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September 14, 2012

Congress led UPA plays their Final Ace ! ~ Announces at one Shot pending FDI reforms !

Congress led UPA has just played their Final Ace ! ~ Announcing this evening at one Shot pending FDI reforms and Specific Disinvestments in PSUs ! 

Clearly the Government was on a long back foot on Corruption Accusations on an unprecedented scale on Coalgate and 2 G

The PM courageously asserting that if they have to go down they will go down Fighting !

It had  played all it’s cards but one ~ FDI Reforms ,especially to open out to a 51% in Multi Brand Retail ,were kept Pending because of huge opposition by Congress allies in the UPA itself

Yesterday evening Government announced Rs 5 hike in Diesel Prices and a LPG Cylinder Subsidy Cap at Six Cylinders per annum per family ~ this is to reign in Oil Subsidies that have been  a major reason for huge fiscal deficits year after year

This bold move,predictably and vehemently opposed by Opposition Parties and so expect a Nationwide Bandh called by BJP and the Left,came quickly after positive and stock uplifting announcements on September 12 by the German Court holding the European Stability Mechanism as constitutional and allowing Germany to financially support it and on September 13,US Fed Governor ushering in QE 3 by announcing a further buying of mortgage backed securities to the tune of US $ 40 Billion a month aggregating to US $ 480 Billion a year

And buoyed by  Stocks rallying,this evening the Indian Government finally played it’s last Ace in my view by announcing at one go a slew of Pending Economic reforms of which major ones are

  1. Allowing 51% FDI in Multi Brand Retail
  2. Allowing 49% FDI in Aviation
  3. Disinvestment of 9% to 12% in Five PSUs ~ four are already listed ~ Oil India,MMTC,Hindustan Copper and National Aluminium ~ while unlisted RITES will make an IPO
Here’s the Disinvestment Table I’ve worked out for you ~ Government could raise  @ Rs 14500 crs from this Disinvestment Exercise ~ They may actually raise less ,probably @ Rs 13000 crs if a reasonable haircut of 10% is applied to current market prices to reward Retail Investors with maximum allotment at reasonable pricing ~ On the other hand the government may,as has been their greedy mindset,look to auction to get a premium !

Planned PSU Disinvestment announced by Government on September 14,2012

PSU

Share Price in Rs

Market Cap in Rs Crs

Govt  % Stake  pre sale

% Sale

Planned

Govt % Stake Post Sale

Potential Disinvestment Proceeds in Rs

Oil India

486

29236

78.43

10

68.43

2923

MMTC

778

77790

99.33

9.33

90

7258

Nalco

54

13942

87.15

12.15

75

1743

H Copper

269

24920

99.59

9.59

90

2390

RITES unlisted

*400

*1600

100

10

90

160

14474

*RITES has made Rs 164 crs PAT on Revenues of Rs 934 crs giving an EPS of @ Rs 40 with Equity at Rs 40 crs (FV Rs 10) and a Networth of Rs1008 crs at March 31,2012 giving a Book of Rs 252 ~ Thus have taken a hypothetical share price of Rs 400 at 10 times Earnings and @ 1.5 times Book ~ Thus Market Cap is Rs 1600 crs

Die Hard Pessimists in the US especially are now warning that the Markets were ahead of the QE 3 announcement in that they had risen already factoring in such an announcement ! ~ what they are warning is about a U Turn from here with the Dow at 5 years high of 13500 + and the Nasdaq at a 10 year high of 3200 !

However in my view Stocks,given these rapid fire recovery measures announced ~ RBI should join the Party on Monday by announcing a CRR Cut ~ and  enough evidence of growing  Investor Interest and Liquidity ,stocks are expected to sustain buoyancy in the Short term ~ At a macro level expect 5% to 10% returns in the Indices from current levels  in the next few months ~ Sensex and Nifty are up 2% already today at 18500 and 5500+ levels  ~At a micro level one can chase and make Alpha Returns much superior to Indices Movements with astute Stock Selections even though Macro Risks remain

Seems Diwali will be Brighter this Year in mid November ! By then,from indications, US President  Obama would have been elected (November 6 Presidential Elections) to serve a second term ! read more

Market Stocks Rally finds Fundamental legs to sustain in the Short Term ~ Take Advantage

Market Stocks Rally finds Fundamental legs to sustain in the Short Term ~ Take Advantage even if you are nervous about the Long term 

On September 7,2012 last week I had bloggged about Important dates in September and Indications are not to Short

Stocks Are Up Today ~ Gold Is Bullish Too ~ Interesting Next Fortnight Coming Up !~ Indications Are Not To Short

Favourable Announcements by German Court for ESM and Fed Governor Ben Bernanke for QE 3 provide  a Fundamental leg to the developing Rally in the Short term ~ Take Advantage of it

Call me on 9820162597 if you’re serious and convinced of a short term rally in Equities to take advantage of it and come aboard with us ~ After January 2012,this is the second chance this year ~ then the rally was really short lived for a month or two ~ this time the period should be longer

Yesterday the Fed Governor,Ben Bernanke announced a slew of measures that would be termed QE 3 ~ The US Government will continue to buy @ US $ 40 billion of bonds  every month  ~ that’s US $ 480 billion annually ~ lower than the US $ 1.8 trillion in QE 1 & 2 ~ GDP Growth Forecasts have been upped to the top end of 3% and 3.5% for FY 13 and FY 14 respectively ~ Interest Rates will be kept near Zero levels till mid 2015 to facilitate an Economic recovery by stimulating Demand

US Stocks reached a 5 year high yesterday

Dow: 13,539, +206.5, +1.5% ~ 5 year Highs
S&P 500: 1,459, +23.4, +1.6%
NASDAQ: 3,155, +41.5, +1.3% ~ highest level in 10 years !

Earlier Day German Court allowed Germany to financially support the European Stability Mechanism (ESM) ~ that was a big relief for the Eurozone as without Germany the collapse was certain

India on cue opened up 2% this morning as Sensex zoomed up over 400 Ponts  to 18500 levels and the Nifty over 100 Points to cross 5500 levels led by strong gains in banking and Oil Stocks~ there may be some tempering today from these levels but after a long time this year the markets are justifiably excited for the short term

On the Indian Front the Government is planning to move ahead with more FDI Reforms ~ today they meet again on Aviation ~ Multi Brand Retail is expected sooner than later ~ On Monday if RBI supports the Government, which just raised Diesel Prices by Rs 5 last evening and put a subsidy cap to six LPG cylinders in a year per family, by reducing CRR,we could see stronger legs on the Rally which is also being supported by increasing FII Inflows

So for the Short term the Bullishness will prevail and Stocks should remain buoyant for the next few months atleast unless we see really ugly geopolitical problems in the Middle east destabilising Oil pricing  ~ The China Slowing Down Problem will be deliberately ignored for the time being  read more

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