M&M to buy Italian Car design firm that designed cars for Ferrari and Rolls Royce

M&M, Indian automaker is in talks to buy Italian car design firm Pininfarina S.p.A. Customers for the design company include notable names like

• Ferrari
• Alfa Romeo
• Peugeot
• Fiat
• Lancia
• Maserati
• Hyundai
• GM

The company's net income in the year 2012 is 32.9 Million Euros. The latest designs of the company include

• 2008 Maserati GranTurismo
• 2008 Ferrari California
• 2009 Ferrari 458 Italia
• 2011 Ferrari FF
• 2012 Ferrari F12 Berlinetta
• 2014 Ferrari California T

M&M's stock ended up today by 1.3% in NSE and closed at 1208. Pininfarina S.p.A.'s stock was up by 10% Wednesday. In the year 2011, M&M acquired Ssangyong Motor Co. 

Asian Markets Now

Kospi up 1.8%

 Shanghai up 1.3%

 Nikkei up 1.2%

Sensex up 1%

ASX up 0.8% at close

Taiex up 0.4%

HK up 0.3%

Should you invest in Stocks or Real Estate?

We are sure, when it comes to investments; people always prefer real estate to stocks. One reason, people think real-estate returns are far better when compared to stocks. Another reason, you own an asset which you can visit, show off to your family and friends. If it is a house or flat, it is a matter of pride. 

            But whether real-estate investments are fool-proof and safe? Or at least they are less riskier than stocks? Does it mean, risk averse investors prefer real-estate investments and risk lovers go for stocks? We are sure; you would have seen a friend or a relative visiting the court for a property dispute. The disputes would be less or almost nil when you buy a flat from a reputed builder. Again, how much you end up paying as interest for the loan is a big question. Here is what Albert Einstein says about compound interest, "Compound interest is the eighth wonder of the world. He, who understands it, earns it ... he who doesn't ... pays it." 

          So people who are paying interest are the ones that are paying it. And who earns it? People who invest in equity related schemes or in any real estate property with their own money earns it. But can we buy a real estate property by paying upfront the total money? No, most of us cannot. But can we buy stocks with few thousands? Yes, we can. 

Disadvantages of investing in stocks

·        Huge Volatility

·        Intangible

Disadvantages of investing in real estate

·        High transaction costs and commissions

·        Huge margin required

·        Returns are lesser than stock investments

·        Cannot diversify with limited funds

·        Chances of litigation are more

·      Maintenance costs like fencing if it is a plot, Renovation, painting, landscaping if it is a flat

·        Have to pay property tax

·        You end up paying twice the amount of the property if you take a loan

Let us see the advantages of owning a stock

·        Liquid

·        Better return than Real Estate

·        Low Transaction Costs

·        More variety (diversification)

·        Less investment required to own

·     Long term (anything more than a year) capital gains tax is zero (Meaning, just hold any stock more than a year, your capital gains tax is zero

·        Chances of litigation are less

Let us see the advantages of investing in real estate

·        Tangible

·        Interest payment can be deducted from taxable income

·        Less volatile

Seems like it is more advantageous to invest in stocks than in real-estate, isn’t it?  Here is what Samuel Langhorne Clemens aka Mark Twain has to say about real-estate investment, “Buy land, they’re not making it anymore.”

So is this the logic for people to invest in properties than into stocks? Well, let us dig deeper to find whether investing in real estate or stock yields a better return. 

Check out this graph (Historical returns of S&P 500 index versus Housing Price Index)

Image Source

This chart doesn’t include the dividends you could make by investing in stocks. If that is included, then the returns from stocks could be even more. And if you take a loan for your real-estate investment, you could probably end up paying more as way of interest.

Mumbai is the hot real-estate market in India. Mumbai cannot expand unlike Bangalore as it is an Island. Poor souls, they have to reclaim the sea to expand the city. Whereas a city like Bangalore is expanding in all directions. A standup Comic friend of us once joked,” Bangalore’s new airport is in Hyderabad.” In the year 1980, a sq.ft of land in the Dalal Street area of Mumbai was selling at INR 100 and it sells around INR 27000 today. That works out to an annualized return of 20.51% over 35 years. Similarly a property purchased in Carter Road in Mumbai in 1970s would have given an annualized return of 19% over 45 years.

Had you invested in Sensex when it was trading at 100 in 1979, you would have made an annualized return of 17% (today Sensex is trading at 29000). You must be smart; you noticed that the returns from Sensex was lesser than the real estate investment examples we discussed. Add another 1.5%  as dividend yield for Sensex, it would now match the returns on these prime properties.

Points to ponder

Many stocks that form a part of the index (Sensex) have given an annualized return of more than 30% since they got listed. If you invest wisely, you can expect an annualized return of more than 20% from stocks.

These prime properties are not for the regular Joes like us. We cannot afford to own a piece of land in those areas (Disclaimer – “We” refers to the Middle class and the lower middle class). But can we own a piece of Sensex for few thousand rupees? Welcome to the world of Bulls and Bears where every day is an exciting one! 

Dow Jones Sell call update

Dow Jones is now trading at 16197. Profit of 177 points. Kindly bring the SL to cost price (16374) and book partial profits 

Call - Sell Dow Jones(Spot) at 16374. SL 16455. Target would be communicated later (Positional Call). CMP 16362 (Given on Friday, 28th February 2014)


Click the link to see the call, https://www.facebook.com/compulsivetrader/posts/777802698898034?stream_ref=10

SGX Nifty

SGX Nifty trading at 6250 at 7 AM IST (Down by 27 points)


https://www.facebook.com/compulsivetrader 

Important events to watch out for Tomorrow.

Indian markets ended up on a positive note last week. Nifty posted gains of 1.97 percentage and closed at 6276. The GDP data and the fiscal deficit data announced after the market hours were not supportive. GDP growth for the December quarter came at 4.7 percentage which was below the expectation. Meanwhile, the fiscal deficit exceeded the annual target of 86 Billion USD in just 10 months.

Auto numbers were not that great though the excise duty was cut. HSBC Manufacturing PMI for India would be released tomorrow. Expectation is 51.2 Vs 51.4

After five consecutive days of up move in the Indian markets, I expect the markets to correct a bit. Be careful with the high beta stocks that had run up in the last five days like Axis bank.  



Our Dow Jones call (Short Sell) given on Friday got triggered. https://www.facebook.com/compulsivetrader/posts/777802698898034?stream_ref=10

Expect Dow Jones to correct and trail your SL for wind-fall profits. Russia's provocations in Ukraine might bring the bears back into action. Have a tight SL in all your trades on the long side.


Events to Watch

HSBC Manufacturing PMI for India
Spanish Manufacturing PMI
Italian Manufacturing PMI
Hong Kong Retail Sales (YoY)
French manufacturing PMI
German manufacturing PMI
Singapore PMI
US Manufacturing PMI
US Core PCE Price Index(MoM)
US Personal Spending
US ISM Manufacturing PMI


For LIVE market calls, visit https://www.facebook.com/compulsivetrader

INFY and the present Economic Scenario.

INFY
INFOSYS' results were out yesterday and the stock crashed by around 20%, biggest intra-day fall in a decade. INFY has around 7.6 %( Source- www.nseindia.com, March 28th 2013) weightage in Nifty, it pulled the Sensex down by 300 points and Nifty down by 65 points. ITC which has a 9.29% weightage in Nifty was up by 3.5%, else the indices would have fallen further. Falling topline growth, billing pressures, margin erosion are the reasons for this dismal performance. But the fall to the tune of 20% is not expected out of INFY as the stock positively surprised everyone in the previous quarter. This suggests that the kind of growth in the previous quarter is not sustainable. In the year 2011, one of my friend who happens to be a big-time trader (He holds several degrees in finance and worked for few pink papers and business channels) in the Stock Markets told me, if a company shows more ‘other income’ than the previous quarter/year and if they still cannot beat the estimates or show better results, the stock should be dumped. Incidentally the other income of INFY is higher and still they cannot meet the estimated growth. No EPS guidance from a company like INFY is another shocker. Investors, traders, analysts are looking out for the guidance from the other IT majors especially TCS to see whether this dismal growth is sector specific or company specific. The less aggressive top management is another reason to blame for the poor performance. INFY no longer has the first mover advantage as companies like Wipro, TCS, IBM, Accenture, HCL Tech., have started pricing their projects aggressively. It lost out to HCL when it planned to acquire Axon Technologies few years back. Not only Axon, INFY lost few other bids in its plan to acquire other companies. With double digit inflation in India, freezing salary hike last year played havoc and when the attrition started increasing they had to change their policy. The global economic scenario is not favorable either. With the Eurozone reeling under crisis and the less spending of companies both from Eurozone and US had taken a toll in the Indian IT sector.


Gold
In India, the total Gold import per year is around 820 tons. For the year 2012, it was around 860 tons. This doesn't include the smuggled Gold into the nation. In the budget, traders and analysts expected the Government to hike the import duty on Gold but Gold was spared. If the current account deficit is uncontrollable the Government may impose more duty on Gold imports. Gold imports are a major contributor to the current account deficit. One troy ounce (1 Troy Ounce= 31.1034768 grams) of Gold in the International Market is trading around 1550$ and is expected to decline to 1400$. If the Gold imports are lesser this fiscal, this would help the Rupee to appreciate against the US dollar and help narrow the current account deficit too. As the demand from India and the demand from Eurozone has been declining it is highly likely that one Troy of ounce of Gold may hit 1400$ soon.

Rupee
FIIs (Foreign Institutional Investors) have invested around 26 Billion Dollars in the Indian Stock Markets and they were selling in India and were moving the money to Japan and the USA. Meanwhile US stock markets are trading near life time highs and the Government is presently purchasing bonds worth 80 Billion Dollars every month. This releases huge cash into the economy through the banks and they may soon stop this Quantitative easing. The Yen carry trades which is not attractive in the recent past may become attractive again as the BoJ (Bank of Japan) has started easing the monetary policy. This has attracted more money into the Japanese markets. As the Yen declines, it is good for the exporters. In India, meanwhile the Rupee declined in the year 2012 and it was the third worst performing currency in Asia. It had hit a low of 57.32 per dollar in the month of June 2012. Indian Government under the new Finance Minister has recently liberalized the foreign investments in the Indian G-Secs and Corporate bonds (Source- Ministry of Finance). This would encourage the capital inflow in to the country and eventually Rupee would appreciate against the US dollar. Allowing FDI is another important policy measure which will have a huge impact in the economy and on the Rupee in the medium to long term. The Government which was earlier blamed for having a policy paralysis seems to have finally woken up. Few foreign carriers are already in discussions with Indian airliners after the FDI norms in aviation were relaxed.

Some analysts whom I spoke to believe that Indian Rupee may reach 59 to a US dollar by year end. I beg to differ from their views. I feel we would be trading at Rs.50 or even less to a dollar by year end. If INFY posts a decline in net profit and shocking revenue guidance when the Rupee is reeling around 55 levels against US dollar, I am sure INFY and the other IT companies will struggle if the Rupee appreciates against the US dollar. The pressure to retain talent and YoY salary hikes to match the inflationary figures are going to be tough. When a company advises the investors about growing at 1.5% QoQ, I wonder what would run in the minds of the employees. Forget about double digit salary hike YoY, would they even be enojoying the current benifits or will they lose the battle to the demon called "Cost cutting". Though the present situation is grim,analysts expect the company to surprise the markets positively like it did in the previous quarter if the circumstances are favorable again.

GDP, Unemployment and Okun's law

Is there a relation between GDP and unemployment?. I hope most of you are working with an established corporate unlike me who always chooses the path less taken. Jokes apart, the job market across the World is not so good. Hope you heard about Boeing's plans to layoff 800 Commercial Jet workers and few companies in India related to the Automobile Industry have reduced the working days to cut the production. And for the first time since its launch in 2004, Maruti Swift which used to have a waiting period of 3 months - 6 months is available off the shelf and with a hefty discount too. And most of the companies are talking about lay-offs and production cuts. Employees are asked to take a cut in the salary or asked to have paid holidays (only half the salary will be paid in this period).

The picture is not rosy. But is this only for the manufacturing or for the Auto sector? No. If you remember a week back, candidates who got campus offers from HCL Technologies were protesting outside the company's offices across India as they have not received any announcement on the formal joining dates. These guys have passed out in 2012 and the next batch will be out in a month or so. A cousin brother of mine says, "Bro, I should have opted for Mechanical Engineering like you. I made a mistake by choosing Computers. I cannot fit into any industry wherein Mechanical engineers are being inducted in IT too." But when the economy is not doing well, it is not about IT or manufacturing, every sector will not do well. It is always the other way round, when most of the sectors are not doing well, the economy in turn will not do well. The Indian IT industry grew so well in a short span of time as it was fueled by cheap availability of skilled labour. But, this is not an advantage anymore as the labour is not cheaply available. In any Indian IT company about 30% of employees would be on bench at any given point of time. TCS has more employee utilization (72%) compared to the other companies. They plan to increase the employee utilization by few percentage. INFOSYS on the other hand hired 80% less employees in the December quarter compared to the previous quarter. The percentage of campus recruitment is very low for all the companies in the Indian IT sector. Before writing this article, I thought of talking to a friend who is working with the IT industry. He is a Senior Manager with a foreign Bank. He is with the software division of the Bank. I called him to ask about the situation in the IT industry. The irony is he has to sack 30 employees by this weekend. The total employee count in his division is 120. And that is 25%. The situation is grim.

Mushrooming engineering colleges led to a minimum of one engineer for every family or in other words, every family (Middle class) has one guy studying in an engineering college at a given point of time hoping to be hired by an IT company. Do not know, whether our economy can afford to employ all these people who pass out of these colleges. The quality of education is at a historical low. Large number of freshers sans quality will make our country a Banana Republic. Be prepared for more protests by students, unemployed youths, law and order issues. If you're a street smart entrepreneur, I am sure, now you would be thinking of ideas to encash this wonderful opportunity. If you have got one, kindly buzz me, I have got few up my sleeve too.

Now to the analysis part, is there a relation between unemployment and GDP? Yes, there exists a relationship. Okun's law or "Okun's rule of thumb" says there exists an relationship between GDP and Unemployment. Before getting into the law, let me tell you where we stand as a country in GDP. The GDP forecast of our country has been reduced to 5% from the earlier 8.5%. This amounts to a 40% reduction. Now let us get back to Okun's law. No point in making Arthur Melvin Okun wait. What the law states is, for every additional 1% increase in unemployment a country's GDP will fall by 2% compared to the potential GDP. If the GDP forecast is reduced by 40% then the unemployment rate prevailing in our nation is around 20%. There may be other factors contributing to a less GDP too. Ceteris paribus, unemployment is around 20%. Can you believe that? I am sure you're shockingly surprised as me. God save our economy!

Disclaimer- The Unemployment calculation is a theoretical one and is based on Okun's law. There may/may not be a similarity to the actual unemployment rates.

Algorithms,HFTs and Flash crashes

Algorithm is a step by step process which involves a formula or a set of rules to solve a problem.In day to day life one or the other household equipments we have, operate on an algorithm.Take for example- A Washing Machine, which has got a set of rules for washing,rinsing and drying.The machine operates on this algorithm and in the event of any anomaly, the machine informs us through a beep sound.It cannot auto correct the mistakes or the anomaly and hence it doesn't fall under machines with artificial intelligence.It needs human intervention to work normally.Same is the case with many algorithmic trading programs which are being used by the FIIs and investment bankers or some technocrat traders.Algorithm doesn't have any intelligence on its own.It does what exactly it is programmed to do.Yes, you heard it right.It is similar to my office boy.You ask him to buy a soft drink and if the store doesn't have it, he will come back saying that it is not there.He will not call you to ask, whether he can buy the other available brand at the store.And you have to send him again.On the other hand the HFT- High frequency trading uses lot of algorithms to execute different orders in a trading day.It executes even thousand orders a day and mostly the trade position is held for few minutes to few hours.By the end of the day there are no trading positions left.Every trader has a few tricks up his sleeves in trading.But the limitation is the process of executing it lightening fast before the market could react.There is were HFT kick in as they have less than a micro second execution time.The organizations which use HFT reduce the volatility of a particular script by creating a market for the particular script.In other words, they act like market makers thus reducing the volatility and bid-ask spreads. And what happened to Nifty on Friday is like a flash crash.It happened within seconds.Infosys dropped around 18-19% during the time and recovered before the markets were closed.Some of my friends attributed this to the error in order punching in both the INFY and the Nifty futures.This lead to the fall as a huge order got executed (a sell order) without the price being mentioned and it got traded to all the available buy orders.This happened within seconds and the markets recovered rapidly.In my opinion it should be because of a punching error and suddenly the algorithms and HFT systems started executing their orders as the prices started dropping and this resulted in the flash crash.In May 2010, DOW Jones fell about 1000 points within seconds and recovered most of the fall before the end of the day.This was attributed to the error in order punching and resulted in a flash crash as the HFT and algorithm picked the signal of the sudden fall and started executing the orders.This all happens within micro-seconds leaving no space for human intervention.No matter what system you use for trading, be it technical analysis or Macro-economics or you trade on the calls given to you by a friend who claims to be an analyst,kindly have a strict stop loss in place.Don't have the stop loss order in your mind.Have it punched in into the trading system.The advantage of doing so is, you can avoid emotions while the prices are nearing your stop losses and less human intervention is possible on days where we see a flash crash.(To receive the Daily Market Report and Breaking news during market hours, in your inbox, type your email id in the box(Subscribe to Broker King) below the World Map in the blog and click Subscribe).www.brokerking.blogspot.comFor your comments and suggestions Kindly visit our FB page, http://www.facebook.com/pages/Broker-King/115212095212768

SGX Nifty

SGX Nifty trades  at 5292.5  at 0710 hours IST

Near term market view.

There is no cheer for the Greek bailout stuff.Most analysts expected a cheer.Now hear this,"A rally would end when a good news for the rally doesn't warrant a move in the rally's direction." Stay cautious with ur longs with a trailing SL.(A strict trailing SL) :) 

Trade what you see.

From the lows of around 4500 in the month of December we had hit 5400 yesterday.Roughly a 20% gain.It was a clear indication that the markets will move up when the RBI announced a CRR cut.We were trading around 5050 in Nifty futures when the CRR cut was announced.The 200 DMA was around 5195 on the spot and we comfortably crossed that hurdle and now currently trading around 5400 levels.Around 5200 levels traders were talking about the over-bought situation in the front line stocks and the index.Indices were in no mood for a pause.Today, Nikkei hits 3 month highs as the Auto giant Toyota raised the profit outlook and the strengthening of Yen boosted the sentiment.It is few notches away from hitting the 9000 mark.

  Today we may trade above 5400 and there is a good chance that we may close above that level if there are no negative surprises from the EU.

  Reliance Industries is trading near the maximum Buy back price(870). Avoid buying near those levels.And yesterday, Government rejected the price revision proposal submitted by Reliance on the KG-D6 gas.It added that $4.2 per mmBtu price was agreed upon by the company and furthermore the Supreme court said the company should proceed with the price which was being agreed upon.

 The GDP data released yesterday by the CSO(Central Statistics Office) showed that the economy to grow by 6.9% in the year 2011-12 which was lower than the projected 7-7.5% by the policy makers.

  FII remain buyers in the Indian Bourses and markets are in no mood to correct in the near term.Trade with a strict stop loss.A rally would end when a good news for the rally doesn't warrant a move in the rally's direction.Even a bad news is not affecting this rally.Markets are looking out for reasons to cheer day in and day out.Trade what you see and use trailing stop losses for your longs and strict stop losses for your shorts.

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200 DMA- Here we come.

Finally Nifty Spot managed to close well above the 200 DMA.With better auto sales for the month of January and HSBC January PMI at 57.5 and the European rally helped our indices to scale new highs for the year.Reliance Ind. closed up by 2% as the buy back program kick started yesterday.Today is an important day as the Supreme court today decides whether the 2G licenses allotted during the tenure of the previous telecom minister should be cancelled on account of the irregularities in awarding the same.The Supreme court to pronounce its verdict on the case filed by Dr.Swamy to probe the present Home Minister's role in the 2G licenses issue during his tenure as the Finance Minister when the licenses were issued.

  Last time when the issue propped up the indices tanked for the day.Keep an eye on the same.SGX Nifty futures indicate that Nifty should be opening above the 5300 mark for the day.Avoid fresh positions till the verdict is out.Once the verdict is out,you can initiate long/short positions depending on the outcome.

  SEBI announced new norms yesterday on the IPP ( Institutional Placement Program) to help promoters to offload their stake.It is a welcome move as the Government is struggling to raise funds for the share sale program in the PSU stocks.

 All the Asian indices are trading in the positive territory for the day.French bond auction to take the center stage after the European open.France plans to sell around 6.5-8 Billion Euros worth of longer tenure bonds for the day.If they manage to sell at lower yields, the markets may move up further.

 Stay cautious ahead of the Supreme Court verdict.

Apologies for not writing in the past few days as I was tied up with a family function.Hope everyone booked profits in the OnMobile short-Medium term call given around 74.8. It made a high around 81 last Friday(8% move from the Buy levels).

 

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Nifty-short term

Europe is trading positive for the day.Dow Futures are trading positive.Nifty facing resistance around 5200, which happens to be the 200 DMA.Every bounce to 200 DMA can be shorted with the 200 DMA as a SL on a closing basis.

Bidding adieu to Jan series.

        The January series comes to an end today after a remarkable journey.Sensex had hit 17000 mark yesterday and Nifty managed to close above 5100 for the day.RBI announced a CRR cut by 50 basis points or half a percent in its policy meet.RBI also lowered the GDP forecast to 7% from the earlier 7.6%. Nifty and Bank nifty surged to make new highs for the day and heavy weights like SBI and L&T closed up by 5% for the day. The much awaited Reliance Ind. buy-back will be open from Feb 1st and will last till Jan 19th 2013.The maximum price for buy-back is set at Rs.870. In the year 2011, Reliance underperformed the index and was down by 35%. Friday after market hours the company announced its results for the third quarter and posted a drop in earnings.The buy-back is widely seen as a cover up for the bad results.

       Rupee today strengthened and closed at 50.07/08 to the US Dollar and in intra-day made a high of 49.925 against the Dollar.

        In the International front, data released yesterday in UK showed that the total public sector debt rose to a record high and crossed 1 trillion pound mark which is around 65% of UK's GDP. The debt plan of Greece reached nowhere yesterday and it triggered a sell-off in European markets.Greece has got more debt than it can actually pay.Adding fuel to the fire , S&P said it may likely declare ratings of Greece to, "Selective default".

        The European indices edged lower for the day and the US indices ended flat to negative.

      IMF said yesterday that the European debt crisis could send the world economy into recession and added that the epicenter of the damage is Europe but the rest of the world is increasingly affected.

       I expect our markets to be volatile ahead of expiry with a negative bias.Weak earnings from Europe can trigger a sell-off in the European markets in the near term.Nifty rallied 13% from the low it made on December 20th. I would advise caution at higher levels and would advise investors to book profits in banking and realty stocks.PSU banks' earnings to set the tone for Banking index in the near future,Buying index puts in Feb series is advisable. 

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Indian Markets-The week ahead

It was high drama on Friday as the indices were moving in a tight range in the first half and then started edging lower in the second half.Wipro announced better than expected earnings and was trading higher.Bajaj Auto and Hero moto corp extended the rally on Friday after posting a good set of numbers.Around 3 PM markets edged lower and made new lows for the day.It was around this time Axis Bank announced its Q3 results and the stock started moving up.HDFC and HDFC Bank which was trending lower for the day erased all the losses and started moving up after the Axis Bank announced a good set of numbers.Indices spurted suddenly around this time and Reliance which was expected to announce results after market hours started moving up too.Both the Sensex and Nifty scaled new highs in the last 30 minutes of trade and closed on a positive note for the week.
  After market hours Reliance Industries announced the results and the profits fell for the first time in two years.And Analysts felt that the shares buy back announced by the company is to cover up the bad results.The refining margin fell to 6.8$ per barrel compared to 10.1$ per barrel in the previous quarter.The Maximum Buy back price is fixed at Rs 870 per share which is at 10% premium to the Friday's closing price.It would be interesting to note how the share prices react today when the markets open.In my opinion, I expect the stock prices to open lower on account of the drop in profits.
  The most awaited judgement on Vodafone was out on Friday.And Vodafone won the case against the IT Department.The Apex court asked the IT department to refund Rs.2500 crores to the company with a 4% interest rate.This landmark judgement is set to pave the way for the company which is planning for an Indian IPO.Vodafone uses OnMobile's Value added services like speech recognition,ring back tones in its own network and its partner networks across its worldwide operations.OnMobile is an Infosys seeded company and provides speech-enabled services in various Indian and international languages.I would advise a short-medium term Buy on OnMobile Global Limited around the Friday's closing price(74.60).
 Most of the Asian markets are closed in this week on account of Lunar New year(Refer to my Friday's article for details). In India, it is a truncated trading week as we celebrate Republic day on Thursday.The FNO expiry for the January series is on Wednesday.Inflation for the week ended 14th January to be announced on Friday, the 27th as Thursday the 26th is a holiday on account of Republic Day.The first policy meet of RBI for the year 2012 will happen on Tuesday the 24th.

Disclosure- I do not hold any of the stocks discussed in the article.

Bulls give high five to 5K mark.

Bulls reclaimed the 5000 mark on Nifty yesterday as the Asian indices rallied for the day.Better Q3 earnings of companies like HDFC Bank, Hero Moto Corp.,Bajaj Auto helped the index to close above the 5000 mark for the day.Rupee supported the sentiment and closed at 50.25 against the US Dollar.Lot of big events are unfolding in the days to come.Today is a big day with the index heavy weight Reliance announcing its Q3 results after market hours.Reliance may announce share buy back and the stock rallied on Wednesday on account of this and it was up by around three fourth of a percentage yesterday.On the negative side, in December Nomura had cut the Reliance rating to ,"Neutral", from, "Buy" and last week Morgan Stanley had cut the target price of Reliance to Rs.650 per share.As the refining margins are edging lower added with a slump in output from KG basin, the company may post a decline in earnings.

  All eyes are set on the RBI's first policy meet for the year 2012 scheduled on Tuesday,next week.And the SBI chairman said last week that he is not expecting a CRR cut in this policy meet.Though the food inflation is falling but the manufactured products inflation came at 7.42% for December 2011 compared to 5.39% a year ago I personally feel RBI would adapt a wait and watch stance.

 France and Spain Successfully auctioned medium to long term bonds yesterday at a lesser yield than the previous auctions.This was the first auction of medium to long term bonds after S&P had downgraded.European markets rallied and the CAC closed up by almost 2% for the day.

 In the USA,initial jobless claims fell to 352,000 beating the analyst's expectation and the consumer price index was unchanged.And the US housing starts fell more than the forecast to -4.1% in December compared to 9.1% in November.Dow Jones initially edged lower but picked up soon and closed on a higher note for the day.

I expect Nifty to open positive tracking the Asian indices.Results of Wipro and Rupee's movement to decide the direction for IT stocks.Reliance Industries will be volatile for the day with a negative bias.Banking and other rate sensitive stocks will be volatile ahead of the RBI's policy meet.Stay cautious in the second half of the day as Reliance will be announcing results after the market hours.Avoid carrying leveraged positions for Monday.

Chinese Markets will be closed through out next week on account of Chinese New Year. Hong Kong markets are closed till Wednesday.Malaysian and South Korean markets are closed till Tuesday.

Disclosure- I do not hold any of the stocks discussed in the article.

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Bulls are back with a Vengeance

Bulls are back with a vengeance in 2012.Let me back this claim with some data.Nifty future is up by 7.4% * since the last trading day of 2011.Rupee continues its strength and finally ended at 50.73 yesterday.Government's move to contain the fiscal deficit by hiking the import duty on gold and silver boosted the sentiment for rupee.As the bulls were looking out for a reason to cheer,Chinese data came in handy.Q4 GDP of China came at 8.9% which was higher than the consensus expectation.Industrial production and retail sales climbed 12.8% and 18.1% respectively compared to the same period a year ago.
  Reliance rallied for the day and ended up by nearly 4% which fueled the rally in the index.Heard from sources that the company may ask the Government to refund its investments if it is forced to give up any portion of the KG-D6 block.Maruti sky rocketed again yesterday as the company had announced price hikes in all its model except Swift DZire.For more information related to the reason for not hiking the prices of Swift DZire, refer to my previous day's article. Metal stocks were star performers as the Chinese data was encouraging.But analysts are pointing out that the lower steel output of China and the lower demand from Europe due to the crisis are the reasons for the fall in BDI(Baltic Dry Index).BDI had fallen down by 50% and was down for the past 19 consecutive days and is below the 1000 mark.It is now near Jan 2009 lows.
  Yesterday, Telecom Disputes Settlement Appellate Tribunal extended the stay on telecom department's ban on 3G roaming.The tribunal would resume hearing on the appeal by the mobile operators on February 2nd if they decide that they have the jurisdiction.
  European and the US markets ended in green as the Chinese data, successful Spanish bond auction(as the borrowing costs fell), and the US manufacturing data boosted the sentiment.US manufacturing rose to a 9 month high in the month of January.It came at 13.48% compared to 8.19% in December and was much higher than the consensus expectation.

 I expect Nifty to open flat for the day.Though some of my trader friends to whom I spoke with are of the view that TCS would rally for the day,I expect it to trend lower.(Disclaimer- Neither me nor my friends to whom I spoke with  have position in TCS).
  The magical 5000 mark is just a few yards away in Nifty.Will the bulls take that out with ease or lose steam and say the grapes are sour? Fingers crossed.



* Closing price on December 30th 2011 for Nifty futures was 4634.40.Yesterday Nifty futures closed at 4977.00

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Nifty bounces from lows on CRR cut optimism.

Yesterday Nifty opened lower reacting to the S&P downgrade of EU nations.Nifty futures had hit a low of 4,835.25 in the morning session and it was seen trading off the lows after the announcement of inflation data for the month of December.It had hit a high of 4,899.70 in the noon session as market participants expected some kind of monetary easing from the RBI in its first policy meet of the year 2012 on Jan 24th. WPI inflation for the month of December 2011 came at 7.47% which is considerably lesser than the 9.11% for the same period a year ago.
    Index heavy weights INFY and TCS were up by around 2% as TCS is set to announce its quarterly results today.SBI was up by around 3% as the Bank's chairman confirmed yesterday that the Government is set to infuse Rs.6000-8000 crores into the bank by March 31st and the infusion will be done through preferential allotment of equity by the bank to the Government.In another news, SBI is expected to raise the interest on its car loans by half a percent from today.
    Maruti was the star performer among the Nifty stocks and was up by around 5% for the day.Maruti is set to launch the new version of Swift DZire by early February.The new car to have length lesser than 4 meters.The present model is 4.16 meters in length and it has an excise duty of 22%. The new model with lesser than 4 meters length falls into small car category and has just 10% excise duty.
    Reliance Industries extended its fall for the day and was down by more than 2% for the day.Last week Morgan Stanley downgraded Reliance Ind. to under-perform with a downward target price of 650Rs per share.

  In the International front, EFSF loses its AAA rating and is now assigned AA+ with a negative outlook(In my Yesterday's article I have written that the Banks of the nations downgraded by S&P and the EFSF may be downgraded).Now expect the banks to be downgraded in the Euro zone.In a not so surprising move, Moody's retained AAA rating of France and said it is still reviewing the stable outlook assigned to France.If you remember,in August when US was downgraded by S&P ,Moody's and Fitch maintained the AAA rating of US.

  France successfully carried out the bond auction yesterday and the Moody's outlook helped the European indices to edge higher for the day.

Asian Markets are trading higher for the day and today around 0730 hours IST, China announces the GDP,Industrial production and retail sales data.

 Chinese data to set the tone for the Asian markets for the day.Expect Nifty to open positive tracking the Asian markets.Stay cautious at higher levels.I expect huge volatility in stocks like HCLTech and TCS as they are announcing the Q3 results today.