bring down the considerable inter-state disparity in gas consumption. Unviable routes where the private sector might not be interested in laying pipeline would be taken up under the gas highway plan.

Why only Pipelines?
  • Pipe transportation is an economical mode of transport compared to traditional modes of rail, road and sea transport.
  • This mode of transportation also helps in saving scarce natural energy resources and time taken for transportation. However, pipe networks need to be guarded from any kind of damage.
  • Despite the above advantages, India with its large geographical area has very low pipe penetration levels at 32% compared to global average of 79% in oil and gas transport. The pipeline network of India for oil and gas transport stood at 13,517 kms as at April 06. Sanitation levels are also lower at 33% compared to 91% in Srilanka and 100% in France. Of 140 mn hectares of cultivable land, only 40% land is irrigated.

Current Scenario:-
India has an existing gas pipeline network spanning 10,000 kilometers of which Gas Authority of India Limited (GAIL), India's largest gas-transmission and marketing company, owns 55%. The remaining 45% is held in partnership with the private sector. The private players are active primarily in the downstream sector.
Following is a summary of comparison between Pakistan and India, comparison done by ASSOCHAM (all 2007 data)-
  • Pakistan's gas pipeline infrastructure is six times stronger than that of India. Its infrastructure has a network of 10,500 km as compared to 56,400 km in India.
  • The current pipeline density of India stands at 116 million metric standard cubic meter per day (km/mmscmd) compared to 1,044 km/mmscmd in Pakistan.
  • As a result of intensive pipeline network Pakistan has connected its 1,050 towns and villages. However, India's connectivity is restricted to 20 cities.
  • Pakistan possesses nearly 1,600 CNG stations against 380 in India.
  • In the study, the chamber estimated that there are 19 lakh gas customers in Pakistan against 5.50 lakh in India.
  • Also, Pakistan runs 15.60 lakh vehicles on CNG, while India runs only 4.60 lakh vehicles.

ASSOCHAM, The Associated Chambers of Commerce and Industry of India, the apex industrial body in India, said that since the pipeline network in the country does not reach out to potential demand centres, a number of industrial projects have to depend on much more costlier and more polluting alternative fuels.
ASSOCHAM and Ernst & Young Global Limited (London), a leading global professional services organization, have estimated a total investment of $9.2 billion over the next five years for laying the gas pipeline network in India, according to Industrial Info Resources (Sugar Land, TX). The study is part of a paper titled "Indian Oil & Gas Sector: Rising Business Opportunities" jointly published by both organizations. The rapid growth in the Indian petroleum sector calls for a robust country-wide pipeline infrastructure. States that have existing regional pipeline networks include Gujarat, Andhra Pradesh, Assam and Tripura. Gujarat is laying a 1,200-kilometer Gujarat gas grid while Andhra Pradesh has further invested in augmenting the present gas distribution network.
The study estimates that an additional $16 billion will be required by 2015 to enhance the pipeline infrastructure. This will primarily be used for gas transportation to consumers and will be developed jointly with the private sector.

Oil and Gas as a pivotal source of Energy:-
Oil and gas contributes to 36% of the total energy generated in India today. Its share in the energy mix is expected to go up to 41% within a decade, while coal remains the primary source of energy in India. While recent initiatives by the Indian government to promote the oil and gas sector such as the New Exploration Licensing Policy (NELP) and tax holidays under certain conditions for exploration projects have been applauded, the ASSOCHAM study also recommends changes to NELP to attract more investors for domestic exploration projects. Investments are important to fund exploration amidst the ongoing global liquidity crunch.
The study highlights the limited availability of oil and gas resources and recommends government regulations to ensure gas is used only in cooking, automobiles and as an input for fertilizers.
GAIL and Reliance are playing a major role in setting up network of pipelines. When the gas grid gets completed, the natural gas business is expected to potentially get bigger than the country's telecom market also.
Need for Security:-
Gas Pipelines, being major medium for transporting important fuel like Gas are like veins in human body. There is a security threat given current state of terrorism in the world and the piplelines must be protected from such risks. Referring to security threat on the gas pipelines, L Mansingh of PNGRB said electronic surveillance technologies like SCADA system will be incorporated across the gas networks to enable precision detection of pilferage or sabotage among the nation-wide pipelines.

Companies that will benefit by the Gas Highway:-
GAIL has a vision of creating a National Gas Grid in India to connect gas sources with consumption centers. The gas grid is conceptually similar to India's PowerGrid and will ensure a common distribution and transmission network throughout India. In order to implement the grid, a few pipeline projects have been initiated that include the Dahej-Uran pipeline project, the Dabhol-Panvel pipeline project and the Jagoti-Pithampur pipeline project. This cross-country integrated project will run across 15 states through a high-pressure interstate gas-pipeline network stretching over 8,000 kilometers. GAIL's gas supply (upstream) comes from indigenous gas fields and imports. Gas from future transnational gas pipelines from Myanmar and Iran could be transported to different consumption centers (downstream) in the country.
Currently GAIL business portfolio includes:-
  •  6,700 km of Natural Gas high pressure trunk pipeline with a capacity to carry 148 MMSCMD of natural gas across the country
  •  7 LPG Gas Processing Units to produce 1.2 MMTPA of LPG and other liquid hydrocarbons
  •  North India's only gas based integrated Petrochemical complex at Pata with a capacity of producing 4,10,000 TPA of Ploymers
  • 1,922 km of LPG Transmission pipeline network with a capacity to transport 3.8 MMTPA of LPG
  • 27 oil and gas Exploration blocks and 3 Coal Bed Methane Blocks
  • 13,000 km of OFC network offering highly dependable bandwith for telecom service providers
  • Joint venture companies in Delhi, Mumbai, Hyderabad, Kanpur, Agra, Lucknow, Bhopal, Agartala and Pune, for supplying Piped Natural Gas (PNG) to households and commercial users, and Compressed Natural Gas (CNG) to the transport sector
  • Participating stake in the Dahej LNG Terminal and the upcoming Kochi LNG Terminal in Kerala
  • GAIL has been entrusted with the responsibility of reviving the LNG terminal at Dabhol as well as sourcing LNG
  • Established presence in the CNG and City Gas sectors in Egypt through equity participation in three Egyptian companies: Fayum Gas Company SAE, Shell CNG SAE and National Gas Company SAE.
  • Stake in China Gas Holding to explore opportunities in the CNG sector in mainland China
  • A wholly-owned subsidiary company GAIL Global (Singapore) Pte Ltd in Singapore 

GAIL had 78% market share in 2008-09 in Natural Gas Transmission and 70% market share in Natural Gas marketing.
Strong Q3FY10 for GAIL: - Gail’s net profit for the quarter ended December 31, 2009, zoomed 240% to Rs 860 crore as against Rs 253 crore in the corresponding period last year. During the quarter, the company’s turnover also rose 6% to Rs 6,187 crore, as against Rs 5,812 crore in the same period last year.
Gail would make a capex of Rs 5,500 crore in 2010-11. About Rs 4,000 crore of this expenditure will be made on expanding gas transmission network. Mr Tripathi said that it was looking at expanding gas distribution network with Egas in Egypt.
GAIL benefits by Parikh Committee recommendations - GAIL, in particular, may benefit significantly from the proposals, which exempt it from under-recovery sharing even on cooking fuels in an increasing price scenario.
GAIL - CMP Rs 405
Target Rs 530 Time frame (12-15 months)

Reliance Industries Limited
India's largest private-sector enterprise, is also involved in small pipeline projects that include the 1,400-kilometer Kakinada-Hyderabad-Uran-Ahmedabad pipeline and the Kakinada-Vajaywada-Nellore-Chennai pipeline. The Kakinada-Chennai pipeline with a scope for extension to Tuticorin and Bangalore covers the southern region. The petroleum majors are also eyeing the possibility of developing a network along the 1,100-kilometer Kakinada-Howrah route. Pipelines emanating from Kakinada are of strategic importance to the company as it owns and has recently started production in the Krishna-Godavari basin and now ramping up the production also.
The proposed acquisition of LyondellBasell by Reliance, if it goes through, will be a winning bet for RIL as the company has enough cash reserves to fund the deal, which in turn will further boost its core businesses.
RELIANCE has submitted bid to acquire Canada-based Value Creation Inc which is a player in Oil Sands development. Canadian companies have expertise in creating Oil from Sands and when regular Crude Oil rates shoot ahead this business would be a major beneficiary, RIL must be expecting firm crude prices in the future and so the bid made in my view.
RIL Q3 results were above expectations as the company showed profit growth first time in last 5 quarters. Net Profits grew 16% to Rs 4008Cr and Sales Revenue rose 92% to Rs 56856Cr. RIL is benefitting immensely after KG-D6 gas ramp-up and this company is a must buy for any investor.
Target Rs 2000 Time frame (15-18 months)

GSPL (Guj State Petronet Limited)
The Gujarat government, through GSPC and other state-owned companies, holds 49.2% stake in GSPL. Established to set up a natural gas transmission network in the state of Gujarat, GSPL has till date commissioned a pipeline network of 1420 kilometers (kms) and intends to expand its grid to 2200Kms reaching all 25 districts of Gujarat. GSPL provides its gas transmission infrastructure on an ‘open access’ basis, which means the transmission capacity is available to any player on a non-discriminatory basis for a fee. For long-term transmission agreements, the contract period typically varies between 5-25 years, while a small chunk of the company’s revenues also flows from short-term contracts. Thus, the company generates a steady income from its business, barring situations where gas transmission volumes fall.
With the experience it possesses and to expand outside Gujarat, GSPL has submitted EoI (Expressions of Interest) for 4 pipelines. There will be more revenue visibility as well as security if some of these tenders are allotted to GSPL.
GSPL Q3 results were amazing – The Company posted Net Profit of Rs 115Cr, a whopping growth of 317% and Income rose 120% to Rs 271Cr.

GSPL – CMP Rs 84
Target Rs 130 (18-24 months)

India with just around 10500km of Gas pipeline needs to improve on this count to make Gas reach even the smallest of the households and it should be at low cost; pipeline transport cost is 1/6th of road and even Pakistan boasts of 56400km of Gas pipeline while China is building a gas pipeline from Bangladesh across India; India has so far missed out on huge infrastructure opportunity of Gas pipelines. Recent Government statement says Reliance Gas has improved Power availability and many NELP scheme would make India a Gas surplus state in years to come, we have to reduce dependability on coal which is becoming expensive and it is a more pollutant fuel than Gas also.

(Data Source: Various News Websites and Company Websites)

Thursday, February 25, 2010

Highlights of Economic Survey
The highlights of Economic Survey for 2009-10 (Apr-Mar) tabled by the government in Parliament:

* Indian economy seen growing 8.25-8.75% in 2010-11

* Economy expected to return to 9% growth in medium-term

* India FY11 growth seen 100 bps more than FY10

* Medium-term prospects of economic growth "really strong"

* India could be fastest growing economy in next 4 yrs

* Expect GDP growth to breach 9% mark in 2011-12

* Risk of second-dip recession in advanced nations

* India seems to be returning to pre-crisis growth rates

* India medium-, long-term growth prospects excellent

* No reason why India can't achieve double-digit growth

* See signs that food, fuel inflation spreading to other items

* Concern of higher than expected inflation in coming months

* Rapidly rising food inflation cause for concern

* Poor rain prevented seasonal food price fall post Oct

* Hype about kharif failure exacerbated WPI expectation

* Transmission of monetary policy remains sluggish

* Higher government borrowing raised banks' SLR investments

* Saving, investment rate good for medium-term growth

* Savings rate expected to rise further

* Govt should promote transparency in commodity futures

* Impact of current subsidy system questionable

* Growth in bank credit remained low in FY10

* Public sector banks better than private banks in credit growth

* Growth in food credit low so far in FY10

* Need more transparency in micro-finance functioning

* Computerisation of banking sector in completion stage

* Rise in risk appetite increased capital flows in 2009


* Need to extend NPS to central, state autonomous bodies

* Pension reforms made significant progress in India

* Challenge to expand distribution network of NPS

* Pension reforms to facilitate long-term savings

* Interdependence of corporate, MFs raising concern

* Govt intervention in markets should be minimal

* Govt shouldn't impose outright commodity futures ban

* Equity market showed signs of recovery after Apr

* Regulatory steps taken to make market sound, stable

* Seen revival in secondary market following stimulus

* Volumes in currency futures on BSE not significant

* Trading volumes in interest rate futures low

* Retail investor participation limited in corporate debt market

* Retail investor participation limited in mutual funds

* Food subsidy must be given directly to households

* Food coupons must replace existing PDS system

* Must identify poor for effective food coupon system

* Possible to switch to food coupons system by 2012

* Agriculture sector continues to be cause of concern

* Need policy initiatives to raise farm growth to 4%

* FCI should be allowed to keep flexible buffer norms

* Need to improve govt strategy for food releases

* Govt shouldn't have any dealing with fertiliser companies

* Fertiliser companies should be allowed pricing freedom

* Provide fertiliser subsidy directly to farmers

* Introduce coupon system to subsidise fertilisers Live Budget highlights on BSE India website, one can visit this link tomorrow for live updates also and these are more links for Live Budget on PC

Wednesday, February 24, 2010

'India can become a powerhouse in aluminium'
  • The Indian aluminium market is growing at a rapid pace and it is one metallic industry where India can emerge as a powerhouse within the next decade, said a spokesperson of Vedanta Aluminum Ltd, a leading producer of metallurgical grade alumina and other aluminium products in the country. 
  • According to industry sources, India with total bauxite reserves of about 3 billion accounts for almost 7.5% of the world’s 65 billion bauxite reserves and is ranked sixth among the countries with highest bauxite reserves. 
  • Indian bauxite reserves are expected to last over 350 year with proven and probable reserves are estimated at ~1200 Mt. 
  • Currently all the major Indian producers are trying to make good the opportunity by expanding furiously. China, which has doubled its aluminium capacity over past half decade to account for more than a fifth of the world's output, is a net exporter of the metal. 
  • The Indian aluminium market is growing at a rapid pace, yet per capita consumption is extremely low: With over 7% growth per annum, one of the highest in the world, the Indian aluminium market is booming. Even better, sectors that extensively use aluminium are themselves booming, ensuring that this sector stays firmly on the growth path for times to come. Total aluminium consumption in the country is around 1,100 KT at present, which has grown significantly from 2002 level of 600 KT. 
  • India's per capita consumption of aluminium stands too low (under 1 kg) comparing to the per capita consumptions of other countries like the US & Europe (25 to 30 kgs), Japan (15 kgs), Taiwan (10 kgs) and China (3 kgs), the demand is growing. 
  • In India, the industries that require aluminium mostly include power (44%), consumer durables, transportation (10-12%), construction (17%) and packaging. "With one of the world's lowest per capita consumption, the country’s aluminium demand is set to explode,” said the Vedanta spokesperson. 
  • India is the eighth leading producer of primary aluminium in the world, with total production amounting to over 1,200 KT. However, the aluminium capacity in the country is only 5% of the world total, despite having the world’s 7.5% bauxite reserves, indicating the scope and need for new capacities in the country. 
  • Domestic aluminium production in India sufficiently meets the demand. Production of 1,200 KT is well consumed domestically with demand accounting for over 1,100 KT. With production surpassing the consumption marginally, India, at present, is a net exporter of aluminium. 
  • India is set to become 4th largest producer from current 8th displacing Norway, Brazil, Australia and Canada. 
  • India is already amongst the lowest cost producers in the world with Hindalco and Nalco already known as some of the lowest cost producers in the world. India's low costs can be largely attributed to the easy availability of bauxite. 
  • At present, cost of aluminium production in India is about $1500 per tonne compared to the world average of $1,600 per tonne. 

Stocks to concentrate:
Being one of the lowest cost producers in the world, Indian aluminium companies are set to benefit fully by growing demand from Power as nearly 40% of 11th 5-year plan expediture was dedicated for Power. Construction activity is expected to rise as GDP growth recovers and Consumer Durables are witnessing good figures after recent stimulus packages. Railways have stressed on Aluminium coaches and that can be one more trigger for growing demand.
HINDALCO has formed a V-shaped bottom in weekly graph and shows bullish formation also which makes it a compelling buy for investors after recent correction. 
NALCO has corrected nearly 30% from its peak and looks near support. Both HINDALCO and NALCO one can accumulate as long term investment.

Monday, February 22, 2010

Indian Budget 2010 Countdown:
Union Budget is scheduled to be announced on 26 Feb 2010 and the day is nearing fast. There are many websites which are totally concentrating on this topic and below are some of them along with Sector Wishlists:

Official Budget Site:
Budget Glossary:
MSN News:
Times of India:
Bloomberg UTV:
Financial Chronicle:
Business Standard:
Financial Express:

What is expected:
Budget is always a balance between growth and fiscal prudence as Fiscal Deficit is touching above 6% already but even developed nations like US have around 10% Fiscal Deficit. Those are in recession, we have merely faced a slowdown. But to come out of slowdown we have had to resort to stimulus measures and measure among them have been Cut in excise duty and Service Tax which was worth nearly Rs 30000Cr and there were 3 stimulus packages involved-
Package 1:
Package 2
Package 3: 
If the excise duty is reversed AUTO, CEMENT are the sectors to be affected and Service tax reversal would affect all the services which come under that ambit. Stimulus measures have really helped the economy as GDP is once again recovering to go towards 8% growth mark and Industry body Assocham has claimed that the stimulus measures have helped the industry in creating 19% more jobs during October-January 2009-10 over the same period last year. But recent move by FM to decontrol some of the fertilizers gives a feeling that Government is trying to reduce subsidies than to kill the ready-made demand created because of stimulus, it will be interesting to see what actually goes through on 26th!

Highlights of President's address

Highlights of President Pratibha Patil's address to joint sitting of Parliament:

- Left-wing extremists continue to indulge in senseless violence.

- The aam aadmi was and is at the core of government's promise of faster and more inclusive growth.

- Economic growth which had slowed to 6.7 per cent in 2008-09 is likely to improve to around 7.5 per cent in 2009-10.

- Higher prices of food items were inevitable.

- Government is committed to bringing forth a legislation to ensure food security.

- Government will aim at a growth rate above 8 per cent in 2010-11 and seek to achieve 9 per cent growth in 2011-12.

- Infiltration of terrorists from across the Line of Control in Jammu and Kashmir has gone up.

- It is imperative that as the economy grows apace, the disadvantaged sections of society be made part of the Indian success story.

- Government to bring in a proposal to amend the Waqf Act during current session of Parliament.

- Government for early passage of the Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005, in current session.

- The Right of Children to Free and Compulsory Education Act, 2009 has been notified to be effective from April 1, 2010.

- National Council for Higher Education and Research will soon be established as an overarching body to regulate higher education and research in India.

- Government has decided to list profitable companies on the stock exchanges through a public offer of at least 10 per cent of the equity.

- New scheme of rural LPG distribution namely, 'Rajiv Gandhi Gramin LPG Vitarak Yojana' has been launched.

- National Mission for the Delivery of Justice and Legal Reforms to be set up.

- An indigenous Influenza A H1N1 vaccine is being developed which will be available this year.

- Renegotiation of the Tax Treaty with Switzerland is in process.

- Digitalisation of both All India Radio and Doordarshan is on the anvil.

- Every effort will be made to ensure a befitting and successful conduct of the Commonwealth Games.

- India is ready to explore a meaningful relationship with Pakistan if it seriously addresses the threat of terrorism and takes effective steps to prevent terrorist activities against India.

- Government will work towards giving Indian citizens living abroad the opportunity to vote by the time of the next regular general elections.

- New agreements for cooperation in the field of civil nuclear energy under consideration.
President of India Website
All profitable PSUs to be listed on bourses: Prez

Sunday, February 21, 2010

Weekly Nifty Update 21 Feb, 2010 by Tanmay G Purohit
Nifty has closed positive +18 points at 4844 positive close 2nd week in a row and Nifty is finding 4950 last 3weeks high as strong resistance. Nifty for a fresh move 4925-4950 level should be crossed with volumes as parliamentary session starts on Monday, Railway budget on Wednesday, Derivative settlement on Thursday and General Budget on Friday will make this week very interesting. Nifty has to hold 4730 and cross 4920 for any fresh move but volatility can be higher than expected as parliament session can throw many surprises and economic survey and policy initiative will be keenly watched, time to wait & watch. HINDALCO, RANBAXY, HDFC BANK, AXIS BANK & TATA STEEL were major gainers in Nifty with more than 5% gains each. BHARTI AIRTEL lost 11% this week after Zain acquisition, UNITECH, REL INFRA and DLF remained other top losers.
Food price index rose 17.97% for the week ended Feb-6 Vs 17.94% in previous week as per government data. The wholesale price index rose 8.56% in Jan from a year earlier, its highest since Nov’08 and accelerating from a 7.3% gain in Dec, data showed but RBI may not hike rates in a hurry until the April policy.
Government raised Urea prices by 10% this week and deregulated other fertilizer prices; which makes Fertilizer stocks attractive once again. This would give way to lower subsidy burden from fertilizers for the government and this indicates may be government wants to reduce fiscal deficit by reducing unnecessary subsidies than raising unessential taxes. As many as 23 firms are awaiting approval from SEBI to enter into mutual fund space, which is already overcrowded with 37 players managing assets over Rs 7 lakh crore; the business has taken a backseat after phasing out of entry load recently but with more players more money may come into stocks which can increase liquidity in long term.
New stocks added in Derivative can show strength ONMOBILE, MUNDRAPORT, AVREVAT&D, APOLLOTYRES look good for short term. Budget stock connected with Insurance should be active EXIDE, DABUR, HDFC, and ICICIBANK. INDUSINDBANK, HCL TECH & GLENMARK are technical picks for the week
Supp 4765/4720/4645 Res 4892/4940/5040

Glenmark: Bright future in the UK and beyond 

Reliance Industries may raise its offer for LyondellBasell that will include cash and stock options for shareholders and creditors, the website reported on Friday

Friday, February 19, 2010

Collection of Views on GOLD from Investment Gurus:

Is gold in a bubble? George Soros reignites the debate 
INTERNATIONAL  Billionaire financier George Soros is the latest to enter the gold bubble debate, warning that with interest rates low around the world, policymakers are risking generating new bubbles which could cause crashes in the future. Speaking to The Daily Telegraph, on the fringe of the World Economic Forum, Soros said: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment". The ultimate asset bubble is gold," he added. Investors are piling into the metal amid fears both of potential inflation and fading faith about the stability of previously-assumed safe assets such as government debt, Soros told the newspaper. Having risen around 40% in 2009 and topping US$1,225 an ounce last month, gold has attracted a lot of interest from investors as well as analysts and media pundits trying to predict its future dirction. Forecasting asset prices such as commodities has never been a precise science. It involves a good understanding of historical precedents, monetary policies, supply-demand balances, fear factor taht drives investors and many other variables. 

What constitutes a bubble? Is it the rate of growth in the last year regardless of its magnitude? Is it a comparison with historical real values? Is it linked to speculation? Is it Supply and Demand fundamentals? Is it all of the above? 
The debate on asset bubbles, especially gold, has been raging for some time, attracting the attention of prominent investors and commentators incuding Nouriel Roubini, calling it a barbaric relic, Jim rogers who in contrast sees gold at US$2,000 within a decade, Marc Faber who sees US$1,000 as a floor and Gold Hand Maktari who had pedicted US$1,200 in 2009. 
So, is gold in a bubble? 
Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics (RGE), who predicted the current financial crisis said in December the rally in gold prices is developing into a bubble and the precious metal faces "significant risks of a downward correction". Writing in a research note published by the Financial Times, Roubini said: "The recent rise in gold prices is only partially justified by fundamentals, and is in part a bubble that could easily go bust. “The recent rise in gold prices is only partially justified by fundamentals, and is in part a bubble that could easily go bust,” warned Roubini in the report provocatively titled: “The new bubble in the barbaric relic that is gold.” Speaking in an interview with Dave Nadig of Index Universe ( in October Roubini said: "My view is to stay away from risky assets. Stay in liquid assets". 
Roubini said asset prices have gone up as a result of liquidity in the system, however he sees a correction looming. " I don’t know when the correction is going to occur, it could be a while longer, but eventually it will be a pretty ugly correction, across many different asset classes," he said. "I don’t believe in gold," Roubini added. 
Explaining his reasoning, he  added: "Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity. So there’s no inflation, and there’s not going to be for the time being". "The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression". "So all the gold bugs who say gold is going to go to US$1,500, US$2,000, they’re just speaking nonsense," Roubini said. "Without inflation, or without a depression, there’s nowhere for gold to go," adding  maybe it could happen in three or four years from now. "But not anytime soon," he said. 

Jim Rogers's view 
In contrast to Roubini, Rogers said the only bubble he sees in the Western world now is in US bonds. “I cannot conceive of lending money to the US for 30 years,” he said. “Other than that, I don’t see any bubbles going on, unless he knows something the rest of us don’t know.” Rogers thinks that Roubini is wrong about the threat of bubbles in gold and some other assets. In an interview with Bloomberg Television last month, Rogers said many commodities are still down from record highs. The price of gold will double to at least US$2,000 an ounce in the next decade, he said. Roubini replied by saying Rogers' forecast  is “utter nonsense.” “Maybe it will reach US$1,100 or so but US$1,500 or US$2,000 is nonsense,”  Roubini said. Jim Rogers reaffirmed his view that gold will reach US$2,000 an ounce over the next decade as government's money printing will lead to higher prices and, on the supply side, no new mines have been opened for decades. In a recent interview  with wallstcheatsheet, Rogers, explaining the variables that will push gold higher,  said: "It’s very clear there is huge suspicion about paper money around the world. This suspicion is gathering steam. Governments are printing huge amounts of money. This has always led to higher prices. Maybe I am wrong and it’s different this time. But I doubt it". Additionally, no new large gold mines have been opened in decades, Rogers said, adding that "some of those mines are over 100-years old and...are all depleting". The legendary investor also said central banks have huge Gold reserves above ground — and they are less interested in selling than in the past. "If you adjust Gold for inflation and go back to its former all-time high in 1980, Gold should be over US$2,000 an ounce right now if you want to say it’s reaching new inflation adjusted all-time highs," he said. "I suspect that given all the money printing in the world, we will see much higher prices for hard assets," he added. 

Robert Prechter 
Earlier this week Robert Prechter of Elliott Wave told CNBC that this is perhaps the last chance to get out of stocks with the DJIA “in quintuple digits.”  He also believes that stocks will fall below the 
March 2009 lows. Prechter, agreeing with Roubini's view, believes that if deflation comes, gold could see a 40% drop from its peak.  He feels gold is overbought and starting a new bear move there anyway. 

Marc Faber 
Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said Gold won’t fall below US$1,000 an ounce again as central banks print money to help fund budget deficits. Speaking at a conference in London on last month, Faber said: "We will not see less than the US$1,000 level again". "Central banks are all the same. They are printers. Gold is maybe cheaper today than in 2001, given the interest rates. You have to own physical gold." Gold prices having held above the upside breakout, Faber now sees the US$1,000-mark as the new floor. China will keep buying resources including gold, he said. “Its demand for commodities will go up and up and up,” he added. “Emerging economies will grow at the fastest pace.” 

Strategy Garden 
The arguments for or against gold beeing in a bubble seem compelling. "This, in our opinion calls for a short term consolidation period where bulls and bears fight it out within a narrow range of US$1,050-US$1,150, says a research note from Stategy Garden, the publishers of BI-ME. The report sees a period of high volatlity in 2010 on exceptional circumstances and uncertainties about the strength of the recovery and the effect of exiting stimulus activities. 

Gold Hand Maktari 
The potential volatility in gold prices in 2010 is also shared by one of the most astute forecasters of bullion prices, Gold Hand Maktari. In a recent email statement received by BI-ME, Gold Hand Maktari says "2010 will see a roller coaster ride with the gold market, thanks mainly to the gradual stability of the global economy and the US Dollar rising and falling to new highs and lows throughout the year." The statement, whose source could not be verified by BI-ME, said: "Gold could reach new highs of up to US$1,600 plus per troy ounce in 2010 and set an all time high once more however, due to the global stabilization of the world economy, we will in no doubt see gold plummet. I see gold dropping at some point after heavy gains, to and around the US$900 mark, and dont be surprised at all if it falls further." "2010 is a time to be very cautious especially as the economic outlook seems to be improving. 2010 will see an average gold price of US$1,150-US$1,190." "We all predict prices to reach a certain high or low in the coming months or years and few are ever correct however, as I stated in 2008 and 2009, we would see gold reach up to US$1,200 by the last quarter of 2009, few would have seen that on the cards," the 'Maktari' statement said. 
GOLD looks negative in short-term, feels A K Prabhakar