Stock Observatory India – 2011 -05 (May)

 

Commencing from 1st May, 2011

Following are the daily brief on the Indian Stocks and related items.

  1. Many of the items being of trading nature, no reply will be posted by the author. While the comment box is open for the readers, but it is meant for the readers to voice their feeling at any time. Kindly use our Confused Mind Clear Answers section to post comments for reply.
  2. All comments are in descending order (date wise)  This will be meant for short term traders and also for long term traders who may wish to cash their gains or losses due to subsequent events.
  3. We would try to pick up stocks based on last 7 days movements, news or other policy related developments. We would not write more than 4 lines, similar to Kabir’s Chopai. This is why we have sub titled it “Kalidas Chopai”. We will make a standard format with first line being a header that contains Stock name (in brief), date, time and headline. Last item will be on top. The headlines will be time based – no sorting.
  4. At month end, they will be consolidated and kept in html (searchable) or PDF format. We will also database it in FileMaker program. We will figure out ways to publish this database on web so that it becomes searchable criteria on line. If it is achieved, other html/PDF format will be discontinued. The comment box is open but we will NOT reply. It will be only one way street. The reason being that day to day movement depends on hosts of factors, previous day’s Dow, current day’s Asian performance ahead of India, currency market movements etc.
  5. In short, use our comments on “AS IS WHERE IS” basis. It may be updated twice a day, if required.
  6. There are no guarantees either. Consult your professional adviser, broker or banks before acting on our Chopai. Do it at your own risk. We are sure that this will prove to be as popular with the readers as Confused Mind Clear Answers series.

Good luck. – Kalidas (Anil Selarka) aa


Stock Observatory India

Ref: ISO/11/39 of 2011-05-31 (India Time 9.45 am)

Overnight Events and Effects:

  1. US markets are closed but Asian markets open today.
  2. Japan rating on downward review by Moody. Yen will therefore rise (surprised?)

Asian Markets today

NIKKEI – Japan at 9,615 (+110 ) Japan reported unemployment at highest at 4.7%. With almost 10,000 workers about to be fired by Ricoh, it may still worsen. The stocks are following sadistic pattern. It looks only at Yen and not at the economy. Write off Japan
Hang Sang -HK at 23,403 (+219 ). Rising due to commodity prices rising and all currencies also rising versus dollar. The only perception in Hong Kong is the property which is being financed as low as 0.7% by many banks (based on Hibor rate). It is the most overpriced property market in the world. However, higher incomes are still supporting the market at high level.
SENSEX – India May respond to higher Asian market. It did not rise by 200 points on Friday, so it will rise today all probability. US effects are neutral and other economic factors do not count today.

Currency:

US$ Index at 74.53 (-0.42) ahead of monthly settlement. It is almost over, so we expect retracement immediately after the June sets in.
NZ$ The consumer and business confidence rosé to 39% from 29% last month. All expect higher profits and prices and higher NZ$ also operate as hedge against inflation of other commodities such as oil. It is a small economy and the NZ$ rosé to as high as 82.35 today. It is the strongest currency

Commodities

Oil at 101.29 (+0.70 ) – again due to monthly settlements of USD index. However, oil prices may not fall much due to proposed OPEC meeting on June 8. We expect production cut by 500,000 bpd (barrels per day)
Gold at 1,537 (+1) after reaching high of 1540 when sudden short selling started. Open Interest at 329,811. Short interest rosé smartly and sudden plunge by $3 in few minutes suggest that the fall is on the way. Of late, the gold is pushed down in Asian market, so that it can be suppressed further when the London and US opens later on the day
Silver at 38.17(+0.30 ) after rising to 38.27 when the short interest rosé with Open Interest at 63,456 rising smartly with Gold. Expect some fall later on the day. The old game of pushing down in the beginning of the month and pushing up from third week of the month till month end continues.

Stocks: Our Observations and Comments

  • The market may rise by about 200 points to stop short of 18,435 or about.
  • IOC Reported good numbers for last quarter. If diesel prices are raised, the stock may move higher.
  • RCOM reported worse than expected profits, alleging stiff competition from Vodafone. The Net Income plunged 71%. The technically bankrupt company is still sailing with hundreds of investors on the sinking ship. Who will buy it. Possibly someone from China judging from the significant exposure taken by CDC. Will China Telecom bid for RCOM? we do not know. Anil Ambani is in the middle of the sea and waiting for some one to throw the life jacket. Buy as take over play in sudden fall. No targets. It will be a “hit and run” stock. If this company fails, with over Rs 30,000 + crores of debts, how many banks will go bust or severely affectd. Read the last year’s annual report and find out who were their bankers. Those banks will lose heavily
  • UBS reports sudden swing in sentiments for IPO/FPO. It says most of the deal will be puchsed to 2012, so next 7 months are very dire. This is what we said last October what they say now.
  • Mark Mobius has changed the tack. He has reportedly said “Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.” This is what we have been saying for over 2 years that financial crisis have not been resolved and in fact worsening. Even God asked me why the hell the markets are rising!
  • Mahindra and Mahindra, considered very safe Auto stock, has found itself in tight corner. It is the first Auto company to report weaker earnings. It says that higher steel prices, rubber and other employees cost are rising (but not able to pass on the cost to consumers). The fire is on, let us see who comes out of the Auto buildings. Mahindra will report worse quarter in slow monsoon season and one thereafter. Expect stock to lose another 25% in less than 7 months.
  • Sun Pharma has projected bullish growth of 28% to 30%. They are not alone. Indian pharma companies have attracted lot of foreign interest of late. This is the sector to go into. It is relatively safe, in spite of stretched valuations. There are no good manufacturing facilities in other countries. Like Software, Indian pharma manufracturers have become indispensable choice for almost every other major company
  • Most of Indian corporates, expecially Marwari owned, are Forex gamblers. Hindalco reported steep fall of 37% in its profits in spite of higher Aluminum prices. Reasons – losses on hedge position on derivative contracts. Derivatives, derivatives and derivatives, which is taking toll on entire financial markets. How could Hindalco lose when the prices rosé for its core production? Almost all are not revealing the truth, and no one asks them the reasons.
  • ONGC would have reported twice the profit had it not been for subsidy. The stock is still a buy because the diesel and kerosene prices might be raised soon after June 9. Otherwise, the FPO may not succeed.
  • No other significant news on political or economic front. The market is on auto pilot today.

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
Anil Ambani CMP Mukesh Ambani CMP Mukesh is winning over Anil Abani who is purshed to corner.

Kalidas One Liner

  • None

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
None today
Ref. No. 11/KC/00 Date: 2011.05.16 Target (3M) Rs. SENSEX at

OVER


Stock Observatory India

Ref: ISO/11/38 of 2011-05-30 (India Time 9.50 am)

Overnight Events and Effects:

  1. US markets are closed on Monday due to memorial day. So US related effects will be known only on Wednesday (India Time). However, Indian market will get stronger today on the back of lack of adverse influence and also the expectation that India may announce GDP growth at 8.1% (which we do not believe).
  2. OPEC meets on June 8 to declare the production quota. The leading brokers like Goldman and JP Morgan Chase are projecting rise in production quota, on what basis we do not know. When the oil prices are lower, there would be production cut, not rise, to help raise the market prices. We believe that OPEC will lower the quota by at least 500,000 bpd. Oil price must rise as result
  3. Bloomberg reports that EGOM (Empowered Group of Ministers) headed by Pranab Mukherji will meet on June 9 (that is after OPEC meeting) to declare the policy on diesel price and kerosene. It appears to us that the timing was chosen to know what OPEC is going to do – if it raises the production, the price may fall, and the present subsidy may be continued. If the OPEC cuts the production and raise the price, the ministry will have no alternative to raise the prices. I still do not know why have these ministers been thinking all along when common sense decision is required. Just decide yes or no and get over with. But that is India, the non decisive RBI and Ministry with Prime Minister watching the show like an Unpire. Since the ONGC issue opens on July 5, the Pranab Mukherji has no option to take the decision in favour of higher prices, and then raising the prospects of inflation and also higher rates that may choke the growth. He still does not understand that the only solution is to allow the Rupee to appreciate to lower the effect of the oil prices and also bring down almost all commodities in terms of rupees.
  4. No other significant news, except that of late Pharma sector has become M&A play. There are many take overs and mergers and acquisitions.
  5. Good day for the traders.

Asian Markets today

NIKKEI – Japan at 9,517 (-4 ) No news from Japanese who are fighting 29 months of deflation. Sony announced massive loss, Auto makers are reporting lower sales, and Ricoh has announced sacking of 10,000 employees. No progress on Nuclear disaster matter except that TEPCO has given up hope to restore the health.
Hang Sang -HK at 23,183 (+65) May rise more due to US holiday. Chinese Yuan rosé to the highest level on Treasury Report that China is not manipulating currency. Sudden reversal of statement is the fact that China is selling USD all the time, this time around buying its own currency as result of which the Yuan is rising.
SENSEX – India May rise by about 200 points.

Currency:

US$ Index at 74.89 (-0.06) ahead of settlement. British Pound rosé the strongest followed by Euro. Next month is about to start, so expect again paper gains in USD and loss of all currencies and gold and Silver. This is a repeat game.
NZ$ Rosé to the highest level. There are reports that its trade surplus almost doubled due to higher exports of Milk and its products and meat and other food products. We were the only one to suggest buying of NZ$ when it was around 0.73. Now, it is the most strongest currency in the world among developed nations. While it may rise to 0.92 before October, it may see correction in first week of June when the USD index operation will résumé.
Rupee Not worth speaking. It is weaker and may go weaker in first week of June when the upward climb of USD may résumé. If OPEC decided to cut the production, Rupee will lose further due to multiple reasons – lower GDP, higher inflation, higher interest rates, higher commodity prices and higher interest rates. 

 

Pranab Mukherji must be complemented for committing “hara kiri” and destroying the Indian economy when it was rising on all four cylinders. RBI, RBI and RBI – the worst advisors to Government of India and both PM (Prime Minister and Pranab Mukherji) do not understand anything about the effect of weaker rupee on inflation.

Commodities

Oil at 100.54 (-0.21). May fall in first week of June but the OPEC cut will have lasting effect on oil prices – to go higher by at least 10% in less than 3 months
Gold at 1536 – stable to weaker. It may slide in first week in spite of troubles in Greece
Silver at 38.21 (+0.17 ) Open Interest at 63,458 ( ). Weaker undertone in spite of rise. Deceptive rally.

Stocks: Our Observations and Comments

  • CAIRNS may move side ways. there is firm demand from ONGC and Government to force it to share the cost. It has no option but to agree or forget about the deal.
  • Buy OMC stocks, RIL, other leading index stocks only on trading basis such as ICICI Bank and Larsen and Toubro.
  • FMCG section is better than others as safe to buy. All eyes are fixed on GDP growth data which may benefit or hurt the power and infrastructure stocks.
  • No other specific recommendations except the old ones in last 4 days to continue.

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
None today

Kalidas One Liner

  • Avoid Airline stocks for the time being, at least until 9th June
  • Cash is king in India now for the time being
  • Tata Motors is more in news. They say Nano will be sold in Sri Lanka.
  • Why Tata wants to sell “nano” overseas when it can sell to replace “3 wheelers”?
  • Everyone is going to Africa. Even Manmohan Singh doled out US$ 5 Billions to Africa. Who says India poor?

OVE


Stock Observatory India

There will be no edition of Stock Observatory India today (29/5/2011 – India time)

Author

29/5/2011


Stock Observatory India

Ref: ISO/11/38 of 2011-05-28 (India Time 11.00 am)

Overnight Events and Effects:

  1. Dow closed at 12,441 (+ 39) in subdued trading ahead of long week end. The markets will be closed in US on Monday 30/5 (Memorial Day) or 31/5 in India. The markets in India will be on their own, and it is possible, that it may extend the small rally of yesterday.
  2. Asian currencies dropped for the first time against USD which was in fact falling against other USD index currencies like Euro and GBP. (They have large weighting in USD Index. It is due for monthly settlement where the shorted currencies have to be delivered physically on settlement. There is no cash settlement. As soon as the new month starts, the European currencies may fall and Asian currencies may rise and USD may also rise.

Asian Markets today

NIKKEI – Japan at 9,521 (-40 ) due to rise in Japanese Yen at 80.79 vs Dollar.
Hang Sang -HK at 23,118 (+217 )
SENSEX – India Markets closed at the time of writing. (It is Saturday there)

Currency:

US$ Index at 74.75 (-0.79 or over 1% ) ahead of physical settlement for May, 2011. It happens always. The shorted currencies go up on short covering and long dollar gets battered.
Euro/$ Rosé to 1.4324 due to USD Index settlement. It is more of common sense factor than anything else. Otherwise, everyone is still harping on Euro debt crisis and Greece.
Kiwi Dollar Rosé smarty to 81.97, near recent high, confirming our opinion that it was the best investment in currency. It may gain relatively more than others such as Aussie $ even if the USD recovers. Early June may bring some weakness again due to paper trading operation of USD Index and others

Commodities

Oil at 100.75 (+0.52 ). All eyes are fixed on OPEC meeting on June 8. While most brokers such as Goldman and Morgan Stanely are opinionating of higher OPEC production, Kalidas feels that the OPEC may cut the production by 500K barrels to 1 Mil barrels due to perceived surplus in the world market which caused the prices to fall by almost 10%. Actually, it was a paper trading weakness. In short, the battle is on between paper trading and physical supply. While US controls the price on paper in derivative trades, the Arabs are controlling price by actual physical control.
Gold at 1537.8 (+14 ) Open Interest at 297,903 ( up+ 75,558 from 222,345 ) Coupled with rise in Open Interest yesterday by 20,746 contracts yesterday, the short position rosé by massive 96,304 contracts. May be the gold is due for a steep fall in the beginning of June next week. In last 2 days, the short position have risen by almost 1/3rd or 33%. We were right in projecting that both Gold and Silver will rise at least until the month end (May, 2011)
Silver at 37.86 (+0.53 ) Open Interest at 60.997 ( down from 61,299 or by just 300 contracts) It may also be due for a fall in beginning of June.

Stocks: Our Observations and Comments

  • ONGC rosé due to story that diesel and gas prices may be raised soon. Since ONGC issue opens on July 5, and road show may be on during last two weeks, it appears that diesel/kerosene price rise may be announced in second week of June to boost the appeal of the ONGC stock. The interest rates may be raised after ONGC issue is out of the way. That is, rates may be raised in second or third week of July.
  • Hindalco rosé due to its US subsidiary Novalis turning profitable. The stock is still expensive.
  • RCOM rosé due to availabilitiy of last Rs 1200 crores from China Development Bank. For us it is non event because it merely increases the debt and not capital. The company is having large stone around its neck in middle of a lake. The company is sinking. It is sure to touch Rs 50 in 23 or 3 months. It is Kalidas theory that once the stock in downtrend breaks the Rs 80 jinx, it goes down all the way to Rs 50. You have also watched ADSL following same pattern and very soon, Jaypee Associates may follow same pattern
  • Tata Stee may have to raise enough capital soon, within next 6 months. If it does not, it will face severe problems in its debt rating and its high debt of over USD 10 billion may become a big liability, especially when the rupee is sinking. It can raise equity only from India where the interest rates are very high.
  • Since we feel that OPEC may cut the production by 500K to 1 Mil barrels in its June 8 meeting, the oil prices may rise hurting Airline and Auto stocks, benefiting the coal and gas prices (Coal India, Peteronet and GSPL may gain). If you differ from Kalidas view, you may take contrary view. ONGC, CAIRNS, RIL may gain as result.

Stock Swap:(All in Rupees)

May be tomorrow. Nothing can happen on holiday

Kalidas One Liner

  • None

Kalidas Chopai

None

OVER


Stock Observatory India

Ref: ISO/11/37 of 2011-05-27 (India Time 10.00 am)

Overnight Events and Effects:

  • Dow closed at 12,402 up marginally by 4 points. Long weekend is ahead so expect massive manipulation in gold and silver prices. USD is lower ahead of monthly settlement. When the new month begins, the situation may reverse.
  • Unemployment rosé again in USA. Yes, we have recovery but no jobs. We are having jobless recovery, just like “condom sex” where one can have pleasure of sex but no babies.
  • Real troubles are brewing for UBS. It has decided to separate its massive Investment Banking unit into separate subsidiary registered overseas to avoid the problems with the Swiss regulators and government. The fact of the matter is that the effects of financial crisis of 2008 are not over, and in fact they are increasing. UBS was and is technically bankrupt. Even massive investment by Singapore governement (almost $23 billions) will not make much money for them and in fact they will lose them. When the world’s second largest investment bank finds difficult to operate on its ow, the internal problems must be quite acute. They are all related to CDS and CDO (which RBI has decided to introduce in Indian market from July).
  • Having subsidiary outside Switzerland is not new tactic. BCCI, the Bank of Credit and Commerce International, used to float subsidiary for each country, such as BCCI HK, BCCI India etc to avoid country related specific problems. BCCI was therefore years ahead in planning, and it was never bankrupt, but made so at the instance of giant US banks who found their business taken away by this bank. No one lost money in having bank account with BCCI. Even slight loss was more due to Liquidator’s heavy fees.
  • When “All is not well” with UBS, it means that “All is not Well” with major banks throughout the world. Even SBI faltered, and no one ever asked how come its profit was down 99% and where did they lose money?
  • Sony reported massive losses. While Japan’s quake may be an excuse, the real troubles are brewing on its regular business.
  • Investment into Retail trades may be liberalized soon, and the largest retailers like Wall Mart and Carrefour (of France) might invade India soon. Many retail counters who are heavy losers may get opportunity to sell themselves to these giants who will prefer to grow by acquisition in same industry. Wall Mart and Carrefour are used to operating on their own and not through joint ventures. Bharati Wall Mart venture may come to an end therefore.
  • Even Reliance might sell out its Food chain or retail operations to these giants to close the chapter.
  • Oil Ministry official reportedly told today that diesel and kerosene prices might be raised soon. This is official statement as reported by Bloomberg. Take position in OMC, MRPL, ONGC and also RIL, CAIRNS and other private sector refineries like Essar Oil. Airline stocks and also auto stocks might get slaughtered, especially those who make diesel operated automobiles. Even good result by Tata Motors might be overshadowed.
  • Our IOC will move in right direction. Start buying now more, and make more purchases if the news become official in the press.
  • Japan saw inflation for the first time in 28 years. And that too after seeing Yen rising from low of 122 to 82. What Subbarao would say in this matter?

Asian Markets today

NIKKEI – Japan at 9,586 (+24 pts). Yen rising and economy already in recession officially.
Hang Sang -HK at 23,115 (+215 pts). Still range bound. All hope for better real estate market which can not be.
SENSEX – India Trading higher with SENSEX at 18,140 (Up 158 points) at the time of writing. Today is last day for India whereas the markets might be closed for long week end. We therefore expect SENSEX to make some of the biggest gain by the time the day ends.

Currency:

US$ Index at 75.02 (-0.50 ) Settlement related weakness. Once the settlement is out of the way all currencies and others will reverse the course.
Aussie $ 

Kiwi $

May gain but the downside is more than upside. NZ$ is near at highest level and may gain more but early part of June might cause US$ rally. It may hurt Kiwi dollar.
Rupee Still weaker at 45.20. No significant news on exchange front. Good for Gold and Silver holders in India because of exchange losses that increase the price of gold and sliver due to Rupee depreciation.

Commodities

Oil at 100.78(+ ) 

 

  • JP Morgan says that OPEC may raise output quota on its June 8 meeting. Why should they do it when the oil prices are lower by 10% – to bring it down further. The bank is deceiving the innocent investors by making them short the oil whereas in real terms OPEC might cut the production to boost the prices.
  • On one hand Goldman and Morgan Stanley are professing oil prices to go higher by 20%, the JP Morgan is saying that OPEC might raise the production quota (why should OPEC hit the spade on its own foot). Dirty game by biggie brokers. Sooner they go bust better it is for the market.
  • OPEC may meet on June 8 but we are sure that the production may be cut. Expect about 8% rally in oil prices especially in second week of June.
Gold at 1527 (+3 ) Open Interest at 258,706 ( up by 36000 from previous 222,345) Expect massive drop within a few days due to holidays when few manipulators will set the tone.
Silver at 37.98(+0.64 ) Open Interest at 63,093 ( up by 1,794 from previous 61,299). This means that Silver might be hammered down during holiday season. Expect some steep drop during off season.

Stocks: Our Observations and Comments

  • Accumulate all OMC – IOC, HPCL, BPCL, MRPL and ONGC
  • Buy RIL and CAIRNS, and also Essar oil.
  • Buy Tata Steel – take initial small position now
  • The market may drop due to inflation fear that may cause rise in Interest rates. Avoid Real Estates, and other big ticket items
  • Rely on defensive stocks like ITC, Dabur and Hindustan Lever
  • Buy IFCI at CMP and add more in weakness.
  • JM Financial is a good buy. Below 25 is a good price to enter.
  • Pharma stocks in great news, but Kalidas does not have expertize in this section.

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
JSW Steel CMP Tata Steel CMP Better prospects
Any stock <60 JK Lakshmi 

Cement, IFCI etc

<45 Good swap

Kalidas One Liner

  • None

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
NONE today
Ref. No. 11/KC/00 Date: 2011.05.16 Target (3M) Rs. SENSEX at

OVER


Stock Observatory India

Ref: ISO/11/36 of 2011-05-26 (India Time 10.00 am)

Overnight Events and Effects:

  1. Dow was up marginally by 34 points to close at 12,394. The fall in dollar and rise in commodity prices caused rise in Asian market, with India also opening considerably higher due to positive results of Tata Steel, Cairns India and latest news of Government agreeing to Reliance demand to restrict the supply of cheaper gas only to power and fertilized units, and permitting free gas prices to other users such as steel, cements etc. Where the ruling market price is US$ 12 per mmbtu against subsidized prices of $4.2 per mmBTU. Reliance may move up smartly too. With two major index players gaining smartly, the SENSEX may show rise of about 200 to 300 points. Asian markets also weighed in smartly
  2. Still the talk is in the air for Greece possible default. However, the non US markets do not appear to be concerned at Greece or Portugal troubles.
  3. French Finance Minister may become IMF Chief to the dislike of US. Even UK is not supporting US in IMF equation. The damages to Euro nations appear to be limited due to leadership change.

Asian Markets today

NIKKEI – Japan at 9,550 (+140). Nothing significant news.
Hang Sang -HK at 22,828 (+84 ) May gain more due to commodity news
SENSEX – India May gain between 200 to 300 points

Currency:

US$ Index at 75.60 (-0.326 or -0.4%) It is just month end squaring position when the long holders of US$ index are required to deliver Euro physically. They are covering their short position. They may come back in June beginning to short the Euro and go long on $ again.
Aussie$ May rise due to selling of its iron ore mines to Asian countries, latest being India (NMDC) who will buy 50% of Australian Iron Ore miner
Kiwi $ Outperformed Aussi $ and rosé to near 0.81. it is still the strongest currency in the free world.
Yuan A significant event was that while the US$ was getting stronger, Yuan was not weakening, that is, China is reducing its US$ exposure on slow and continuous basis.
Rupee Still weaker. Weak stock market also hurts rupee. Recent RBI decision to allow FII to sell or buy CDS or Credit Default Swap will mean that Rupee will become the focal point in future for derivative operation. When the whole world suffered due to CDS and CDO, RBI is becoming fan of such derivatives.

Commodities

Oil at 101.60 (+0.2 ). Higher oil prices will remain until month end but the trend may reverse in early part of June. However, we have to see how the OPEC talks about the prices, availability of supply and production cuts. With both
Gold at 1528 (+3.29) Open Interest at 222,345 (+ 20,746 than previous day 201 599) It shows that the short sellers are taking short position but this may not work for them. In short run, the gold may settle for consolidation between 1535 to 1545 level before pushing higher. Gold is heavily bought even in USA and some states (latest UTAH) have started accepting Gold as settlement currency. In short, the US government is asking the states to get back as much as gold as possible before the pressure develops to sell the gold to reduce the budget deficit.
Silver at 38.29 (+0.65 ) Open Interest at 61,299 (- 1,124 from 62,423 ). Volume was light, so the speculators or investors are cautious so as not to be caught on wrong foot. The most important level is 39.87 and if it crosses beyond and stays there for 2 more days, the bullish undertone may set in. We are still buyer of physical silver below Rs 60,000 in India. With rupee weakening, the Silver may rise even if it falls in dollar terms. There is nothing in dollar that would warrant selling out silver easily.

Stocks: Our Observations and Comments

  1. Reliance Industries Ltd.: Becomes a strong buy due to changed government policy on gas pricin. Government asked RIL to supply gas at lower prices only to power and fertilizer units. that is about 48 mmBTU whereas its production capacity is 84 mmBTU. Government was finally squezed by RIL successfully. Mukesh is smart man. The cost of imported gas is $12 per mmBTU. So, if RIL charges same price or even $11 per mmBTU for rest of at least 30 mmBTU (84 mmBTU – 48 mmBTU to Fert/Power sector) = 26 mmBTU. It will straightaway add to its bottom line. RIL will get back into growth phase again. RIL is now a BUY
  2. CAIRNS will also come back to buy list again after stupendous profits. With oil prices heading north, its higher profitability is assured.
  3. ONGC may also benefit due to changed gas price policy by Government. It can also sell gas at market price to Steel sector and other industrial users. It may also add to Index
  4. Petronet may be affected because its volume will suffer due to RIL admission as supplier domestically. Overall fundamentals are good but short term it may be affected. in any case, it is overvalued stock at the moment. We still prefer GSPL
  5. JK Lakshmi Cement is good for long term investors. The company is trading at low P/E and also declared good dividend of 25% or Rs 2.5 on the stock price of Rs 44 which means that it will give 5% dividend. This is a good stock for investment. Its next quarters will be better due to contribution of power units and other operations
  6. HPCL has changed its profile. It is buying back stake of ICICI and others on Prize Petroleum which is an oil exploration company. In short, the HPCL is migrating slowly from pure refiner to oil explorer and producer. It is a backward integration. in any case, it is on our BUY list
  7. Ruchi Infrastructure is at the first stage of buying. Reserve at least 10,000 shares position or even 25,000 shares (Total value not to exceed Rs 5 lakhs) or 5% of your portfolio (equity portfolio)
  8. IFCI is excellent price, may be even more cheaper at 41 t0 43 (no hurry). With EPS hanging at close to Rs 10, you can not expect better stock in terms of value.
  9. TATA STEEL: we will begin to look at this stock from now on. It is no longer on sale list. We will write more within next 3 days.

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
SBI CMP IDBI Bank, RIL, IOC, IFCI, CAIRNS or BOI, Yes Bank CMP If you want to swtich in same sector, consider IDBI Bank, IFCI, Yes Bank, or in other sectors such as Eneregy sectors such as Coal India, Cairns India,

Kalidas One Liner

  • None today

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
See the stock selection as above. We will write more tomorrow.
Ref. No. 11/KC/00 Date: 2011.05.16 Target (3M) Rs. SENSEX at

OVER


Stock Observatory India

Ref: ISO/11/35 of 2011-05-25 (India Time 10:00 am)

Overnight Events and Effects:

  • Dow dropped only 24 points after losing steeply in previous few sessions. They talk about the debt fears in Europe and default by Greece.
  • They say that IMF Chief DNA matches with the stains found on the carpet and maid’s clothes. If that was so, the theory of “Set up” as surmised by us in our latest article holds firm footings. If IMF Chief knows that his DNA evidence will be against him, then why did not he admit the offence? Does it mean that he was “set up” for the sex scandal? Does it mean that he admits having “Consensual Sex” but not “Criminal or forcible Sex”?
  • Report suggest that US banks made over $67 billion profits. How much tax did they pay the taxes we do not know – at least Bank of America did not pay any tax. They pay tax if there is real profit. Another report also suggest that 888 banks are identified as “Problem Banks” by FDIC who guarantees the bank deposits. Their combined exposure is over $397 billions. So make $67 billions and lose $397 bilions is simple arithmetic of banks soundness in United States.
  • Most of the attention nowadays is only on Europe, Euro and Greece. It is a battle between the Euro and dollar and we believe that we were right on spot on this issue.
  • Goldman Sachs and Morgan Stanley have revised oil price target by as much as 20%! It means that dollar will decapacitiate and gold/silver prices will rise. In India, subsidies on oil will come to head again, and inflation will rise beyong imagination. the Interest rates will rise to almost 14% on long term deposits. Housing Prices are therefore slated for massive fall and banks are disposed to take heavy losses in provisions in October quarter. This is why we said that defer buying bank stocks until the Mid or End November when their quarterly numbers will be out.
  • With four major Index stocks such as SBI, ONGC, RIL and GAIL heading for decline in next 3 to 4 months, we do not see reason why the market should not test 15,800 level in coming 2 months. That is massive 2000 point loss from current level. Gold is the best refuge followed by Silver.

Asian Markets today

NIKKEI – Japan at 9436 (-40 ) Nothing significant.
Hang Sang -HK at 22604 (-126 ) Really weak on the back of Chinese stocks. Dow
SENSEX – India at 17960 (-51) Weak may slide down to 17,760 before rebounding.

Currency:

US$ Index at 76.09 (+0.20 ) May lose stength within 3 days ahead of settlement.
Aussi$ Still not good time to enter. Wait until 103.50. Kiwi is stronger than Aussie dollar as expected by us while recommending NZ $ (Kiwi dollar)
Rupee Will weaken to the glee of RBI and Finance Minister. These are sadistic people who enjoy when their own house is on fire.

Commodities

Oil at 98.87 (-0.72 ) The US focus is on oil, dollar and euro with gold and silver taking some back seats for the moment.
Gold at 1525 (+1 ) Open Interest at 201,599 down from 227,516 or (by 25,917 contracts) That is short sellers are covering their short position at higher price
Silver at 36.49 (+0.37 ) Open Interest at 62,423 (- 58 contracts from 62,481 ). In other words, the short sellers are still not covering their short positions.

Stocks: Our Observations and Comments

  1. SBI Bond issue was oversubscribed 17 times by retail investors. It pays 9.25% for 10 years and 9.5% for 15 years. We do not know whether it has option to redeem the bond before maturity. If there is no such option, it speaks adversely on the SBI Management and also points fingers at its financial health. How could SBI take a view of high interest rates for 10 and 15 years. Supposing the rates fall to less than 6% in future, it will be stuck with paying interest at 9.5% and receiving only 8% to the borrowers. It will be a net loss for the bank.
  2. There are also reports that Government of India might be subscribing its share to FPO to the exent of Rs 15000 to 16000 crores. On one hand, the government is trying to divest from PSU and on other it is enlarging its stake in SBI, the major PSU. Further, the government does not have money, it is already running in budget deficit, so what is the point of borrowing money from the market at 8% under Treasury Bonds and investing into SBI equity free of interest for almost 10 years? The action seems to reflect the dire state of SBI financial position, the reality of which is not known to the market. Why SBI need so much of capital injection? Why? Where did it lose money that we do not know. Its recent plunge of 99% of drop in profit is one of the indication as to the future. It is almost certain that SBI has lost money in Credit Default Swaps or CDO in overseas market which might have turned payable. Even ICICI bank is also concealing that vital number. Let the 3 Idiots in RBI, SBI and Ministry Finance sing the song that All IS WELL. ALL IS NOT WELL for SBI.
  3. Even if the SBI comes forward with FPO of massive amount, the equity dilution will lower the price projections. Unless the earnings outpace the amount of higher equity, the stock will only go lower and lower. Such massive amount of equity raising will require deep discounting of FPO prices, well below the current market price or even the price that may exist in July when the FPO may become the reality.
  4. A report suggest that Government of India has directed to allot gas from KG Basin to Power and Fertilizer sector. In short the war is on. It is clear that Government of India is not only dictating the pricing policy but also distribution policy. We suspect court battle on these issue in Supreme Court which will crystalize our suspecion. Most of the power plants relying on gas supply from KG Basin will be in limbo and higher interest costs may make them highly unprofitable. GDP will come down materially. Anil Ambani will smile for a while but his brother Mukesh will allocate gas more to government sector to keep their mouth and stick shut.

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
SBI CMP IDBI Bank <131
Any NP stock <Rs 80 IFCI at 41-43 Good value in IFCI with EPS at Rs 10 making P/E at just 4.1

Kalidas One Liner

  • Kya bole. Market kharab hain

OVER


Stock Observatory India

Ref: ISO/11/34 of 2011-05-24 (India Time 12:00 pm)

Overnight Events and Effects:

  1. Goldman Sachs changes the tune frequently, so its intentions not known. Only last month it said that do not buy commodities, and this month it says that you better do. It is now bullish. We do not know which side GS is and where the investors fit in.
  2. Dow dropped 130 pts to 12,381 due to so called European debt worries. No one worries in United States about its trillion debts but more concerned about a few billions in Greece and Portugal in Euro zone. It is clear. Euro is being pressured to wilt. President Obama’s tours to Europe is precisely timed to bring more direct pressure on certain euro countries.
  3. While Euro fell the Gold surprisingly rosé with rise in dollar. Normally, there is inverse relationship with dollar, but it seems that there is increasing disconnect with dollar.
  4. Indian market is taking beating due to sustained selling and negative news on corporate fronts. Even large banks like HSBC suggested not to buy when the index is retracing because it foresees more weakness and negative picture due to higher interest rates.
  5. Rating and mating game worsens, as S&P picked up Belgium for possible downgrade from its AA+ rating. In short, the rating agnecies are playing up agenda to weaken the Euro zone and its currency Euro. The war is on between Dollar and Euro.

Asian Markets today

NIKKEI – Japan at 9,471 (+10) – stable in spite of increasing risk in its demanged nuclear facilty. Yen weakness also helped.
Hang Sang -HK at 22,726 (+15 ). Still not recovering from yesterday’s steep fall.
SENSEX – India at 17,993 (-332 points) in yet another sell off. It may halt the fall at about 17.765 or about but overall weakness remains.

Currency:

US$ Index at 76.09 stable to slightly lower, but with firm bias to dampen the Euro spirit
No other currency worth mentioning

Commodities

Oil at 98.30 still below 100. Goldman raised its target by $20 and again for $2012. It means that Goldman is seeing the dollar much lower, by about 7% from current level. It also means that Gold and Silver might rise.
Gold at 1517 ($2) Open Interest at 227,516 ( )
Silver at 35.27 (+$0.35) Open Interest at 62,481 (down from 66,985 ) That is, 4000 contracts have been bought back. There is disconnect with dollar again. Since we are in third week of May, it is likely that the strength may be maintained for another 5 days or month end.

Stocks: Our Observations and Comments

  • MAHINDRA SATYAM reported loss after exceptional item of settlement with SEC. Its Net Margin improved, sales also improved, employees improved and 12 new clients were added. However Mahindra group outlined that the merger will be delayed for another 12 months. The business is under solid improvement, but we are sceptical as to why the Mahindra group is downplaying the game. There is somethng we do not know or else. It is also the way Satyam announced its numbers. Normally, companies report operatinal earnings and state exceptional item separately. In this case it was not. Due to overall weakness in the market, we would buy only in steep drop conditions. Our target of May might be deferred by another 3 months. We are still bullish on this counter as before.
  • PTC shares fell off steeply. Reasons not known.
  • ADSL shares dropped to 51+ but still responding to market weakness. Our old strategy to add every 10% drop is intact.

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
None

Kalidas One Liner

  • None

 


 

 

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
None 

 

 

 

Ref. No. 11/KC/00 Date: 2011.05.16 Target (3M) Rs. SENSEX at

OVER


Stock Observatory India

Ref: ISO/11/33 of 2011-05-23 (India Time 10.15 am)

Overnight Events and Effects:

  1. Currency war has intensified. The attack on Euro is gaining momentum with old game of rating downgrade has restarted. S&P downgraded now, Italy’s debt rating of A+ from stable to negative. Again the common factor among all Euro zone’s downgrade (Greece, Portugal, Italy and Spain) are their enormous gold holdings which appear to be lying in United States under lien to these countries. This is merely guess work as the public information is rare. Please refer our old article “ Rating and Mating Game” being followed to destroy other nations. Even close observers were surprised at S&P move because country’s ratings are generally revised by leading agencies like Moodys and Fitch (of Europe).
  2. According to latest available information, following European countries hold some of the largest gold reserve. The nations under attack and their gold holdings are December, 2010 (t= tons and TFR Total Forex Reserve) 1. Greece 111.7 Tons or 78.7% of TFR; Portugal 382.5t or 81.7% of TFR; Spain 281.6t or 38% of TFR; Italy 2,451.8t or 68% of TFR. In short these four nations hold 3,227 tons of gold most possiblyt lying in United States physically which aree earmarked and under lien in Fed’s balance sheet. It appears that the demand or some indirect references are taking place in Senate or Congress to sell the gold and reduce the budget deficit. However, FED can not sell gold because they are already earmarked and under lien. Before this truth comes out, it appears that they want to get hold of 3200 tons of gold as free by forcing those above nations to ditch euro and buy $, so that US could come forward to grant them US$ loans against sale of their gold by removing lien.
  3. USD moved higher to 75.93 (up 0.5%) and yet Gold moved to $1510 and Silver $35.08. Oil dropped $1 or 1%. It is evident that the focus of operation is to lower the oil prices which is hurting American consumers, and firming dollar against Euro mainly. Tornado damage has been rising in United States and hundreds of thousand of farm land are under water. There will be heavy shortfall of Corn and Wheat crop this season, so also Cotton and Soybeans.
  4. French Finance Minister Lagarde is likely to be next IMF Chief which may thwart the planning of dethroning Euro into tailspin. So one Frenchman goes, other comes in as IMF Chief. This is saving grace of Euro. However, until the appointment is official, nothing can be said as final. UK has also backed the French appointment.
  5. Troubles are rising for Hong Kong where the deposit and loan growth in first two month were 26% after rising 29% last year. HKMA, Hong Kong’s virtual central bank, is cutting down the expectation of growth ahead which may dampen the property market which is key to Hong Kong market. In short, the interest rates in HongKong are on rise. Even HSBC raised the rates on mortgage.

Asian Markets today

NIKKEI – Japan at 9469 (-137 pts). Steep fall, reasons not known. May be delayed reaction to its entry into recession. Fund may be selling down after taking delayed decision
Hang Sang -HK at 22,785 (-413 ). Very heavy fall. Multiple reasons – credit tightening, factory blast in China which makes Apple iPad, a scandal of Alibaba – subsidiary of Yahoo, and some other reasons not yet known to us.
SENSEX – India May react badly to Asian markets. It may give up gains of last two days. The trend is overall lower. ONGC may emerge to be laggard and RIL too may falter due to lower gas production. OMC may also suffer but the plus point for them is lower oil prices than two weeks ago.

Currency:

US$ Index at 75.95 (+0.5% ) helped by forced sell off of Euro which weighs 57% of the index. It is an attack on Euro from all fronts, pressuarizing Greece to leave euro, also attack on Portugal, Spain and now Italy in rating downgrades, and exit of IMF Chief DSK at critical time. Well done – United States.

Commodities

Oil at 99.07(-1%). OPEC meets in June when expect cut in production.
Gold at 1510 (+$20 ) after hitting $1518. Open Interest at 236,875 (-11000 contracts from 247,929 last Friday) There is substantial reduction in short interest suggesting bullish trend. The gain in gold is despite the firmness of US$. The Europeans will buy gold because the gold prices will be higher in Euro terms due to rise in $ prices and rise in $ against Euro by 0.5%.
Silver at 35.08(+$0.20) Open Interest at 66.985 (+2,800 from 64,150 previous day). That is, short interest in Silver is rising which may suggest some aggressive shorting again to depress prices. Be careful in playing out Silver. It may be noted that Gold is outperforming Silver and there has been some disconnect with gold of late.

Stocks: Our Observations and Comments

  1. Adani group was denied the security clearance to bid for another terminal at JN port. Adani has already promoted Mundra Port and Special Economic Zone and also bought leading coal mine in Australia. By permitting Adani to build JN Port, its business will be secured due to millions of tons of coal from Australia. There is no reason to deny them permission.
  2. Anil Ambani group stocks are under severe pressure of late. Looks like low stock market is playing havoc with his holdings. While his public information through NSE/BSE does not disclose any of his shares pledged, we still surmise that he might have employed clver ploy to conceal this information, otherwise, the steep sell off is not likely. Of all the stocks under pressure, Reliance Infrastructure looks attractive, as there are reports that its Metro line in Mumbai might become operational immediately after monsoon is over.
  3. RBI has been creating avoidable problems for PSU banks by insisting provisions at 15% of NPA. Following is the definition of the NPA and RBI policy in quotes:

“Substandard Loans are those where there has been no repayment (not mentioned but usually interest payment as per standard policy) for more than 90 days and less than 2 months”. If the interest rates are say 12%, then quarterly interest payment is just 3%. If that is delayed, which is normal, why should RBI insist on making provisions @15% which is nearly 5 times the amount in default? Further, banks usually grant loans upto 75% of security value, that is if the loan taken is Rs 100, the security cover is 125% to 130%. That is, defaulted interest of just 3% is more than 40 times covered by securities.

Why should RBI complicate the matters and stretch the healthy finances of PSU banks unnecessarily and cause heavy “sell off” their stocks. This might be picked by some notorious credit rating agencies like S&P whose affiliate in India is CRISIL, and Moodys and Fitch and cause these banks to pay much higher interest in overseas loans. Even ICICI paid 4.5% for its recent $1 billion loans.

I have said many times here that it is RBI which is destroying the Indian economy and raising the budget deficit of government of India. If Government has borrowed 200,000 crores, and if the interest rates rise by 3% in last few months and again by 2% in next two meetings, the Government of India’s interest servicing cost may rise by Rs 10,000 crores or more on domestic borrowings. That too at a time, when Government of India needs money to balance its budget.

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
CAIRNS Rs 337 IOC/ONGC CMP More potential for swapped stocks
BOI, BOB CMP IDBI Bank, Dena CMP More potential . Mark Dena for buy at abour Rs 81

Kalidas One Liner

  • It may make sense to switch from ONGC to IOC and others since the effect of higher subsidy burden may dampen the profitability. The saving grace is its FPO. In spite of heavy subsidy burden, ONGC is still immensely profitable.
  • IFCI finally is coming down. At Rs 47 it is a bargain, but since it has shown weakness of late, better wait and place it on buy side at another correction of 5%. Our preferred price for entry is Rs 41.10 but we do not know whether it will reach there soon.

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
None today.
Ref. No. 11/KC/00 Date: 2011.05.16 Target (3M) Rs. SENSEX at

OVER


Stock Observatory India

Ref: ISO/11/32 of 2011-05-21 (India Time 9.00 am)

Overnight Events and Effects:

  1. Dow rosé marginally by 45 points to close above 12,600 level. USD Index was weaker
  2. IMF Chief will have last night in Jail as his bail has been arranged at $1 Million + $5 Million bail bonds. So rich fellow after a hotelmail. Does not make sense.
  3. Almost all currency rosé, Euro to 1.43 in spite of all problems in Greece, Portugal
  4. Sugar is very volatile. It rosé nearly 5% yesterday and today, it lose 4%
  5. Who says recession in United States? The builders in New York are planning to add several skyscrapers adding almost 25 Million Sft. in 9 years. Oh! Nine years. Forget it
  6. Bloomberg reports that Mukesh Ambani’s RIL debt risk is considred risky with credit default risk rising due to gas production slump. They do not know the reason for gas slump. they should read my latest article which is on the front page.
  7. Inflation in India is not slowing down, so interest rates may rise by 0.75% (about 2% in Kalidas opinion). With that almost all high capital intensive activity is slowing down (Power, Infrastructure, Real Estate)
  8. 9 million users conntect to 3G in 4 months. so MTNL should be winner. Is that why its stock rosé over 2.46% yesterday in ADR market?

Asian Markets today

NIKKEI – Japan at 9,622 (+1 ) Japan refused to add liquidity on recession news
Hang Sang -HK at ( )
SENSEX – India Up 170 points at the point of writing (we are late today)

Currency:

US$ Index at75.11 nearly stable but may weaken as the month end approaches.
Euro at 1.43 – again it is due to month end coming effect.
Aussi$ Strong at 1.066. It is neither buy or sell, somewhere in middle.

Commodities

Oil at 99.28 ( ) – stable
Gold at (1496 ) Open Interest at 247,929 ( ) It is more like Kabhi Khushi Kabhi Gam
Silver at 35.11 ( ) Open Interest at 64,150. Stable but tricky. Good to buy physical.

Stocks: Our Observations and Comments

  • Ruchi Infra is excellent buy at CMP.
  • Ashok Leyland reported turnover of over Rs 11000 crores. with arrangement with Nissan in place, to make at least 200,000 cars, this is one stock that may be picked up in correction.
  • ONGC FPO may open on 5 July and close 8 July
  • Not much heard about decision to diesel prices. Do nothing
  • Anil Ambani’s stocks slumping. He is heading for bankruptcy, looks like.

 

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @< or > Reason in brief
Any stock <80 Ruchi Infra <22 Sales, earnings are rising at double speed

OVER


Stock Observatory India

Ref: ISO/11/31 of 2011-05-19 (India Time 10.15 am)

Overnight Events and Effects:

  1. Dow rosé 79 points on the back of Dell Computer’s robust numbers. However, Hewlett Packard (HP) has already sounded the warning. It may be noted that these high tech’s numbers are not indicative of strength of US economy because most of their hardwares are assembled in countries like China, Taiwan, singapore and Malaysia. They are alredy reflected in those countries’ performance. Accounting them again in United States amount to duplication of economic activity.
  2. Japan has slid into recession officially again with second consecutive drop in its GDP. This may not be relevant because last quarter was affected by exceptional event of quake and tsunami. Let us see what the next quarter holds.
  3. It looks like IMF Chief’s sex scandal may have been politically motivated. They say that as per hotel policy, two persons usually enter the room as per their internal rules. In that case, how come this lady entered alone. Further, it IMF Chief was in the bathroom, how could he have guessed that the hotelmaid was in his room and he came out naked (unless there was prior arrangements with that lady to pay her in advance for sex). Treasury Giethner immediately responded that IMF should elect a new head as the present chief is incapable to handle his job. He wanted the function to be handed over to his deputy who is an American. It appears that IMF of late was very vocal about the problems in US economy and constantly flouting US for not doing enough. IMF Chief was French and as such was supportive of help to Greece and Portugal as they were European nations. US wanted to destroy Euro and saw Greece as lightening point. However, Germans came to the rescue and the plan failed. Even IMF came to their rescue. It appears that conspiracy was hatched to remove the thorn, that is IMF Chief who was not listening to Americans, so that his rôle could be handled by the American who was next in line. He might be more amanable to destroy the Euro the way the Fed and Treasury wanted. It is a murky affair and it is really a Euro and Dollar equation.
  4. No decision as yet on diesel price and gas price deregulation. Now they are mulling cutting custom duty. If the government cuts the import duty, then again its Income side goes down and budget deficits will increase. Whether you hold ear from one hand or the other, the effect is same. All these officials are simply wasting national time.
  5. Euro rosé as expected, so did Gold (marginally) and Silver. For silver, it has to cross the level of 39.85 to return to bullish undertone. Until the month end, we believe that almost all currencies, commodities, gold and silver will climb.
  6. State Bank of India has thrown shivers among all banks who are terrified in having lent heavily to power, infrastructure and real estates all of whom are bruised badly. Weaker rupee is adding salt to the deep wound. The most important factor among banks is the “pension liability” which runs into several thousands crores per bank and form indirect liability of the Government of India. A separate article is written by us which is still under process.
  7. Among banking stocks, though they are coming within our desired range, we would still wait fo another 10% slide. Better look at them when the Index drops to 16800 level. One can buy some of them as first level of entry, but at the moment the downside is more.

Asian Markets today

NIKKEI – Japan at 9,634 (- 27 ) No major effect of recession news.
Hang Sang -HK at 23,189 (+178) up due to higher commodity prices
SENSEX – India at 18,103 (+17) but may slide. Another 300 point loss is likely in few days

Currency:

US$ Index Weaker. Almost all pairs are up.
Euro 1.4290 – up strongly
Aus$ 1.0663 – again on uptrend. Still prefer Kiwi dollar
Rupee 44.93 (up 0.12 , that is down from 45.05) Nothing significant.

Commodities

Oil at 100.41 – Up and regained level of 100. Now the trend is up
Gold at 1497 ( +6) – wil move higher to 1535 in a few days. Trend up until month end
Silver at 35.49 (+0.388 ) Open Interest not available as website is having some problem. It is in uptrend right now and may continue until it reaches 39.85

Stocks: Our Observations and Comments

  • JM Financial is the stock to own at current prices or below. It has handled many major deals recently on behalf of leading corporates that may add good income to its bottom line.
  • JK Lakshmi Cement is another stock within our buying range. With good dividend, growth and reasonable price, it offers cheaper entry. Due to weaker market, one may afford to wait for some better price, but better be a buyer before 23/5. It may announce dividend on 25/5 and final numbers.
  • MTNL ADRs were up by 2.46% in USA, looks like the stock has bottomed out. for long term investors only. Most negative already reflected in price. Accumulate from now on.
  • Some hotel stocks may be worth looking at. Taj GVK is one of such pick.
  • Ashok Leyland has suddenly slumped to mid 40s, Watch it for a strong buy.
  • Reliance at 911 is attractive but its dispute with government exposes it to bad news shake out when it can be bought. It has solid fundamentals.

OVER


Stock Observatory India

Ref: ISO/11/30 of 2011-05-18 (India Time 8.00 am)

Overnight Events and Effects:

  1. Dow slid 49 points due to debt limit concern. US housing starts dropped again. There are reports that Wheat crop in US will be down by 25% this year or even more. That my abet inflation, but the Bernanke is ignoring food and oil prices as non event and exclused from his measure of inflation. (Interestingly, other nations have only one measure of inflation – including food and energy prices, and they wrongly compare their inflation with United States. It is like comparing apple and oranges)
  2. State Bank of India slid 7.7% on massive drop in its profit to negligible 200 Mln rupees. While Advances and Deposits rosé, why did the profit drop? More provisioning on bad loans. It looks like SBI is taking massive hit on losses on power and infrastructure financing, constructions loans to developers in particular. We were right in this column to say only a few days before that the sudden rise in heavy interest rates in small term Savings deposit by massive 2.25% was unusual and that the bank may be facing liquidity problem. Further, SBI says that its future growth may be limited to just 3%. If India’s most important banks will grow only @3% how Indian economy would grow @ 8% to 9%? We were again right in issuing SELL call in last october and requested everyone to ligheten up on bank stocks and also informed them at that time that real problems will begin to surface from Mid April for banking sector. This is why we suggested to go long on bank stocks only after their losses are known in Mid November.
  3. The market is precariously low at 18,200 or about. When diesel price policy is announced soon, the real effect on the market will begin.
  4. If Supreme Court upholds judgement against Vodafone, we expect downgrading of India’s credit rating and wholesale outflow of money by FII. Supreme Court judges do not have idea or financial knowledge how their one sided judgement could destroy the confidence in India. They should be given some lessons on financial market how they operate.
  5. The rates are rising which is a boon to savers in India especially the Retiree and Senior Citizens. Many educated people send their parents to Old Parents House (Orphanage for Senior Citizens), so if the interest rates rise, and the parents have learnt not to give away their money to their children, they will have cause to live. Thanks to RBI – who has raised the interest rates to the advantage of at least one section of our community – the Senior Citizens and Retirees who need not speculate on the stock market.
  6. UK reports that financial vacancies have risen to over 15% showing strains of the market. When the world equity markets are near their top, why do everyone say that the financial markets are so bad?
  7. Let us await for the announcement of diesel prices and LP Gas price policy today or within 3 days. If news is bad, it may be announced on Saturday when the markets are closed.
  8. UK Inflation jumped to 4.5%. Interest rates there may rise in next meeting. Even with GBP rising by 10% causes the inflation, then what happens to India when the Rupee never appreciated at all?

Asian Markets today

NIKKEI – Japan at 9,623 (+56 ). All eyes are fixed on GDP numbers tomorrow
Hang Sang -HK at Not open ( )
SENSEX – India If the market is open, then it may slide mildly. There are no positive news

Currency:

US$ Index at 75.40 Down a little bit. It will continue to go down until month end. This index usually goes up during beginning of the month and starts reversing from third week of the month due to physical settlement on 3rd last business day of each month.
Eur/$ at 1.4245 – rosé smartly despite Greece and Portugal woes. In fact, almost all important pairs being part of US$ index have started rising, because the month end is approaching (for physical delivery of these currencies). Euro has 57% weightage on USD Index.
GBP Also rosé to 1.6245, it has second higherst weightage on US$ Index. It will continue to rise until month end

Commodities

Oil at 97.69. This commodity is attacked in future markets to lower the pump prices in USA. Soon you will hear the production cut by OPEC
Gold at 1483 (-6 ) after hitting low of 1475. Open Interest at 263,027. It will begin upward journey with all currencies. The correction is over for all practical purposes.
Silver at 33.93 (-0.20) Open Interest at 64,625. Went down at one time to 32.96. Here too I believe that correction is almost over. We should see the rise from 18th May but short sellers are still around to play around but the month end delivery may force them to cover or roll over (most roll over is done but whether physical stocks at COMEX increased or not, I do not know). Buy physical now.

Stocks: Our Observations and Comments

  1. Only pharma stocks look better. Weaker rupee also helps them. India is becoming good alternative manufacturing source for many foreign drug companies. This is the area where India holds ACE over China. It will take years for China to conquer Indian pharma companies.
  2. State Bank of India is heading towards Rs 1800 within 6 months. It lent too heavily to infra and real estate sector without understanding the whole influencing factors.
  3. During this banking slide, watch for good stocks to gather. One rule of thumb is slice 30% from recent high to make it attractive buy. HDFC Bank will become more important bank in future. The stock is expensive at the moment, but wait for more correction. It will also be split but it is still most expensive banking stocks at the moment.
  4. During this slide, focus on buying LIC Housing Finance, GIC Housing Finance, who have more liquid resources or funding available.

Kalidas One Liner

  • Bajaj Auto finance is diverting into Credit card and infra financing. Wrong entry!

OVER


Stock Observatory India

Ref: ISO/11/29 of 2011-05-17 (India Time 9.35 am)

Overnight Events and Effects:

  • IT department is going to ruin the FDI (Foreign Direct Investments) in India. After unjustifiably seeking to tax the Vodafone with massive Rs 11,218 crores, which is likely to be supported by Supreme Court to appease the government, IT department has argued that may Telco companies are using same route as Vodafone had and as such it was justified to tax Vodafone and almost all Telco companies in future.
    • There is no justification of taxing Vodafone. It bought the shares of Hutchison which was clearly the transaction outside India. Hutchison may have thousands of assets in various parts of the world, that does not mean that Vodafone has to be made answerable to all jurisdictions of various countries. Hutchison shares are listed in Hong Kong, and their investment in India through one of the subsidiaries was its investment, just you, me and everyone has investment in ADR, GDR, etc. If someone buys ADR listed in New York, and governed by law of United States, could IT department of India question the holder only because the underlying shares are of listed entities in India?
    • May be the government is under pressure to balance the budget but to seek to balance the budget by improper means, the government is setting a serious precedent of interfering with the jurisdiction of other countries, and making Foreign investment into India a highly dangerous game. The Foreign Investors will simply flee and the government will be left with all uncompleted projects for want of capital.
    • British Petroleum bought some stake in RIL paying US$ 7.6 billions through one of the subsidiaries. If it wants to sell its stake, by selling that subsidiary’s shares, should it be subject to tax in India when the transaction is consummated in UK?
    • CAIRNS sold its stake in Indian subsidiary to Vedanta group in UK by transferring the shares of its UK owned subsidiary who in turn owns the Cairns India. Does it mean that Vedanta group will be bound to pay or withhold tax on payment due in UK which is governed by UK law and taxation?
    • If government wants to balance its budget deficit, it may use right recourse by removing unpalatable subsidies which is the main cause of its deficits. Otherwise, it will be like “killing golden goose” which lays golden egg every day.
    • The judiciary in India is also playing to the gallery. This case of IT deserves to be thrown out on the face of it.
    • This is single most negative factor in Indian Corporate Scene and Investment. India may have legal system which is vitiated by the self serving interest of the Government of India.
    • If money comes in, in lakhs, croes or thousands of crores, the dispute automatically come in. The money and dispute go together. If proper administration of justice is not ensured, the money will flee in the electronic age with the speed of light.
    • Stupid IT department, Ministry of Finance, Registrar of Companies of India, SEBI, NSE, BSE and RBI. They are proceeding in the direction of self destruction.
    • I would not be surprised if Supreme Court eventually upholds IT appeal and order Vodafone to pay Rs 11,000 plus crores. It will be black day for India and the Indian Rupee which is well poised to go to below Rs 30 may go to Rs 70,80,90 I do not know when the FII get out wholesale from the highly self centrist, corrupt and irresponsible India.
    • What the hell the Manmohan Singh is doing on this issue. He has proved to be spectator rathen than an actor or player. Shame on him and his deputy – Pranab Mukherji.
  • High interest rates are begining to take toll on various infrastructure projects. LT who is awarded the Metro Rail project in Hyderabad sees its project costs soaring from Rs 12,132 crores to Rs 16,375 crores (by Rs 4243 crores) or by 35% when India’s inflation rates is close to just 8%. Wow! who is right – Government, RBI or LT? Also, LT was taken aback when SBI, the leader of consortium, raised the interest rate by 1.5% suddenly in about 9900 crores of financing.
    • This will be the case for most infrastructure projects. The GDP rosé mainly due to infa projects and when they are curtailed, GDP will slide below 5% before November. GDP is a measure of expenditure and when those expenditures are curbed in thousands of crores, all touted growth will swirl down at frantic pace.
    • Soon before we see most of the concrete structures everywhere half completed, with squatters using them as open toilet facilities.
    • All could have been avoided if only RBI allowed the natural tendency of Rupee to rise. Now, with stock markets beginning to feel the adverse impact of lack of money and FII on road to exit due to IT department stance, the interest rates may rise to as high as 14% before taking a respite. In short term. 2% higher rates are distinct possibility.
    • Avoid stocks with high leverage, higher debts and in the business of power plants, roads or other infrastructures.
  • Rarely, have I seen highly incompetent people in Ministry of Finance, RBI, SEBI, EPC and others, including Prime Ministers office who have set off the bomb with a timer – tick, tick, and tick. India from high profile growth is going down the drain.
  • There is a confrontation between Manmohan Singh confident Mohtek Singh Ahluwalia and Subbarao of RBI. While former goes on churning out positive numbers as if it is a facit machine, Subbarao is placing his foot on the brake. Subbarao may be seeing his last days perhaps. It is difficult to dislodge Sardar Ahluwalia because of his close relationship with the Prime Minister. Nothing will change at RBI. so throw away this news in dustbin.
  • USA: The debt limit was not increased. Now, theTreasury Secretary has written to Senators that there will be terrific consequences if it is not raised within next 5 weeks when US will come close to first official default. (in fact it is second)
    • All these news are great for Gold. Silver too but the some short sellers with the blessing of Comex are still active. Silver price crash is the biggest ever fraud ever committed by the recognized exchange, in this case, COMEX, NYMEX, GLOBEX, ICE Group and huge short sellers such as JP Morgan Chase (buy this crook’s stock because these chors made money). Goldman Sachs, HSBC and host of other banks taking part in this official yet camouflaged loot.

Asian Markets today

NIKKEI – Japan at 9,516 (-42 )
Hang Sang -HK at 22,928 (-23 )
SENSEX – India Still weak, reeling from higher oil prices. The market may have weak bias until May 17/18 when rise in diesel /LPG prices may be announced or postponed again.

Currency:

US$ Index at 75.65 ( +0.02) Dollar slightly positive despite news on debt front
Rupee Very weak at Rs 44.97 after hitting 45.14 Time to send Rupee to India and keep them in local deposit to earn over 9.5% interest. Interest return will outweigh depreciation risk
Au$, NZ$ Wait for AU$ by another 1.5% but Kiwi dollar is worth accumulating now.

Commodities

Oil at 97.68 (- 0.17) Nothing significant. May begin to rise within 3 days
Gold at 1494 ( +3) Open Interest at 271,519 for June 2011. We take the view that Gold is due for rise from third week end of May 2011
Silver at 33.97 (=0.32 ) Open Interest at 65,596 (-4000 appx ). It is showing tricky pattern with downward bias. However, our view is that Silver should begin to come out of lower trading range from 18/5 onwards.

Stocks: Our Observations and Comments

  • Glenmark Pharma The stock at 306.25 jumped over 10% yesterday after announcing licensing of its new products still under development to cure almost incurable disease – Crohn Disease and Multiple Sceloris (MS). There are over 400,000 patients suffering from MS in United States alone. This is the initial payment and where the drug does have chances of success and failure on 30:70 basis, it will still be good chance to take for this company which already has over Rs 20 as normal EPS and present payment of US$ 50 Million will add another Rs 8 to 10 per share. Place this share on your radar and when the market in general or pharmaceuticals sector are under strong correction, take some shares. Not suitable for retirees and for people >55 years of age. Good for young middle aged investors >30 years <48 years.
  • Oil Marketing Stocks: It is time to buy more of these stocks, and build up the position upto 35% of intended position. That is, if you originally intended to buy 3000 shares, try to accumulate upto 1000 shares now. We are particularly strong on IOC – who is about to embrak upon growth phase within 6 months. Make a fund by yourself comprising of IOC (40%) HPCL (10%) , BPCL (10%), ONGC (10%) , MRPL (15%) and CAIRNS (5%). Long term investors may allocate investment amount of Rs 30 lakhs maximum or about 15% of their total portfolio of Rs 2 crores. Those having smaller budget may work out proportionate amount.

Kalidas One Liner

  • None today

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
 

None today

 

 

Ref. No. 11/KC/00 Date: 2011.05.16 Target (3M) Rs. SENSEX at

OVER


Stock Observatory India

Ref: ISO/11/28 of 2011-05-16 (India Time 11.00 am)

Yesterday’s Events and Effects:

Events Effects (Immediate and Prospective)
IMF Chief arrested on charges of attempted rapes of hotel maid in $3000 per night suit.
  • DSK, the prospective Presidential candidate of France could have been victim of political game to defame him
  • Another reason could be his rôle in helping Greece and defending Euro at the expense of dollar. Of late he was openly critical of US economy and dollar and was talking it down.
  • US wants to destroy Greece and so it does not want any one to support it. Hotel Maid could be a weapon of mass destruction to derail Euro and bolster the dollar.
  • It gives the impression that all politicians should have their genitals removed so that they could serve their nations very well without any sex scandals.
Debt Limit: The Republicans are playing tough and Obama says or better threatens that if debt limit is not raised there would be worse than 2008 recession.
  • Newt Gingrich, the possible US Republican President (who was also caught in sex scandals when he was following impeachment of President Clinton) says that the “President should not get a blan Check”.
  • What he did not say that “Bernanke already has full 100 leaves checkbook blank signed in absentia by the Pres. Obama already.
  • Who disburses or print the money without authority- Obama or Bernanke/Geithner?
Petrol prices were raised in India by Rs 5/lts, largest increase so far. Diesel and Gas price rise decision was again postponed for another 3 days by Council of Ministers
  • When there is already Prime Minister, Finance Minister and Oil Minister, why do they need the Council of Ministers?
  • They are judging the impact of Rs 5/ltr price rise in the market. If the reaction is too strong, they may wait or water down the diesel/gas price rise.
  • Finally, the OMC are getting into better shape. Their final numbers were not published due to non payment of subsidy by the Government. In other words, even if the Government gives or announces subsidy, it does not pay the OMC.
  • OMC CEO are acting like old Habsi Slaves of 14th century. When the petrol prices were already decontrolled, why do they approach the ministry for prior approval.
  • Let us wait for another 3 days, having waited for years in the wing.
ATF prices or refined Kerosene used by Airlines were reduced by the Oil Ministry. Why when other oil prices were raised?
  • Government does not want Air fare expenses to rise. The Airlines said that they had no alternative but to raise the fares when the input costs rises.
  • When Auto riksha rates were allowed to rise by 10%, why Air Travel Riksha (Air planes) were allowed to pay less by 4%?
  • What is more important factor for inflation – Air Travel expenses or Auto riksha travel expenses?
  • Looks like the government wants to window dress the balance sheet of Air India and make it competitive. Right way or wrong way, does not matter.

Asian Markets today

NIKKEI – Japan Down 75 pts or 0.75% to 9,573 due to stronger yen.
Hang Sang -HK Down 302 pts or 1.29% to 22,974.
SENSEX – India Down 1% at the time of writing due to rise in oil prices and fears of inflation.

Currency:

US$ Index
  • Rosé to 75.83 to weaken the Euro to destroy Greece. However, from this week, the Euro should beging to rise. wait for the level of 1.385 to correct to.
Aussie Dollar
  • Fell to 1.0547 but may weaken to 103.50 when it can be bought.
Kiwi dollar
  • Good buy even now. May be bought cheaper in a day or two, but not to wait too long
Rupee
  • Slid to 45.06 on the back of universal gains of USD. Pick up this opportunity to send the remittance to India.

Commodities

Oil
  • Down 1% but expect Arab announcement to cut the production. In Iran, the oil minister was dismissed and Ahmadijenad the Prime Minister will handle the oil prices and ministry. He is a hawk and make sure that the oil prices rise, not fall. It will support production cut.
  • It will be a fight between the paper and the physical again
Gold
  • Fell due to fall in Euro and rise in Dollar. The attack is on Greece who has large part of its FOREX reserve in gold. US wants Greece to be out of euro block and wants to come forward to offer dollar help against its Gold collateral or sale. European union may not want to do that nor the Greece itself. Let us see where they are going.
  • Gold is still a buy. While debt limit extension is a certainty, the rally in gold may have to wait for a little while. It is still solid
Silver
  • Deceptive rally. While gold fell and silver rosé – it happened for the first time. Open interests are rising again with rise of 5000 contracts to reach at 70116. There could be another sharp attack on the silver. They are following Mao policy – let

Oil prices and Middle East situation:

Nothing significant news except some violence on Israeli border. Iran comments already made earlier.

Stocks: Our Observations and Comments

  • A serious feud is developing between the Oil Ministry and Reliance Industries Ltd. The Govt asked RIL to restart the drilling of two well, whereas RIL is sitting until the pricing policyis announced. It may happen that Government will finally threaten some action to force RIL to start the production. The extreme action is cancellation of license or deferment which may not happen but some pressure may be applied.
  • Suzlon is showing good performance again. Is it real, we do not know.
  • Arvind is trying to develop 132 acres of land with Tata Housing Ltd. Arvind is a stock that remains in good demand and relatively strong. Use weakness to buy this stock. Our ideal price is <61 but it may not come down that much. Buy it only in good correction of the market.
  • GSPL and Petronet are rising again. Still prefer GSPL to Petronet
  • Pharma stocks are back in demand. This sector is coming back in favour. However, we are not in position to identify proper stocks. We will try to find some.
  • With a fall of communist party in Kolkata, the prospects of growth might brighten which may help the banks like UCO Bank and Union Bank of India who are having strong presence there. Real estate sector in West Bengal may also be poised for growth there.
  • All banks have raised interest rate even on Housing which may incease the EMI of many borrowers. Housing Sector is due to correction but it is not showing signs so far. Sales are slow but the builders are holding on to prices. give 6 more months and see the decline by 15% to 20% in major cities. Smaller cities may not see much reaction.

Kalidas One Liner

  • Mark TAJ GVK Hotel for a buy
  • Mark JM Financial for a buy. even present prices are good to enter.

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
Not today 

 

Ref. No. 11/KC/00 Date: 2011.05.16 Target (3M) Rs. SENSEX at

 

Stock Swap:(All in Rupees)

SELL @< or > SWAP to @ < oe > Reason in brief
Any stocks <20 Ashtavinayak @CMP Speculative buy. However invest upto Rs 30,000 in all
Any stock >350 IOC @CMP Accumulate on long term basis. Avoid its trading.
Petronet >141 GSPL <108 Good Swap

 

OVER

 


 

 

 


Stock Observatory India

READERS MAY NOTE: (Announcement)

Readers may note that there will be no edition on Saturday (India AM time) or Friday (US PM time). A combined edition will be published on Sunday (India AM Time) or Saturday (US PM time). This will be followed on regular basis.

Author (Anil Selarka or Kalidas)
2011-05-14 (India Time – AM)


Stock Observatory India

Ref: ISO/11/28 of 2011-05-13 (India Time 9.00 am)

Yesterday’s Events and Effects:

USA and International:

  • Rajratnam verdict has sent showers of praise on the prosecutors. The black picture of Rajratnam is that he was made scapegoat, arresting mosquitoes when the elephants like Goldman Sachs, JP Morgan Chase walked away. It was more of a racist decision. His skin – brown black – was the culprit, not his deeds. In stock market everyone buys on tips. If there are no tips around, there will be no markets. It is said in our Gujarati – “One who got caught is a thief, and those got away are businessmen.” The jury system, long time before abolished in India, is the bane on justice. What those layman know what is justice, what is right and wrong in complex case of insider trading?
  • How about catching thieves in Silver trading in Comex, Nymex and Globex. The margin requirements were leaked out (inside information) which was used to advantage by large short sellers like JPMC, HSBC, Soros, Goldman Sachs and even Morgan Stanley. Their profits may be up in next quarter. If you have no moral attachment, buy these crooks ahead of their quarterly numbers to benefit. Money has no color.
  • Hong Kong land auction went off well. These are final good days of Hong Kong.
  • China is wisely buying mines and resources. It agreed to buy another Iron Ore company -Sundance Resouces Ltd. for about 50% stake for $2.4 billions. It wisely dumps the dollars and buys the real physical assets. There are no better investors in the world than China.

Asian Markets today

NIKKEI:Down 23, not significant

HANG SENG INDEX:

Down over 121 points below 23000.

SENSEX/NIFTY:

Still weaker. but may remain range bound. No significant news except good economic news on production growth.


Currency:

  • US$ Index: 75.37 – up slightly. The recent rise in USD index is overly magnified. The rise is not even more than 1.5% in general. Euro and GBP are relatively more weaker as expexcted because they constitute major part of index.
  • NZ$: relatively more stronger than rest of the currencies. Aussie dollar is stable to weaker.
  • Yen: not holding above 81, which signifies its persistent strength. There is lot of reversal of swaps – Yen to Aussie$ – is taking place. That is, Aussie dollar is sold and Yen bought
  • Yuan: China raised the Reserve Ratio again instead of raising interest rate. Tightened liquidity may not have much effect.
  • Rupees: Weaker bias trading at about 44.85, having been at one time at 44.98. Good for gold and silver in India. Bad for inflation.
  • Euro and Rand go hand in hand. If Euro rises, Rand rises, if Euro falls, Rand falls.

Commodities

GOLD:

Gold/Silver ratio expanded to 43.51 – all the way down from near 31 nearly ten days back. That is, Silver is more weaker than Gold. Our original idea of selling Silver around 48 and switching to Gold would have reduced losses considerably. Gold is stable above 1500. Euro troubles (greece) affects silver more than gold. Gold is still a strong buy upto $ 1535

SILVER:

The short sellers are using “guerilla warfare” tactics. They allow some rise, and then attack down by 4% to 7% when the market is thin in Asia (Globex Singapore). Enough time has passed for Hedge funds to take stock of the Silver position and we may see renewed optimism soon. At the moment, the metal is fragile. Buy only on 5% to 7% dips. Open interest reduced marginally by 500 contracts, suggesting Short Sellers are still in the wing.

Oil prices and Middle East situation:

Nothing to comment on today.


Stocks: Our Observations and Comments

  • Tata Consultancy has come up with very bullish guidance with 20% rise in revenue. This is one of the top software company to own. Expect 50% rise in its value in less than 18 months.
  • Indian Refiners are buying West African crudes at premium after Libya debacle. If Libyans can accept Rupee payment, it will be good for India to lower cost of import, and bring more depth in Rupee. But Oh! RBI – the villain of the peace.
  • Lower crude prices are helping EGoM to defer the decision on diesel deregulation. Oil Marketing Companies want at least Rs 6/lts rise in Petrol prices. Expect Rs 4/ltr as bargain rise. OMC were better due to lower crude prices.
  • Gas prices in India will dictate Reliance production target. Gas is still the best sector to go in. GSPL, Petronet and Indraprashtha are pure gas play with GAIL
  • OMC may get Rs 20,000 crores as cash subsidy from government, it was announced. IOC gets lion share. According to ET report, the OMC are losing Rs 18.2 per liter on Diesel, Rs 29.7/ltr on Kerosene, Rs 329.7 on LPG cylinder and Rs 8.5 on petrol. If diesel rises, IOC will be the biggest winner.If diesel is decontrolled, IOC turnover will rise by 45% from 312000 crores to 440,000 crores. While government has agreed to grant Rs 20K crores, actual cash payment might be deferred. In short, the profit or less losses will be only on paper. The loss of interest will be much higher due to delayed payment and higher interest rates. Government is merely deferring death.
  • Many power plants are idle after completion due to lack of coal supply. Coal India therefore appear to be better stock to own.
  • Ajay Piramal and Adani group are the edmerging businessman of India. Piramal is very opportunistic businessman selling companies or stake at right time and very cash rich. Adani is having vertical integration, forward and backward. Mark up these two groups for constant follow up. We will suggest some companies in their stable after study.

Kalidas One Liner

  • MTNL losses reduced 30%. Wait for another 6 months to buy the stock. final low days

OVER


Stock Observatory India

Ref: ISO/11/27 of 2011-05-12 (India Time 9.30 am)

Yesterday’s Events and Effects

USA and International:

  • There was a farce in US courts. Rajratnam, the famous now turned infamous, was found guilty on 14 counts of charges, for having made about $ 63.8 millions due to insider tips. A billionaire made only $63.8 millions! How about rest of $ 936.2 millions that he made. Were they made out of insider tips too, or were genuine trades?
    • He might be facing a jail of 15 1/2 to 19 1/2 years. He wanted to appeal but the prosecutors opposed on plea that he might run away to Sri Lanka and wanted to be held in “custody”.
    • Finally, he was allowed bail on $100 Millions. Wow! A man who made $63 millions is asked to post bail of $100 Millions? Even Saddam Hussein and Osama Bind Laden were carrying their “Head Price” of US$ 25 millions for killing of thousands of men as alleged. So was the crime of Rajratnam was so serious as to warrant payment of bail bond of US$ 100 Millions – 4 times that of the head of Saddam Hussein and Osama Bin Laden?
    • If Rajratnam was not from Sri Lanka and was a normal white American, would he have to pay that much penalty or security deposit? How much Madoff with a fraud of $45 billions and Stanford with a fraud of $ 9 billions paid for their financial crimes? Why did they pay less only because they were white Americans?
    • Also, when JP Morgan Chase is being investigated by SEC for CDO fraud of US$ 1 trillion (US$ 1000 Billion), the bank wants to settle the dispute by paying some fines and the wrong doers sitting at the top will get away free. In fact, their services will be recoginized better and award them with millions of dollars of pay increase and bonuses.
  • What a fine democracy United States has, where whatever I earn is mine and whatever you earn is ours. Look at the centrestage of commodity markets where frauds running into billions of dollars is taking place right now right under the Authority’s nose, but anyone is listening? No. They have earphones plugged into their IPod listening to carrebian music.
  • It was again a day of cheating and downright perfidy. After allowing Gold and Silver to rise in normal course, first few minutes of trading of just about 2000 contracts, the Silver dropped like a thud with 8% fall in straight line. See the graph below.
  • Dow dropped by 145 pts due to commodities fall, US dollar Index was manipulated higher on the ground of possible Greece default, derating of Greece by S&P just to speed up the fall of Greece and of Euro, the attack on Euro was intensifying. The game plan is to save US Dollar and also avoid higher petrol prices at pumps. This is why after Silver, the contagion spread to Oil where was the massive fall again by 6% with commodity exchanges willingly helping out the wrong guys with comfort that US administration will not mind fall in oil prices as avowed by President Obama to punish the oil speculators. As fall out, expect production cut of Oil by the Arabs very soon, cutting off almost 1 to 2 million barrels per day.
  • Is US economy is improving? May be as the CNBC, Bloomberg, Wall Street Journal and others will say. But two major foreign banks want to leave the United States soon for good.
    • Royal Bank of Canada, the largest Canadian bank in US, has put up for sale its entire US operation after 10 years of presence. Why? Reasons untold.
    • HSBC is going to announce today or tomorrow to put its massive US operation on sale. It has 430 branches. When HSBC announced its acuisition of Household Finance for US$ 10 billions, we sent out a memo to our customers that it will lose money big time. After losing $45 billions it wants to shut off the operation, says the market reports.
    • Even a bank like Barclays is rumored to cut down its US operations.
  • This is all happening when the US economy was supposed to be improving, 240K jobs were created last month, people were more confident (the unemployment rate rosé to 9%) and Nokia wanted to reduce its work force by 7000 people.
  • The floods are so much pervading in mid west that millions of acres of farm land is “underwater”. The Wall Street reported that 28% of all mortgages are also “underwater”. So most of the assets underwater, we are getting reports that the economy is on upswing. This remind me of George Orwell’s Classic – 1984 – written by him 40 years before that year what would happen. It is not happening although it is late by 26 years. He wrote that in 1984, “the knowledge will be crime” and big brother will be watching you everywhere. What we call wire tapping or satellite supervision or in house video camera surveilance.

India:

  1. Economic times report that poor NRIs in Dubai sent over US$ 11 billions, 4 billions more than British Petroleum to Reliance, last year. A question arises, if poor workers in UAE could have so much of $11 billion dollar to send (they must be making $44 bilions every year – what they remitted was just 25% of their income as savings), what the wealthy Indians would be earning in US, UK, Hong Kong, Singapore, Australia, and others?
  2. Do we really need FII to boost our GDP growth. Why do Government of India is partisan to FII and negligent to NRI? Why NRI are paid less on their Rupee deposits when local Indians are paid almost 6% higher? Why such step motherly treatment? Under constitution of India, all Indians should be treated equally – it is their fundamental rights – so why some Indians are paid more and others less in same country? Disgusting.
  3. After SBI, many other banks have started raising rates. We are in the era of rising rates. Let us see what the government decided on oil price de-regulation tomorrow.
  4. CCI or Competition commission of India (when it was borne?) has served notice on all domestic Airlines for raising the Airfare during the strike of Air India. What a joke? In city like Mumbai, when the trains are stopped or there is heavy rain, the Taxi and Riksha operators jack up the price or do not ply the route at all. These consumers outnumber the Air travelers by a ratio of500 to 1, then why their interests are not protected by commission like CCI. They never called Taxi Owners or Operators union to discuss this. Hypocrates! However, we have some opportunities here. Airlines will be reporting higher profits for this quarter (to be released in July) thanks to Air India. In fact, Air India should frequently go on strike to benefit the shareholders of other airlines! Your loss is my gain – is the eternal truth of competitive business.
  5. The Government of India postponed till 17 or 18 May (one week more) the raising of oil prices or diesel price deregulation after crude prices fell on paper. All OMC will take hit because of this, and RIL will not be willing to increase gas production in KG Basin. The reason for postponing the meeting was reported to be one minister “Mamta” away. Why was she sent away when the important meeting was taking place.
  • Take the decision once for all – either allow oil companies to raise the price and remain solvent or let government shoulder all subsidy. Why should Oil Marketing Companies, public listed commercial enterprises, be forced bear the subsidy. It is their right to increase prices under freedom of rights guaranteed under the Constitution of India (Fundamental rights under Aritlcle 19).
  • The meeting is re-scheduled to May 17 to 19 but the decision is now certain – No increase in petrol, diesel, kerosene or gas prices for the time being. OMC may therefore come down. Reduce position by 30% if you want to trade if the stocks do not fall much (not over 5%), sell now and buy back later. We are not selling any of our OMC stocks because we do not trade quality.
  • CAIRNS-VEDANTA deal is again in limbo. Again there is no decision. They say they will decide by May 20 when Empowered Committee of Ministers meet again. Again, Mamta’ absence is delaying the matter. The CAIRNS UK CEO is visiting, visiting and visiting, hoping, hoping and only hoping. After Government approval, ONGC approval will be necessary which it says it is not empowered to do it soon. The stock will be hurt again. In short, OMC Stocks, CAIRNS, ONGC and RIL will be the losers, so also some Index commodity stocks. The market may overall lose in the end.
  • Should you buy OMC or CAIRN stock now – not at the moment. The government is meeing on top of the peak – Mount Abu to decide what to do in bottom in the valley – the budget deficit. Even if they pee from top of the mountain, the droplets may not reach the valley with thousands of crores of deficits. In short, the deficits will swell, the interest rates will rise, and GDP will shrink further.
  • Coming to Airline stocks, instead of falling, they would gain. They are just trading buys. In and Out for short term traders.

Asian Markets today

NIKKEI: Down 77 points

HANG SENG INDEX: Down 188 points due to lower commodity prices and poor HSBC result.

SENSEX/NIFTY: May drift lower by about 200 points due to fall in OMC stocks, RIL and ONGC and delayed decision on Cairns deal. Banking stocks may perform better because of feeling that the rates may not rise much due to lower oil prices. Airline stocks might do better. These are all 5 days situations.

Stocks:

  • Allied digital bounced in heavy volume but not with huge rise. Watch it closely. We believe it is time to buy more.
  • GIC Housing Finance reported the EPS of Rs 21 and stock trading at Rs 112 with almost 4% yield (It pays Rs 4.5 dividend per share or 45% of its face value Rs 10). Trades at 5.5 times current PE.
    • It is a good alternative to bank deposits. The yield is going to increase in future. The dividend may rise as Rs 7.8 per share in 2 years giving you almost 7% yield with chance of capital appreciation. Backed by the full credit of GIC (= General Insurance Corporation owned by Government of India).
    • This is relatively one of the cheper stocks but not meant for trading. Only long term investors may buy small to start with and more in steep correction.
    • It will appreciate more in third quarter of this year. and prospective P/E of 4.5 times. Target price in 2 years is Rs 240, almost 110% or 55% per year. This is in addition of dividend return of 15% minimum in 3 years.

Currency Market:

  • US$ Index: Rosé first to cause damage to gold, silver, oil and euro but settled slightly less. It is evident that the buyers are none than the US Govt sponsored agencies who alone can have so much of money power. Bernanke and Geithner are so much worried of inflation that they want to bring down the commodity prices acorss the board by dumping futures contract in short, swift and hefty moves when the market is thin. They also want to finish Euro by making S&P to reduce the rating, and then trying to kill Greece by making it leave Euro zone so that people revert back to dollar zone. Europeans are slow to understand this game plan but they are trying to ensure that Greece does not leave the Eurozone. The money is now roating between USD, Euro, Oil, Gold & Silver. Other currencies fall in light trading.
  • If Europeans want to straighten the United States, they should demand physical delivery of their GOLD under lien to them but physically lying in Fort Knox in USA. If they demand immediate delivery, hell will break lose. US wants to avoid such demand by causing disturbances in Europe.

Commodity Market

GOLD:

  • Relatively stable though it dropped first below $1500, down about 1.4%. Recovered showing its real strength.

SILVER:

  • Silver dropped massive 8% within initial few minutes of trades with massive 2000 contract to start with. The short interest came down which means that after initial fall, when the short interest increased, those sellers bought back the contract for cancellation. The purpose of shorting silver on massive scale after raising hope is that they want to corner as much physical silver as possible. The only large source of Silver is SILVER ETF. By causing steep fall of silver, they are forcing the ETF to sell down their physical inventories so that short sellers could cover their position. When the Authorities collude and conspire with the criminals, no one’s judgement is going to work.
  • It looks like very strong governmental forces are at work to cause commodity crash. They are using USD index versus other commodities. As such, 10% to 15% movement on the top side is becoming strong sell point for them. They did not want Silver to go beyond 39.85 level because once Silver gets into 40s, it would have returned to bull territory. Anything 20% below recent top is considered as technical sign of bearish market. This is what they are going to achieve.

Look at the above graph. Look at between 7:30 AM to 8:00 AM when the market is very thin. The Silver was just pushed down in short and swift operation. Again, it was smashed between 11:30 AM to 12:00 PM (30 minutes) which was close to lunch time and near close.

Oil prices and Middle East situation:

  • Oil prices slumped by massive 6%. Emboldened by the success in Silver, these authorities wanted to suppress the Oil prices in paper trading. US consumes almost 30 Million barrels of oil per day, how could its price drop by $6 per barrels? It is not small quantity to manipulate but they do it when the market is very thin. However, the Arabs are very clever and soon you may find announcement from OPEC that the oil production is cut by at least 2 million barrels per day because of excess supply in the market. These guys will be frustrated by the real market of oil which is not dependent on paper derivatives.

Our Observations and Comments

  • As above

Kalidas One Liner

  • None

Kalidas Chopai

None

Stock Swap:

SELL any non performing stock around Rs 60 and SWAP to Allied Digital Services Ltd. in two or three stages. It is now a strong buy.

OVER

 


Stock Observatory India

Ref: ISO/11/26 of 2011-05-11 (India Time 9.00 am)

Yesterday’s Events and Effects

USA and International:

  1. Chinese alone knows how to talk to Americans. When American team pressed China to make its Yuan flexible (or allow it to rise) and reduce the trade surplus, Chinese team retorted that “most of the suprlus is generated by US and Japan based companies who have been assembling the products in China” In other words, we are not doing, ask your own people not to assemble in our country.
  2. Dow rosé by 75 points on news of Microsoft buying “SkyPe” for $8.5 billions. The feeling is that the financial markets, especially M&A (Mergers & Acquisition) activities are back that feeds the fat brokers on the Wall Street. Anything that feeds Wall Street carries through to the people who believe the analysts more than the politicians.
  3. Weaker dollar is beginning to tell on US consumers. The Labour Department reported 2.6% increase in Import Price Index. (in that case, if China is forced to let Yuan rise, the cost of imports will be still more.
  4. Interest Rates on EU loan to Portugal will be around 6%. Greece will be still more. In short, the interest rates are on rise everywhere. If government credit become so costly, what happens to private borrowers or corporations?
  5. There is single spearhead attack on Euro by decimating Greece. Europeans are still not able to realize the game plan of others.
  6. Even Goldman Sachs wants to borrow in Australian dollar at about 6%. Recently, many brokers and banks from US have gone to Australia to borrow there at about 6%? or that the money is not available in United States even at 6% which forces them to go to Austalia. If the credits are so cheap in homeyard, why do they want to go to Australia? Are they planning attack on Aussie Dollar by the way? The Finance Minister says that Australia will return to Budget Surlus this year.
  7. IMF says that Kiwi dollar is overvalued by 20%. Their mathematics – because the yield between Kiwi dollar and other developed countries currency is too wide. Wow! what a logic! In other words, when Kalidas is saying that Kiwi dollar will go to 92 or by 16%, IMF says it is overpriced by 20% and should devalue.

India:

  1. SBI raised the lending rates by 0.75% (higher than bank rate rise of 0.5%) and also increased deposit rates in 4 maturities as high as 225 basis points or 2.25%. BPLR or Basic Prime Lending Rates rosé as high as 14%. Housing, Auto and other finances will cost higher. The rise is just across the board. In other words, the liquid funds is disappearing fast at State Bank of India.
  2. Mukesh Ambani said that it is uneconomical to drill for more gas due to gas price cap at $4.20 per million cubic feet. He wants to let the market determine the rates. According to Bloomberg report, the LP gas prices in India are about 68% lower than international prices. That explains why Reliance is not producing enough gas and operates at 60% capacity. It is possible that Reliance may increase the production only after the oil price policy announcement tomorrow.
  3. RIL reported profit of Rs 16000 crores on sales of Rs 192000 crores last year, that is, nearly 8%. If the IOC, whose sales is around Rs 312000 crores, its profits should be around Rs 24000 crores against just Rs 10000 crores. That is, IOC should have EPS of about Rs 100 per share minimum on minimum increase in diesel prices. With stock sitting at Rs 345, I often wonder when those days will come when IOC will rise Silver a few days ago? I want to make partial switch from Silver to IOC but let me eat the full plate of Silver
  4. NTPC reported superduper profit which may give fillip to Power sector.
  5. I was looking at few stocks of Anil Ambani. At one time, the stock of Reliance Capital traded as high as >2800. Was there bonus later on? Its EPS has shrunk from Rs 41 to less than Rs 14 and it is currently trading at about 63 times PE that is EPS is rated to be Rs 8 or 80% lower than those days. Its profits has become 1/3rd whereas the book value has gone up by 20%. After God, it is Anil Ambani who knows how to build something out of vacuum.
  6. Diesel price deregulation may be announced in today (India time) after the market close or in next 5 days. I think the time is returning big time to favor the stocks in Kalidas wish list for so long.
  7. Coming to Airline stocks that might tumble in next two days due to rise in petrol and ATF prices, it may be time to pick up some stocks like all three – Jet, Kingfisher and Spiejet- who all would have made good money due to Air India strike. Their load factor must have improved. Although I do not like Kingfisher from financial view point, it could also be short term buy. It has sales of about Rs 5000 crores against Spiceet 2100 crores and Jet Airway about 10000 crores. Strictly speaking, I would not want to buy Kingfisher more than Rs 20 for its shares trading at Rs 44 now, but it may be a tall claim. It is still financially stretched company like “inedible elastic naan”. Watch Airline sector for good pick during next 5 days.

Asian Markets today

NIKKEI: Up 100 points and re-testing the 10,000 level. What pleases Dow pleases Japan. There was a song from famous Raj Kapoor movie “Jis Desh Mein…” which was sung in lilting tune of Shankar Jaikishan by Mukesh – Begaani Shadi mein, Abdullah Diwana…” HANG SENG INDEX: Up strongly by 176 points on the back of good feeling from Chinese talks in United States and high hopes for 3 expensive sites slated for Auction very soon, one of them on prestigious Stubb Road and another in upscale Kowloon Tong area. Property is the vitamin “M” for Hong Kong market. Sales of properties are at the lowest, with Chinese money flow drying out due to high interest rates and appreciation of Yuan. SENSEX/NIFTY: May rise further until 18,800 this time. When global markets are good, Indian markets follow. After oil price announcement, Indian market may slump if the price rise is more than expected. It will fire up the inflaton fear which may amount to further rise in interest rates by at least 2 times if not more. I think one more time rise in interest rates and then India may be done with for until the monsoon is over.

Stocks:

  • Allied Digital has bounced back. It happened one hour before market close. at 02:34 PM onwards to be precise. The remained same for another hour until close. It means that most downside is over and the stock is back on track. If I do not own any, I wil throw away caution and buy some shares. It looks like that short sellers will face squeeze and the stock may trade at upper circuit for next 2 or 3 days at least. That is, rising 30% in a few days. A few of our readers bought it, so might benefit.

Currency Market:

  • US$ Index: Fell to 74.55 Commodities price are rebounding rebound
  • Both Au$ and NZ$ rosé slightly.lt is still time to buy this pair, and we prefer more of Kiwi dollar that Kangaroo dollar.
  • Russian Rouble is showing solid sign of going higher. Russia wants to promote Rouble as alternate currency to dollar but will not succeed.
  • ICICI has come up with interesting tips (Not KALIDAS tips). Why should US Dollar remain strong and should become strong, no one knows.

ICICI Securities expect the US dollar to remain strong against the INR. “Utilise the lows in the USD/INR May contract to buy above 45.10 with target of above 45.79 with target of 44.97/45.05 and a stop loss of 44.70“ it says. “In the currency futures market, the most traded near-month dollar-rupee contract on the NSE closed at 44.89. The USD/INR May open interest was down 1.5%,“ it notes. “The June contract witnessed an increase in open market interest by 6.4%.,“ it adds.

Commodity Market

RAGING MISSISSIPI RIVER and Soft Commodities Scenario

Worse flooding and highest ever rive level in Mississipi in almost 75 years, is causing lot of concern at the downstream. After blasing 2 mile long “levee”, the water is gushing out to over 130,000 acres of farm land downstream. However, worse is the diversion of river flow to Lousiana where over several million acred of farm land will remain in water for many days before water gushes out to the Gulf of Maxico.   This will have severe impact on food prices, especially Corn, Wheat and Soybean. Chicken farms, dairy foods and beef prices may go high. The food prices are slated to rise by at least 15% in next 2 months or so.   Such storms and river flooding could have been avoided if the US Administration had heeded the solution outlined in my book “Sub Prime Resolved” Chapter 16 – US Should Bomb Itself – where the solution was provided to use “Cluster Bomb technology” to dig almost 1000 miles to 3000 miles long river artificially connecting East (which is water rich) and West (California) where the risk of wild fires would diminish as result of water flow reducing the dryness. Further, Tornado loses power and energy when it comes in contact with the water. If East and West were connected with artificial river which will criss cross through the plains of the mid west, all tornados that come in contact with the water at places would subside down to avert major disaster. I hope some day some one will read my Chapter 16 which was one of the best chapter in my book.

GOLD:

  • Gold recovered by 0.75% in Asia to $1516. It may see higher Morning fixing in London. Gold is still a solid buy upto $1535. In India, it may rise to over Rs 33,500 or by 40% before December 2011. Deutche Bank says that it will reach $2000 before year is out. In any case, we are on track to $1685 within 2 months.

SILVER:

  1. Silver rosé to 38.47 (up 3.6%) and dollar fell again. The Short Interest in Silver also came down from 72,192 to 66,597 that is by about 5300 contracts less than yesteday. In other words, the short covering is going on but at faster pace. The buyers have returned and expect strong rise. Once the Silver rises above 39.87, which is just 3% away, it will return to bullish territory again. Hold back selling and ride the rally. In India, the silver prices rosé to almost Rs 58,100 which is still a buy level. Buy physical silver upto Rs 58,500 per kg in India.
  2. Weaker rupee also adds about Rs 800/kg to Silver prices. Rupee is at Rs 44.70 against Rs 44.10 a few days ago.

Oil prices and Middle East situation:

  • Oil prices fell due to higher margin on Oil futures contracts. There will be war between the Middle East who may scale down production to retain higher prices and COMEX/NYMEX may raise the margin to reduce the prices. Arabs will prevail. Looks like US Administration is using COMEX to combat inflation. There was one famous song sung by Manna Dey – in movie Toofan aur Diya – which versed as “ Nirabal ki ladai bhagwan ki, ye kahani hai diye ki aur toofan ki”.

Our Observations and Comments

  • Allied digital is past the hurdle. It has smartly recovered after lower circuit related fall. If you can buy try it out in baby steps and then take a cradle and sleep. Mom Kalidas will wake you up to have milk feed when the time is ripe. It is a bargain amonst all other stocks at the moment. It is time to make money in quality stocks. this could be one.

Kalidas One Liner

None today.

Kalidas Chopai

None today. Stock Swap: SELL any non performing stock around Rs 60 and SWAP to Allied Digital Services Ltd. in two or three stages. It is now a strong buy. OVER


Stock Observatory India

Ref: ISO/11/25 of 2011-05-10 (India Time 10.30 am)

Yesterday’s Events and Effects

  1. Dow rosé marginally by 45 points. Nothing special about it. Wall Street reported that the housing prices continued to fall in the first quarter with deeper falls than expected. The economists are now scratching their heads and are revising the figures downward. They still expect the housing prices to fall by 5.7% in second half and foreclosures are rising. Almost 28% of all mortgages are underwater (that is, debit balances are higher than the market value). Extremely bad news for Bernanke and Geithner.
  2. Dollar is after being weak is again strengthening. Now at 74.84 with primce focus is to hurt the Euro. The Americans are fousing to destroy Euro and use Greece as starting point, same way the Thailand was used as starting point while causing Asian crisis contagion. The chances are they may not succeed now.
  3. Temporary strength is lent to US$ to appease the Chinese who are visiting this time to discuss the prospects of Dollar and Debt level talks. It looks like that the talks are not going too well.
  4. Wall Street reports that Chinese wages are likely to rise by 80% in less than 4 years which may cause end products sales to US to cost more and enhance the Core inflation. it also reports that if Chinese are forced to raise its currency higher, it may cost Consumers in US more due to higher dollar prices of same good. US is therefore in dilemma. It loses on both counts which is setting stage of higher interest rates which it does not want.
  5. After it is the time to cause fall in oil prices by increasing margin by 25%. CME group is now increasingly using margin as tool to bring down the prices, obviously at the behest of the Government of United States. Higher pump prices are causing havoc in US which hurts Obama’s popularity very much.

Asian Markets today

NIKKEI: Up marginally. HANG SENG INDEX: Slightly up by 176 points or about 0.75%. There is no real momentum. SENSEX/NIFTY: May rise further until 18,800 this time.

Stocks:

  • A blow to Indian Corporate sector wishing for IPO or FII financing. Singapore withdrew offer to buy stake in Shriram Transport. First casualty of weak market with more troubles to come. We are now distinctly in bear market but not recoginized as such.

Currency Market:

  • US$ Index: Fell to 74.56 and any fall below 74.50 will take it to 74. If it does not hold this time, expect more fireworks on exchange front. Commodities price will rebound
  • Both Au$ and NZ$ rosé slightly.lt is still time to buy this pair, and we prefer more of Kiwi dollar that Kangaroo dollar.
  • Russian Rouble is showing solid sign of going higher. Russia wants to promote Rouble as alternate currency to dollar but will not succeed.
  • Indian Rupee is slightly better in line with other currencies. It is range bound between 43.90 to 44.80. Still a good time to buy rupee and keep it in FD in local currency to earn 9% interest. Earn in rupee deposit for next 6 months at least. You will earn 4.5% (@9% per year) which is equal to Rs 46.70 counting interest income.
  • South African Rand is my preferred currency and its Zero Coupon bonds issued by Rabo Bank, DEVSA and ESKOM. This is one of the best long term investment for International investors at the moment.

Commodity Market

GOLD:

  • Gold recovered by 1% in Asia to $1507. It may see higher Morning fixing in London. Gold is still a solid buy upto $1535. In India, it may rise to over Rs 33,500 or by 40% before December 2011.

SILVER:

  1. Silver rosé to 37.41 in spite of dollar rising. It is a disconnect that may be seen more often in future. The Short Interest in Silver also came down to 72,192 about 2000 contracts less than yesteday. In other words, the short covering is going on but at lower pace. The buyers are returning. In India, the silver prices rosé to almost Rs 57,000 (now at 56,400) which is still a buy level. Buy physical silver upto Rs 58,500 per kg in India.
  2. Weaker rupee also adds about Rs 800/kg to Silver prices. Rupee is at Rs 44.70 against Rs 44.10 a few days ago.

Oil prices and Middle East situation:

  • Oil prices fell due to higher margin on Oil futures contracts. There will be war between the Middle East who may scale down production to retain higher prices and COMEX/NYMEX may raise the margin to reduce the prices. Arabs will prevail.

Our Observations and Comments

  • Fame India looks good to me. Small position is suggested.
  • Allied digital is another stock may be bought in 3 alternate sessions. It has dropped again to Rs 53.95 about 10% in lower circuit. Buy on alternate day to average down the prices. It is a bargain amonst all other stocks at the moment.

Kalidas One Liner

  • None today

Kalidas Chopai

PEP = Preferred Entry Point

Stock Allied Digital Services Ltd CMP Rs 53.95 PEP CMP
The stock has simply slided for no ostensible reason. Except for IT raids on them, there is nothing untoward towards their financials. It is one of the cheapest stock in the market with almost no debts and higher earnings. The stock is trading at about 3 times P/E ratio. Buy it with long term target well over Rs 200 in 18 months.
Ref. No. 11/KC/15 Date: 2011.05.10 Target (3M) Rs. 87 SENSEX at 18,641

Stock Swap: SELL any non performing stock around Rs 60 and SWAP to Allied Digital Services Ltd. in two or three stages. It is now a strong buy. It is time to look at Power stocks after so much of decline. We will cover perhaps after two days. OVER


Stock Observatory India

Ref: ISO/11/24 of 2011-05-08 (India Time 10.30 am)

Yesterday’s Events and Effects

  1. Dow rosé marginally by 54 points, and almost everyone is touting Job Growth as important figure. No one talks about the rise in unemployment numbers which many consider as “lagging indicator”. The authorities claim that private sectors added 240,000 jobs, and in that case, how come the unemployment rosé. What this “240,000 job creation number?” It is a Net Figure or Gross Number? that is, job creation “Job Created MINUS Job Lost number or just it is one side number, that is, Job created number WITHOUT counting jobs lost numbers? It is clear that US administration is playing with the numbers and almost all brokers or investment banks are accepting them as the “saying of God”.
  2. In India, OMC are back in the track. Due to fall in oil prices by 9%, there There are rumors that the oil ministry is going slow on price increases from Rs 6/ltr to Rs 3/ltr for diesel, and similarly for other products such as Kerosene and LP Gas. It is likely that Kerosene prices may not be raised at all. The OMC stocks may therefore may give up some gain today. Still the writing is on wall that “ Oil Prices including Diesel prices are on course to decontrol” The pace may change, not the policy itself. We are still recommending OMC stocks as “Accumulate strongly” ignoring all negatives surrounding it.
  3. All eyes on Chinese government economic team visit to United States Let us see what the Chinese are going to do. Judging from continuous weakness of dollar, it appears that Chinse are uneasy and they are off loading dollar portfolio.
  4. Silver slightly increased to 36.27 today and short position is reduced by almost 6000 contracts to about 74,000. Those who wanted to buy Silver may buy it today and next 3 or 4 days. Silver may stop at 39.87 level and this will be tested strong by short seller. However, the dollar is so low and weak that gold and silver prices can not be suppressed for long time.
  5. Gold recovered by 1% in Asia to $1501. It may see higher Morning fixing in London. It is strong due to demand in India (physical) due to Akha Trij or akshay trishta. Gold is still a solid buy upto $1535. In India, it may rise to over Rs 33,500 or by 40% before December 2011.

Asian Markets today NIKKEI: Down 48 points due to higher Yen. HANG SENG INDEX: Slightly up in sympathy with Dow. Up nearly 1% SENSEX/NIFTY: May correct in the morning but recover in afternoon.

Stocks:

  • A blow to Indian Corporate sector wishing for IPO or FII financing. Singapore withdrew offer to buy stake in Shriram Transport. First casualty of weak market with more troubles to come. We are now distinctly in bear market but not recoginized as such.

Currency Market:

  • US$ Index: Fell to 74.56 and any fall below 74.50 will take it to 74. If it does not hold this time, expect more fireworks on exchange front. Commodities price will rebound
  • Both Au$ and NZ$ rosé slightly.lt is still time to buy this pair, and we prefer more of Kiwi dollar that Kangaroo dollar.
  • Russian Rouble is showing solid sign of going higher. Russia wants to promote Rouble as alternate currency to dollar but will not succeed.
  • Indian Rupee is slightly better in line with other currencies. It is range bound between 43.90 to 44.80. Still a good time to buy rupee and keep it in FD in local currency to earn 9% interest. Earn in rupee deposit for next 6 months at least. You will earn 4.5% (@9% per year) which is equal to Rs 46.70 counting interest income.
  • Polish currency appear a good buy, considering policy announcement of its Central Bank. However, readers need not bother due to its unfamiliarity and unknown factor.
  • South African Rand is my preferred currency and its Zero Coupon bonds issued by Rabo Bank, DEVSA and ESKOM. This is one of the best long term investment for International investors at the moment.
  • Commodity Market

GOLD:

  • Go on buying now. No more comments necessary.

SILVER:

  • At best stable after recent plunge with short covering going on. Almost 6000 contracts are bought back. We are buyer of Silver all the way to US$ 39.85 or upto Rs 59,000 per kg in India. Then enjoy the ride.

Oil prices and Middle East situation:

  • Oil prices rosé by 1.69% but still below $100 in USA. It may be range bound between 98.35 to 105.35 level. No change in middle east situation. We can hear only sound similar to rattling sound in our kid filled Kitchen.

Our Observations and Comments

  • Hopes are protecting the real estate sector. It does not take much time to dash hopes.
  • Fame India looks good to me. Small position is suggested.
  • Allied digital is another stock may be bought in 3 alternate sessions.

Kalidas One Liner

  • None today

Stock Swap: SELL LT to IOC, HPCL, BPCL or MRPL SELL ICICI to IDBI Bank SELL Realty stocks and buy MRPL OVER


Stock Observatory India

Ref: ISO/11/23 of 2011-05-07 (India Time 0830 am) Market closed

Yesterday’s Events and Effects

  1. Dow rosé on mixed signal of job reports which said that 244,000 jobs were added last month but the unemployment rate rosé to 9% – unable to reconcile. Dow rosé marginally by 54 points. No other change in economic picture. US$ rosé at the expense of Euro and GBP, may be due to reversal of “Dollar Carry” trade due to fall in crude prices. Michael Bloomberg, Mayor of New York city, proposed cut of 6000 teachers jobs as budget trmiing exercise. All job figures are therefore contradictory. No clear signals yet.
  2. In India, OMC are back in the track. There are rumors flying that Oil Ministry has suggested hiking of Diesel prices by Rs 6/liter, Kerosene by Rs 3/liter and LPG by Rs 50/Cyliner. Since oil prices have since fallen, it is possible that the actual rise may be limited to 75% of proposed rise. It does not change the policy picture that diesel/kerosene/LPG prices are in decontrol mode and only the degree of control may differ.
  3. All eyes on Chinese government economic team visit to United States in few days and stated that it will watch closely the Debt limit talks in USA. Indirectly, it is a veiled warning that if the debt limit talks do not progress well, China could turn out to be a big seller of T Bonds. The recent strength of dollar is aimed at pleasing Chinese that “All is Well” . China is too smart to believe the Americans.
  4. Silver slightly increased but short position after being reduced again rosé slightly. Silver hit day high of 36.43 before trading now at 35.56. If Silver goes back againt to same old level, it would have gained by 35% because of lower base. Rupee slumped by 1% to 44.80 – perhaps the best time to send the remittance to India by NRIs
  5. Gold recovered by 1% to close at $1495. It is strong due to demand in India (physical)

Stocks:

  • Hang Sang: Closed today, being Saturday. Stronger dollar helps but the sentiments in property sector is markedly weak. All eyes on HSBC result which may indicate some troubles for the bank.
  • Japan (Nikkei) up 60 points but no real momentum on either side. It is more of reversal of Yen carry trade (vs. Aussie dollar and Kiwi dollar) and Dollar carry trade (vs. Euro and GBP). Euro and GBP are weak by almost 1% after their refusal to raise interest rate. We expect the Sell Dollar Buy Euro/GBP may start from early next week due to interest differential.
  • Indian markets closed today. Sentiments still weak but better than 2 previous days. Bank stocks rebounded due to short covering only. Union Bank reported good numbers although the profit rise was less. IOB appears to be doing better with its NPA lower than expected. Best stock is however IDBI followed by Yes Bank and DCB. Still it is not opportune time to get into banking stocks due to their rising cost of funds and increasing NPA from property sector and now, Power sector.
  • ONGC may come out with IPO in July which may do well due to proposed rise in oil prices by the ministry. The oil prices may be raised twice, one now and another a few days before ONGC issue, to make it a success. OMC are therefore the best stocks to get into. Even leading brokers like Nomura have started rating OMC stocks to neutral from negative in the past. Do not read Nomura much – they are mostly wrong.
  • Let us keep our fingers crossed for the final numbers from OMC, rise in oil prices and result of Mahindra Satyam. Except these stocks and Gold/Silver, reduce other position. Anil Ambani stable is very negative. Focus on his Infrastrucure arm due to its strategic position and its media business. Look at Fame India.
  • More on Indian stocks on Monday morning India Time, that is, tomorrow US time.

Currency Market:

  • US$ Index: Rosé above 74.90 just below psychological level of 75.
  • Both Au$ and NZ$ corrected. If USD Index rises above 75, then wait for one or two days to buy these currencies cheaper by 1.5% at least.

Commodity Market

GOLD:

  • Go on buying now. No more comments necessary.

SILVER:

  • Stable with deceptive strength or even weakness. The short interest after being down rosé again but marginally. It may be noted that Silver dropped after reaching 36.53 to 35.05, that is, by $1.50 or 5%. The % fall or rise look bigger due to lower base. If you want to buy, better buy on sudden dips. Major downside is over. Weaker rupee also helps silver prices. Silver would have been down more in rupee terms but for Rupee drop by 1%

Oil prices and Middle East situation:

  • Oil prices may begin to rise from Wednesday in India time. There was no effect on pump prices in USA – it is same as $4.45 per gallon as before despite fall by 9% – there is always lagging effect. However, if the pump prices do not come down, it woud mean that paper prices of oil are not reliable.

Asian Markets today

NIKKEI: up 60 poins HANG SENG INDEX: Again weak. Market closed today SENSEX/NIFTY: Market closed today. REMINDER: Anil Ambani group is extremely weak with RCOM falling below 90s. Since the companies do not become bankrupt like in USA., Indian version like restructing may apply. since power projects are still in slump with gas supply still uncertain, RPOWER too may suffer more. Unless major investor is found for RCOM, it is going to be in serious trouble due to tremendous debt load when the interest rates are rising. Watch NSE report, how many shares are being encumbered for this company

Our Observations and Comments

  • None today

None other than above. We do not see any special situation in the stocks.

Kalidas One Liner

  • None today

Stock Swap: SELL LT to IOC, HPCL, BPCL or MRPL SELL ICICI to IDBI Bank SELL Realty stocks and buy MRPL Mark for BUY – IDBI Bank OVER


Stock Observatory India

Ref: ISO/11/22 of 2011-05-06 (India Time 0930 am)

Due to server problem, today’s issue could be posted only now – at about 2:30 PM India Time

Yesterday’s Events and Effects

  1. Dow lost momentum again in spite of good news on commodity front, but oil stocks were under pressure due to steep fall below $100 in paper trading. Dow was down by 139 points to close at 12,584.
  2. Yet another discncerting news that will draw the Arabs away from US$. Read the Bllomberg reports as under:
  3. The Obama administration said it will permit Libyan rebels to draw on the $33 billion in Libyan assets frozen by U.S., as allied nations opposing Muammar Qaddafi looked for further measures to force him from power.
  4. Secretary of State Hillary Clinton made the announcement at a meeting in Rome yesterday of foreign ministers from NATO and allied nations. The Contact Group on Libya vowed to “intensify the pressure” on the Qaddafi regime, which has continued its attacks on civilian areas such as Misrata in defiance of the UN Security Council and major Western powers
  5. Our Comments: How could US Government could permit the Rebels to have access to the Country (Libya’s) Forex reserve. It is like your bank balances being frozen and given to your neighbours. No sane country will keep its Forex reserve with the United States in future, as such the real demand for US% will continue to go down.
  6. In India, OMC are back in the track. There are rumors flying that Oil Ministry has suggested hiking of Diesel prices by Rs 6/liter, Kerosene by Rs 3/liter and LPG by Rs 50/Cyliner. Since oil prices have since fallen, it is possible that the actual rise may be limited to 75% of proposed rise. It does not change the policy picture that diesel/kerosene/LPG prices are in decontrol mode and only the degree of control may differ.
  7. Chinese government economic team is visiting United States in few days and stated that it will watch closely the Debt limit talks in USA. Indirectly, it is a veiled warning that if the debt limit talks do not progress well, China could turn out to be a big seller of T Bonds.
  8. Silver slumped further due to conspiracy between COMEX, NYMEX, GLOBEX and ICE group, owner of above exchanges. This is perhaps the biggest fraud on investors to the extent of US$ 30 billions in less than 3 days. The short position is reducing suggesting that the short sellers are trying to cover their shorts, but still major weakness remains all through the day where even little strength disappears in short selling. ICE has put out a note to defend its position on margin. They are the main culprit. We are penning the investigative article which may appear after 3 days.
  9. Gold recovered by 1% but Silver still slumped by 3%. It is Silver that will break the back of the COMEX in future. The major buyers are not going to let COMEX off the hook and we may hear soon.

Stocks:

  • Hang Sang was down due to weakest property sales and rising market rates. In other words, while the Central banks are trying to control the interest rates in primary market (their issuance of T bills), the secondary market which is much bigger than primary market suggest that the rates are on rise.
  • Japan (Nikkei) was down strongly by over 150 points mainly due to selling by Japanese funds on margin calls on commodities. They were selling Japanese stocks and meet the margins.
  • Indian markets recovered on 10th day after 9 days of steep losses. Jindal Power postponed the power issue to bad market. They will have trouble in future.
  • Bank stocks though rebounding may not last long. We prefer right now only IDBI Bank, Yes Bank and Development Credit Bank.
  • ONGC may come out with IPO in July which may do well due to proposed rise in oil prices by the ministry.

Currency Market:

No comments today

Commodity Market

GOLD:

  • Go on buying now. No more comments necessary.

SILVER:

  • Still weak. There are some signs of recovery but they are not so strong. If you want to buy physical, then this is the time. This is perhaps best time to accumulate Silver in present 2 days. If you want to buy futures, then buy it in another slide of $1.50 as it is still weak.

Oil prices and Middle East situation:

  • Oil prices drove down on paper. They may rebound soon.

Asian Markets today

NIKKEI: Down over 150 points HANG SENG INDEX: Again weak. This market has lost its upward momentum. SENSEX/NIFTY: Use Index rebound to lighten up on interest rate sensitive stocks such as Banks, finance houses, housing, construction, cements, metals and power companies.   Anil Ambani group is extremely weak with RCOM falling below 90s. Since the companies do not become bankrupt like in USA., Indian version like restructing may apply. since power projects are still in slump with gas supply still uncertain, RPOWER too may suffer more. Unless major investor is found for RCOM, it is going to be in serious trouble due to tremendous debt load when the interest rates are rising. Watch NSE report, how many shares are being encumbered for this company

Our Observations and Comments

We do not see any special situation in the stocks.

Kalidas One Liner

  • Looks like Pranab Mukherji may be on way out in cabinet reshuffle.
  • PC might be called in. PC (Chidambaram) may be asked to take over.
  • Rising star on Indian Corporate scene is Adani groupl. Watch their moves closely. In slumped market this could be a winner.

Stock Swap:

SELL LT to IOC, HPCL, BPCL or MRPL SELL ICICI to IDBI Bank SELL Realty stocks and buy MRPL Mark for BUY – IDBI Bank OVER


Stock Observatory India

Ref: ISO/11/21 of 2011-05-05 (India Time 0930 am)

Yesterday’s Events and Effects

  1. Dow lost momentum and down by 84 points to close at 12,723. The Dow followed our exact prophecy that it will hit 12,835 and then drop. It happened exactly same way. The investors do not see any major sign for recovery except some booby trap like talks from Fed officials, one of whom recently said that US will add job @ 200,000 per month for next 12 months, that is, 2.4 million jobs. Most of the job growth will come from discontinuing the job less allowance after 2 years as prescribed by President Bush.
  2. In India, OMC are back in the track. There are rumors flying that Oil Ministry has suggested hiking of Diesel prices by Rs 6/liter, Kerosene by Rs 3/liter and LPG by Rs 50/Cyliner. In short, diesel prices may rise by 15%, that is, IOC whose diesel sales is about 87% or about Rs 278,000 crores will earn more or lose less by Rs 15% of Rs 278,000 crores or Rs. 42,000 crores or nearly by Rs 171 per share (245 crore shares outstanding). How much it adds to the bottom line will depend on how much they were losing before. This is why we are rating IOC as the best stock for next decade. BPCL will benefit more on gas and petrol prices, whereas HPCL may benefit from gas prices and petrol prices.
  3. RIL may also benefit, so also Petronet and GSPL. Producers like ONGC, CAIRNS and also Essar Oil may benefit on reducing scale. In short, this is the time to go long on oil and gas stocks. Old prices may not return except in sharp meltdown.
  4. Hong Kong stocks are losing force due to weakest property sales and lack of buyers from China. It is almost certain that Hong Kong will have to revisit the peg regime soon and may revise the new peg level at about 20% to 30% from current level, almost on par with Chinese currency
  5. Mexico, Russia and Brazil central banks are adding Gold as alternate reserve asset in place of declining dollar. Their dollar sales is taken up by Japan, India and South Korea judging from the currency movement.
  6. Silver slumped due to conspiracy between COMEX, NYMEX, GLOBEX and ICE group, owner of above exchanges. This is perhaps the biggest fraud on investors to the extent of US$ 15 billions in less than 3 days.
  7. Gold will continue to move higher after recent nominal correction. It is set to our former target of $1685 and Silver should begin to move by today or in 2 days. The pace of fall has slowed down and Open Interest is falling down.
  8. Palladium appear to be the safest metal after Gold. We were right in suggesting switching from Silver to Palladium. Still, Silver will bounce back soon as soon as its technical selling tied to 20% fall from top is worked through. There is nothing in the world that may suggest the wealkening of precious metals for at least next 3 years.
  9. People talking about Soros selling Gold and Silver on his statement that he bought these metals as protection against deflation. While the world over the demand for these metals were to protect against inflation, George Soros invented new theory that he was protecting against deflation. His behaviour and statements for over last 2 years do not make any sense. He is faltering.

Stocks:

  • Hang Sang was down due to weakest property sales and rising market rates. In other words, while the Central banks are trying to control the interest rates in primary market (their issuance of T bills), the secondary market which is much bigger than primary market suggest that the rates are on rise.
  • Japan (Nikkei) rosé due to stronger dollar or weaker yen, same old theme rehearsed for over 16 years without any success. Japanese Robots will never learn that stronger yen is in their interest. They need another disaster, either nuclear of their own or natural.
  • Indian markets are sluggish at the best, if not very weak. It is the worst performing market in Asia. Remember my words, market crash will have epicenter in India
  • RBI – let us write it off for the time being. Subbarao says that rising hurt will not damage GDP – only he knows how?

Currency Market:

  • US$ Index: Rosé above 73. It is still weak and on course to 69 as we projected.
  • NZ$ corrected to 0.79 or about which is the good opportunity to enter.
  • Germany is having very good economy amongst all European nations. the Job less rate dropeed to 19 months low.
  • Surprisingly South Africa has highest job loss growth at 25%. i do not know how come but there is some problem in compilation.

Commodity Market

GOLD:

  • Go on buying now. No more comments necessary.

SILVER:

  • Silver reached our level of $41.35 (currently 41.26), so it is a good entry point. It dropped further to 39.10 level. The test level was 39.87 which is breached but it always happens in overshooting the support or resistance level. We are comfortable to take position at current level. However, in India, OMC are better choice in short term of about 15 to 20 days, By the time you come out of these stocks, you may Silver wagon waiting at the station.
  • Silver was manipulated in massive short selling where COMEX, NYMEX, GLOBEX and ICE group colluded and corroborated with big banks and short sellers to save them from virtual default on COMEX. This was the biggest fraud ever thrust upon the Investors by the Commodity Exchange. The timing of increasing margin was after the close of Asian markets on Saturday and due to holidays ahead, the Silver was shorted on Asian exchanges in 11 minutes to make the investors lose US$ 7 billions. Asian exchanges were used to avoid possible investigation by CFTC in USA. They do not have power to go beyond the shores of the United States. Asians are generally big buyers not sellers, and raising or margin by few thousand dollars do not attract so much of coordinated selling. Just 6000 contracts sale in less than 11 minutes caused the heaviest loss of $ 7 billions (there were more than 150000 contracts outstanding that is, about 750 million ounces of Silver or about US$ 36 billions contract value. Loss of 21% amounts to about $7 billions of losses. If some one sues the above exchange and files class action law suits, there will be huge cry against these manipulative exchanges. These exchanges deliberately increased margin by 13%, in spite of having already increased only a few days ago, and that too after the close of Asian markets and before opening on next working day after holiday. We are writing an article soon to appear on this website.

Oil prices and Middle East situation:

  • Oil prices will continue to go higher in Middle East after two days in lull.
  • People talk about more of Osama rather than Libya and Syria.

Asian Markets today

NIKKEI: Yen higher, Nikkei floating near 10,000. The index is not worth even at 6000. Nikkei long term put option in USA may make more money than any other index options. The reason is that lower index may make money in absolute terms and higher yen will double the gain. HANG SENG INDEX: Buffet want to buy some companies in Hong Kong. He may make money by accident because HK$ peg if breached may make more money for him. However, he wants to go Hong Kong because he feels that downside risk is less due to peg. He is a US$ worshipper. He selects countries that support US$ SENSEX/NIFTY: The market may get some support at 18165 and then rebound some

Our Observations and Comments

  • Bank’s bad debts (NPA) are rising. They will be much more after October (known in Mid November). Bond losses are going to be significant but these are paper losses. Indian Banks do not trade bonds and hold till maturity (HTM). As such, ignore these losses
  • Mundra port might do well due to its parent’s take over of Australian Port operations handling Coal. This is a stock to buy when it drops with the market.

None other than above. We do not see any special situation in the stocks.

Kalidas One Liner

  • nothing today

Kalidas Chopai

Yesterday’s recom continues. PEP = Preferred Entry Point

Stock Indian Oil Corporation (IOC) CMP Rs 344 PEP CMP
It is almost certain that diesel prices might be raised (if not decontrolled) after May 10 by at least Rs 6 to 8 per liter or by 15% to 21%. IOC with turnover of over Rs 320,000 crores has diesel sales pegged to 87% or Rs 278000 crores. 21% rise will make Rs 41000 cr to Rs 58000 cr or EPS will rise by Rs 167 to Rs 236. RBI raised rates by 0.5% only due to inflationary effects of higher diesel prices
Ref. No. 11/KC/10 Date: 2011.05.04 Target (6M) Rs. 600 SENSEX at 18,454

Stock Hindustan Petroleum Corporation ( HPCL) CMP Rs 387 PEP CMP
It is almost certain that diesel, petrol and LPG prices might be raised (if not decontrolled) after May 10 by 10%. HPCL might benefit from higher LPG prices. with Annual turnover of Rs 115,000 crores, and only 35 crore shares outstanding, rise of income or lowering of expense will be Rs 10000 crores or massive Rs 285 per share. This is time to take some position in OMC by at least 20% of intended Q
Ref. No. 11/KC/11 Date: 2011.05.04 Target (6M) Rs. 720 SENSEX at 18,454

Stock Bharat Petroleum Corporation BPCL CMP Rs 638 PEP CMP
It is almost certain that diesel, petrol and LPG prices might be raised (if not decontrolled) after May 10 by 10%. HPCL might benefit from higher LPG prices. with Annual turnover of Rs 120,000 crores, the potential earnings could rise by 12000 crores. with 36 crore shares outstanding, the EPS could rise by Rs 333. Not all will add to bottom line but the losses will be reduced too.
Ref. No. 11/KC/12 Date: 2011.05.04 Target (6M) Rs. 935 SENSEX at 18,454

Stock Mangalore Refinery & Petrochemical CMP Rs 71 PEP CMP
It is almost certain that diesel, petrol and LPG prices might be raised (if not decontrolled) after May 10 by 10%. HPCL might benefit from higher LPG prices. With turnover of Rs 38000 crores, the earnings will rise by 3800 crores or Rs 22 per share. This is extremely good stock to buy. Further, the company will be marketing Oil products from June 2011 which are not subject to price control
Ref. No. 11/KC/13 Date: 2011.05.04 Target (6M) Rs. 131 SENSEX at 18,454

Stock Swap: SELL LT to IOC, HPCL, BPCL or MRPL SELL Realty stocks and buy MRPL SELL Banking Stocks and Buy ONGC Mark for BUY – IDBI Bank OVER


Stock Observatory India

Ref: ISO/11/20 of 2011-05-04 (India Time 10:30 am)

Yesterday’s Events and Effects

  1. Dow was almost flat. Dollar rosé slightly in paper trades. Nothing significant news
  2. Osama Bin Laden was reportedly buried in the sea without any reasonable evidence. It appears that US might have faced demand to return the body to his disciples. To avoid such demand, it appears to be stated that the body was cremated as per Islamic rights. The dead body might have also invited violence at different places.
  3. It is said that Osama was killed by the US Seal but the name of the officer shooting the Osama was not disclosed. Some sources report that the Osama might have been shot by his own guard if he was very close to capture as per his directions. Now they say that he was shot twice, one in his left eye and another in his head. It is likely that another bullet was pumped into his left eye after he was shot dead by his guards who were also killed in the operation. In any case, the end of OBL will be relief to many western powers.
  4. Wall Street reports that almost 800 million Swiss Francs of Gadaffi/Libya were frozen by the Swiss government. It is also reported that almost $30 billion of Libya/Gadaffi lying in United States were frozen by US government. With these actions the ME governments including Iran will not be willing to park their money in USA, UK and Switzerland (Euro is excepted). There is also possibility that Swiss governments, who is lax in security in peaceful country such as Switzerland, might invite reprisal from Libya who has already avowed to take revenge. They are not goint to forego nearly $ 1 Billion equivalent to Switzerland. Read our article Mind Your Own Business, where it is clearly mentioned the negative effect of such freezing of forex reserve by Western powers on their currencies.

Stocks:

  • Hang Sang was down due to hawkish actions of Chinese government to raise Bank Reserve Ratio that might tighten the credit. Hong Kong is not affected directly but the actions in China hurting its properties might have negative effect on Hong Kong developers who own substantial projects half of them nearly empty.
  • Japan (Nikkei) rosé due to stronger dollar or weaker yen, same old theme rehearsed for over 16 years without any success. Japanese Robots will never learn that stronger yen is in their interest. They need another disaster, either nuclear of their own or natural.
  • Indian market might rebound a bit due to weaker rupee benefiting software sector but might slide again. India is on way to go down to 14000 or even 12000 within 6 months. More interest rate rise will strongly impact the GDP which is now estimated at 8% (reduced from 9%) but may slide to 3% within 6 months. In short, the Indian growth story is getting disowned day by day. GDP will be lowest in Mid November (October numbers) and banks profitability sliding down at fastest pace. Avoid bank stocks.
  • RBI stance to raise rates by 0.5% and at the same time with market tanking 465 points without hurting OMC stocks suggest that Government of India has finally decided to raise the diesel, Petrol and LPG prices after May 10 election is over. It could be the reason for delaying the OMC annual results. IOC is having turnover of Rs 320,000 crores of which 87% is diesel. that is, almost 275,000 crores. If diesel prices are raised by Rs 8 per liter against current price of Rs 38/liter (may vary from state to state), it means that its losses will be reduced or profits raised by 21% (Rs 8/38= 21%) or by massive Rs 58,464 crores or Rs 233 per share. I would take a chance and add more of IOC, HPCL, BPCL, MRPL and ONGC. Also, the share price of Cairns will also benefit. Private refiners like RIL, Essar Oil will also benefit. But the main beneficiaries will be state owned oil sectors.

Currency Market:

  • US$ Index: Rosé above 73. Since it is beginning of the month, there may be derivative boost to the dollar which may cause some weakness in gold and silver. The surpprising thing is that there is no follow up rally in dollar because of very poor fundamentals. We have to wait for one more day for confirmation of short term trend. At the moment, it may appear to be good trading sell of foreign currencies.
  • If some one wants to buy non-dollar currency, they may wait for two or more days (until Friday morning time in India (Thursday US evening time).

Commodity Market

GOLD:

  • Only yesterday we suggested buying gold at $1535 if it touches. It did and then rebounded. Gold is relatively firm due to some oil related settlement. I guess it is Libya and Iran. They can not be tracked. Gold at about $1536 level in spite of stronger dollar on paper. Buy it now. Our target remain same at $1685 within 2 months.

SILVER:

  • Silver reached our level of $41.35 (currently 41.26), so it is a good entry point. In spite of volatility, it is the opportunity to make good money since the risk is reduced by almost 20% from near top last week. The short interest also came down by 2000 to 4000 contracts suggesting that the selling is almost done. Next leg will be up. There may be attempt to push it down to 39.87 level to spread the news that Silver might be entering into “bear territory” having been down 20% from top of 49.84. We think that it is time to position in Silver now. We withdraw our SELL call on Silver with immediate effect
  • Silver was manipulated in massive short selling where COMEX, NYMEX, GLOBEX and ICE group colluded and corroborated with big banks and short sellers to save them from virtual default on COMEX. This was the biggest fraud ever thrust upon the Investors by the Commodity Exchange. The timing of increasing margin was after the close of Asian markets on Saturday and due to holidays ahead, the Silver was shorted on Asian exchanges in 11 minutes to make the investors lose US$ 7 billions. Asian exchanges were used to avoid possible investigation by CFTC in USA. They do not have power to go beyond the shores of the United States. Asians are generally big buyers not sellers, and raising or margin by few thousand dollars do not attract so much of coordinated selling. Just 6000 contracts sale in less than 11 minutes caused the heaviest loss of $ 7 billions (there were more than 150000 contracts outstanding that is, about 750 million ounces of Silver or about US$ 36 billions contract value. Loss of 21% amounts to about $7 billions of losses. If some one sues the above exchange and files class action law suits, there will be huge cry against these manipulative exchanges. These exchanges deliberately increased margin by 13%, in spite of having already increased only a few days ago, and that too after the close of Asian markets and before opening on next working day after holiday. We are writing an article soon to appear on this website.
  • Nothing else is special.

Oil prices and Middle East situation:

  • Oil prices will continue to go higher in Middle East after two days in lull.
  • Libya affair is now more dangerous than ever before. Expect anything in revenge. Libya is the most explosive situation in Middle East today. Always read what Libya is doing.

Asian Markets today

NIKKEI: Yen higher, Nikkei surprisingly higher by 157 points HANG SENG INDEX, Falling due to news of Chinese tightening of credit soon. SENSEX/NIFTY: May rebound from yesterday’s fall but may not sustain. Some FII will take negative view on SENSEX within 2 working days to become seller rather than buyer. Watch Indian ADRs every day for direction. Weak rupee may help textile/apparel exporters and some software companies.

Our Observations and Comments

  • InfoSys will be headed by Kamath of ICICI Bank. Bad omen for InfoSys. Get out
  • Bank’s bad debts (NPA) are rising. They will be much more after October (known in Mid November). Bond losses are going to be significant but these are paper losses. Indian Banks do not trade bonds and hold till maturity (HTM). As such, ignore these losses
  • Sugar is becoming dearer in United States but there are import restrictions. India is surplus in Sugar so the active Sugar exporters may do well.
  • All depends on when POSCO and BP will send $ 20 billion to India (to convert into Indian Rupees).
  • Mundra port might do well due to its parent’s take over of Australian Port operations handling Coal. This is a stock to buy when it drops with the market.
  • Government and Reliance are at loogerhead. Government wants RIL to boost the gas output whereas RIL says nothing. Government is finding fault in RIL for not boosting production and even asking it to dig two abandoned well. This is the reason for RIL weakness. The real reason is that RIL does not want to give gas to his sibling Anil whose power plants are getting ready but without any gas to feed. He will be killed by higher interest costs if he does not start the plants in time.
  • POSCO project is cleared after 5 years delay. More dollar inflow means stronger rupee the months ahead.
  • Higher oil prices and lower rupee makes the subsidy untenable.

None other than above. We do not see any special situation in the stocks.

Kalidas One Liner

  • nothing today

Kalidas Chopai

PEP = Preferred Entry Point

Stock Indian Oil Corporation (IOC) CMP Rs 344 PEP CMP
It is almost certain that diesel prices might be raised (if not decontrolled) after May 10 by at least Rs 6 to 8 per liter or by 15% to 21%. IOC with turnover of over Rs 320,000 crores has diesel sales pegged to 87% or Rs 278000 crores. 21% rise will make Rs 41000 cr to Rs 58000 cr or EPS will rise by Rs 167 to Rs 236. RBI raised rates by 0.5% only due to inflationary effects of higher diesel prices
Ref. No. 11/KC/10 Date: 2011.05.04 Target (6M) Rs. 600 SENSEX at 18,454

Stock Hindustan Petroleum Corp ( HPCL) CMP Rs 387 PEP CMP
It is almost certain that diesel, petrol and LPG prices might be raised (if not decontrolled) after May 10 by 10%. HPCL might benefit from higher LPG prices. with Annual turnover of Rs 115,000 crores, and only 35 crore shares outstanding, rise of income or lowering of expense will be Rs 10000 crores or massive Rs 285 per share. This is time to take some position in OMC by at least 20% of intended Q
Ref. No. 11/KC/11 Date: 2011.05.04 Target (6M) Rs. 720 SENSEX at 18,454

Stock Bharat Petroleum Corporation BPCL CMP Rs 638 PEP CMP
It is almost certain that diesel, petrol and LPG prices might be raised (if not decontrolled) after May 10 by 10%. HPCL might benefit from higher LPG prices. with Annual turnover of Rs 120,000 crores, the potential earnings could rise by 12000 crores. with 36 crore shares outstanding, the EPS could rise by Rs 333. Not all will add to bottom line but the losses will be reduced too.
Ref. No. 11/KC/12 Date: 2011.05.04 Target (6M) Rs. 935 SENSEX at 18,454

Stock Mangalore Refinery & PetroCh (MRPL) CMP Rs 71 PEP CMP
It is almost certain that diesel, petrol and LPG prices might be raised (if not decontrolled) after May 10 by 10%. HPCL might benefit from higher LPG prices. With turnover of Rs 38000 crores, the earnings will rise by 3800 crores or Rs 22 per share. This is extremely good stock to buy. Further, the company will be marketing Oil products from June 2011 which are not subject to price control
Ref. No. 11/KC/13 Date: 2011.05.04 Target (6M) Rs. 131 SENSEX at 18,454

Stock Swap: SELL LT to IOC, HPCL, BPCL or MRPL SELL Realty stocks and buy MRPL SELL Banking Stocks and Buy ONGC OVER


Stock Observatory India

Ref: ISO/11/19 of 2011-05-03 (India Time 07:05 am)

Yesterday’s Events and Effects

  1. Dow ignored the death of Osama Bin Laden as non financial event. Gold after initial sell off recovered from $1535 – which used to be our limit buy level.
  2. NATO killed Gadaffi’s son and three grand children in drone attack. Gadaffi took a vow to take the revenge. Expect ME crisis to worsen and oil price rise by at least $15 in next 10 days (except Tuesday (US time) or Wednesday (India Time) when it may correct for short time)
  3. Gadaffi is a Muslim and he can not forget the death of his blood – younger son and three grandchildren. There could be venomous attack by Libya in defiance of all civilian norms. He will feel that if NATO does not follow any norm, why should he. I expect some major attack on civilian targets soon.
  4. Dow retreated after hitting 12,835 figure as suggested by us two days ago. There was no patriotic rally after killing Bin Laden.

Stocks:

  • Inflation numbers are high that forces RBI to rethink on interest rates. It appears that Governor Subba Rao has thrown in the towel to fight the inflation and now publicly laments and prods for policy inititative, that is, he expects the Government of India to use policy measures as monetary measures have not yet succeeded. Let us see what GOI comes up with. Two PM will consult each other now.
  • The banks like HSBC expects 0.5% rise in interest rates which will push the bank stocks, developers, infrastructure and high capital sensitive stocks to correct sharply. The builders like HCC are nearly bankrupt having one of the most leveraged balance sheets.
  • HSBC also expects Government permission to IOC to raise the diesel prices after May 10 when the state elections will be nearly over. IOC result may be announced later (may be in third week after diesel price rise even if it is limited rise)
  • In all, disposable income of MIG (Middle Income Group) may decline significantly. May is the hottest month when the vegetables are scarce and constliest.
  • Subba Rao compares India’s inflation with United States without realizing that both have different components. He is mixing apple with oranges and this is why he is making errors. In USA they deliberately use Core and Non Core inflation (excluding violent food and energy prices)

Currency Market:

  • US$ Index: Rosé above 73. Since it is beginning of the month, there may be derivative boost to the dollar which may cause some weakness in gold and silver. The surpprising thing is that there is no follow up rally in dollar because of very poor fundamentals. We have to wait for one more day for confirmation of short term trend. At the moment, it may appear to be good trading sell of foreign currencies.
  • If some one wants to buy non-dollar currency, they may wait for two or more days (until Friday morning time in India (Thursday US evening time).

Commodity Market

GOLD:

  • Only yesterday we suggested buying gold at $1535 if it touches. It did and then rebounded. Gold is relatively firm due to some oil related settlement. I guess it is Libya and Iran. They can not be tracked. Gold rebounded to $1543 but it is not well up enough and thefefore vulnerable for a day or two.

SILVER:

  • Swap is going on from Silver to Gold due to higher margin requirements of Silver. During Asian trading in morning thin hours the US operators banged down the Silver by massive 13% in less than 11 minutes in very small volume when the traders were barely in office.
  • Dow Jones reports the following:

“Two weeks of gains in the silver market were erased in 11 minutes as investors sought to avoid higher trading costs and cash out of a historic rally.

Silver prices tumbled 12% shortly after electronic trading opened in Asia for the week — around 6 p.m. EDT on Sunday — in a swift and violent cascade. Prices recouped some of the losses over the course of the trading session, but the most-active July silver futures contract closed down 5.2% at $46.084 a troy ounce on the Comex division of the New York Mercantile Exchange. After prices had settled for the day, silver futures staged another sharp drop in electronic trading.

Traders said the declines were triggered after Nymex raised its trading-deposit requirements, known as margins, over the weekend. To trade silver futures, investors typically pay only the margins, which cost a fraction of a contract’s full value of around $230,000.

CME Group Inc. (CME), which operates the Nymex, had raised its margin requirement for speculative traders twice last week due to high volatility. These investors must now put up $14,513 per contract for a day trade, and a further $10,750 to keep that contract overnight. Both requirements are up 24% from a week ago. For investors holding hundreds of contracts, that’s a difference of hundreds of thousands of dollars. “

At the time of writing, Silver traded near day high but short interest has risen by another 4000 contracts suggesting that the short sellers are still active and wants to push down the price after sucker rally on upside. They are using $46.35 level to go short again, and this time it does look that Silver may test recent low again. As such, take rally to offload and buy only in correction. Silver should rebound from Wednesday US time or after the close of markets in Asia.

  • Nothing else is special.

Oil prices and Middle East situation:

  • Oil prices will continue to go higher in Middle East after two days in lull.
  • Libya affair is now more dangerous than ever before. Expect anything in revenge. Libya is the most explosive situation in Middle East today. Always read what Libya is doing.

Asian Markets today

NIKKEI: Yen higher, so expect some drop in Nikkei HANG SENG INDEX, Nthing special SENSEX/NIFTY: We understand that RBI policy on rates may be announced on Tuesday. If the rates raised are 0.5% against 0.25%, the market may see large fall. Indian market is fully priced now but we are waiting for our favorite counters to report numbers.

Our Observations and Comments

  • Watch out for TVS Motor. Any fall is a good entry point. Its Indonesian business is also doing well.
  • InfoSys will be headed by Kamath of ICICI Bank. Bad omen for InfoSys. Get out
  • Bank’s bad debts (NPA) are rising. They will be much more after October (known in Mid November). Bond losses are going to be significant but these are paper losses. Indian Banks do not trade bonds and hold till maturity (HTM). As such, ignore these losses
  • Sugar is becoming dearer in United States but there are import restrictions. India is surplus in Sugar so the active Sugar exporters may do well.
  • Rupee is still weaker – due to perhaps political pressures from Ministers who have parked their black money overseas. They are seeing losing value having sent at 47/48 and getting now only 44.30 or about.
  • All depends on when BP will send $7.6 billions to Reliance and whether RIL will keep the money overseas or bring back to India (to convert into Indian Rupees). It will have to do the conversion because it has to issue 30% stake to the BP
  • SAIL reported lower result – surprising. But this is the stock to own later, not now.
  • Many are asking us about TITAN trading at almost 40 times PE or more. It announced bonus and also split to make it more attractive to retail investors who go by hypes. It is 100% guaranteed to lose money at this level. Its Jewellery division may be doing well but the profit margin is very thin in this business.
  • Government and Reliance are at loggerhead. Government wants RIL to boost the gas output whereas RIL says nothing. Government is finding fault in RIL for not boosting production and even asking it to dig two abandoned well. This is the reason for RIL weakness. The real reason is that RIL does not want to give gas to his sibling Anil whose power plants are getting ready but without any gas to feed. He will be killed by higher interest costs if he does not start the plants in time.
  • POSCO project is cleared after 5 years delay. More dollar inflow means stronger rupee the months ahead.
  • Higher oil prices and lower rupee makes the subsidy untenable. I do not know why the OMC are listening to the Government. Under the Constitution of India, Article 19, they have authority to do business in free manner. Further, it is the responsibility of the OMC management to respect the rights of minority shareholders and follow proper policy. Government of India DOES NOT have legal rights to dictate price control policy. It can not have a public listed company and at the same time operate it as though it is 100% owned PSU.

None other than above. We do not see any special situation in the stocks.

Kalidas One Liner

  • nothing today

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
NOTHING TODAY.
Ref. No. 11/KC/10 Date: 2011.04.30 Target (6M) Rs. SENSEX at

Stock Swap: None OVER


Stock Observatory India

Ref: ISO/11/18 of 2011-05-02 (India Time 06:30 am) – Markets Closed

Yesterday’s Events and Effects

  1. Major news is that Osama Bin Laden is dead. except for being confidence booster it is a non event. Dangerous event was in Libya
  2. NATO killed Gadaffi’s son and three grand children in drone attack. Gadaffi took a vow to take the revenge. Expect ME crisis to worsen and oil price rise by at least $15 in next 10 days (except tomorrow when it may correct for short time)
  3. Gadaffi is a Muslim and he can not forget the death of his blood – younger son and three grandchildren. There could be venomous attack by Libya in defiance of all civilian norms. He will feel that if NATO does not follow any norm, why should he. I expect some major attack on civilian targets soon.

Stocks:

  • In anticipation of good market in USA, the Indian market may rise strongly as the day progresses.
  • no other remarks today

Currency Market:

  • US$ Index: Rosé above 73. However, the delivery deadline on April expiration might result in Euro ending on stronger note. EURO and GBP may perform better for next 2 days and afterwards they may correct in favor of gold and silver.
  • Commodity Market

GOLD:

  • Went higher to $1573 before it corrected due to political news of Bin Laden being dead. It is a political event which will take back seat from Wednesday. We do not see much weakness in gold which may test the level of $1535 tomrrow, but be a buyer now.

SILVER:

  • We mentioned only other day as under:

“Silver is shown at $48.60 but real close was $47.80. It appears that higher close shown is to entice the people to buy Silver at higher level (so that short sellers can sell short) and then bring it down. In all probability, Silver may come down on Monday upto $46 or thereabout which will be a good opportunity to buy. In India, there might be intraday correction to Rs 67,000 to 68,000 intra day only.”

  • Silver dropped by massive amount – 13% in a few minutes. The fall was more than expected but only in very small volume. In India, it dropped 19% or over Rs 7000 per kg to 63,000 and then rebounded.
  • The margin on Silver was again increased at COMEX. It appears that it was aimed to reduce the price of silver as the situation was getting almost near default at COMEX which it wanted to avoid.
  • The news of Osama Bin Laden also helped. USD also gained over 73 and may gain more tomorrow when US market opens. Dow may gain 200 to 400 points suddenly due to phsychological mood. Good feeling rally but then it will fall again
  • Euro and GBP gained because of FOREX expiry was over and there was physical delivery for dollar index bought who have to deliver foreign currency mainly Euro and GBP
  • Silver will begin to go higher from Wednesday afternoon in India. It may drop again to Rs 63,000 in India and then rebound. In US$ terms be a buyer at about $41.35 which may be tested intraday low. ISilver shares is going to make placement of $2 billions soon so there will be demand for physical delivery of 50 Milln ounces in the market. I would therefore use any major weakness to entre the position.

Oil prices and Middle East situation:

  • Oil prices will continue to go higher in Middle East but in US it may drop sharply due to “feel good” factor.
  • Libya affair is now more dangerous than ever before. Expect anything in revenge.

Asian Markets today

Closed today due to Saturday. Except Japan NIKKEI: at 9849 (+157 points) HANG SENG INDEX, Hong Kong: Closed today SENSEX/NIFTY: Closed today. Monday may open higher due to muhurut trading for May.

Our Observations and Comments

  • Income Tax departments have no other work but to harass the tax payers. It has decided to run after HNI (High Net Worth Individuals) for payment of Wealth Tax which is nothing but a form of “double taxation”. When the wealth is accumulated after payment of Income Tax, why should it be taxed again. Wealth Tax should be abolished.
  • IT department wants to chase all people who have wealth in excess of Rs 30 lakhs. In good city and locale, even the toilet cost over Rs 50 lakhs. When one is pissing, he feel like wetting Rs 50 lakhs. Even Pranab Mujkherji and Manmohan Singh have gone crazy.

Kalidas One Liner

  • nothing today

Kalidas Chopai

PEP = Preferred Entry Point

Stock CMP Rs PEP CMP
NOTHING TODAY.
Ref. No. 11/KC/10 Date: 2011.04.30 Target (6M) Rs. SENSEX at

Stock Swap: None OVER

 Posted by at 12:58 pm

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