Stock Observatory – First Quarter 2012 (Jan-March) – Published Monday to Friday.

Important Change from 1st April, 2012

There will be only bi-weekly edition, one appearing as “Weekend Post” on Monday and another as Mid week edition on every Thursday.

First weekend edition will appear on Tuesday (instead of Monday) since the banks are closed on Monday in India. I am not sure whether the stock markets are also closed for that day.

REASON FOR CHANGE:

Not much change take place on daily basis except on some really volatile day. It will give me enough time to analyze the situation on bi weekly basis, rather than on daily basis.
I will try to make bi-weekly edition more meaningful than daily edition.
There is a time difference between India and USA (where I am based). Thus, the effect of Friday events in USA will be reflected only on Monday in India. India is more influenced by Monday events in Asia than in USA which will have effect only on Tuesday
It takes too much time everyday, almost 2 to 3 hours, which robs me of time to think to write regular articles.
The short term trend is dictated not by one stop event on a day but the continuation of events for at least 3 days. We have to judge some trend, not react to some spot event.
If the situation does warrant, there may be “Flash Edition” in addition to weekend and mid week editions.

Kalidas

USA, April 1, 2012

Stock Observatory India

Ref: ISO/12/60 of 2012-03-30, Friday, India Time 9.30 am)

Overnight Events and Effects:

It was a day for derivatives. Of late the commodity prices are hammered down in less than 15 minutes near the closing time. The idea is to make everyone believe that the inflation is down so that interest rate need not be raised. However, almost all commodities recovered immediately, suggesting that the game plan was foiled by knowledgeable circle. Only yesterday, we hinted that there could be some failure similar to Enron, in fact on much larger scale.
Dow was stable but dollar was down. The BRIC countries decided finally to trade among themselves in their respective currencies. Not all items may be traded because such trades will go through a bank, in India it is EXIM Bank. Most of the trades among BRIC countries are of revenue type which may need settlement in dollar, not their own currency. This is a big blow to dollar because the total volume between BRIC countries will be $250 billions at least. Dollar is surviving only because of derivative related manipulation.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,145	13,126	19
NASDAQ	3,095	3,104	-9
NIKKEI – Japan	10,080*	10,114	-34
Hang Sang -HK	20,487	20,609	-122
SENSEX – India	17,232	16,995	237

* = live intra-day.

All indices were weaker except India.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	78.855	79.096	-0.2410		Weaker on BRIC news release
Euro/US$	1.3349	1.3319	0.0030		Rising steadily
Rs/US$	51.1800	51.1375	0.0425		Consistently weaker.

Observation (Currency):

Dollar was weaker due to news out from BRIC stable that they would trade among themselves in their own currencies rather than dollar. The total trade between themselves is around $250 billions. Not all trades will be local currency based. They are not specific about this item. In any case, the United States will not like this idea of its currency being sidetracked. If this really happens, there will be few takers of the currency with the result that there could be massive slide in dollar value forcing FED to raise the interest rates. In other words, the scenario is changing on currency front. While all talks are in air, there may not be actual pressure to depreciate the dollar. But the things may change later because BRIC are the only countries that will have positive GDP and growth in debt laden global economy.

Interest Rates (US$)

LIBOR 1M	0.24125	LIBOR 3M	0.47315	LIBOR 6M	0.7409	LIBOR 1Y	1.0521
T 1M	…	T 3M	0.06	T 1Y	0.13	T 2Y	0.34
FED Target	0.25	T 5Y	1.02	T 10Y	2.16	T 30Y	3.28

Not much change on interest rate front.

Commodities

Item	Latest	Previous	Change	Current OI	Prev OI		Change
Oil (WTI- USA)	103.37	105.29	-1.92	289,470	297,487	-8017
Oil (Brent) …	123.64	124.98	-1.34	…	…	0
Gold …	1,662.70	1,661.8	0.90	220,352	193,335	27017
Silver …	32.25	31.97	0.28	51,159	51,111	48
Palladium …	648.10	647.35	0.75	19,878	19,882	-4
Platinum …	1,639.40	1,638.70	0.70	36,774	33,231	3543

Observation (Commodities)

Almost all above commodities were massively shorted in 15 minutes just before close to force the value down and spread the terror. However, this game was known to few other traders who took this opportunity to step in and buy aggressively to restore the value. Look at the massive rise in short interest in gold – 27,000 more contracts, that is, 2.7 million ounces of gold = US$ 4.5 billions in 15 minutes!
Oil was also shorted in USA. There is wide divergence between Nymex prices and Brent prices trading in London. The spread is over 20%. The gas prices in USA are rising at brisk pace. I have seen the prices rising to $4.4 per gallon (about 4 Litre) against $3.30 only a few months ago.
We fear that the next crisis will come from the domain of commodities. This is the area where the government oriented selling is at the maximum. No trader has capacity to take the risk of over $4.5 billions. If we take the position in all commodities, the value could rise to $ 7 or 8 billions!

Stocks: Our Observations and Comments

Although the market is up today, almost all fundamentals are worsening. The government is chasing various businessmen, including Mukesh Ambani of RIL, when it shot down the arbitration proposal to sort out the Kg6 related problem. Such cases are always decided by Arbitration Tribunal, but in present case, the government is not heeding the request of private companies. RIL may stand to lose over Rs 6500 crores due to its dispute with the government. This is why we had suggested selling RIL and buying Essar oil etc. In all probability, RIL may post loss for the first time either now or in less than 6 months from now. It is still good time to sell RIL and swap to other stocks.
Godrej property is redeveloping 18 cooperative housing estate in Sahakar Nagar Chembur near my home city Ghatkopar. It is a low middle class area and I do not know what value will be added by the Godrej? Why Godrej is trying its luck in property sector when the going is rough at the moment. Godrej may lose substantially in this project.
The market is up by over 240 points today at the moment of this writing. Do not be sucked into this rally., Just sell and stay on sideline until the index falls to 15,400 at least. No sector is growing except the Government of India deficits. It is a beggar’s market.

Special Situation:

None today

Something Right, Something Wrong….

Everyday is dynamic. Some events, news or policies are right having beneficial effects on the stock, sector or economy and some are wrong hurting the same categories. These are explained briefly. For detailed view, refer to other appropriate sections for which reference is made here with a link, if possible.

Wrong: Government’s action in shooting down RIL’s arbitration proposal. Such denial is against good spirits in business. Businessmen talk, always talk, only the obstinate never talk.
Right: BRIC country’s decision to trade among themselves in local currencies against dollar. In other words, after euro, this is the continent which is going away from Arabs.

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
Banks/Airlines	…	Software	…	Weaker rupee
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reasons
RIL	CMP	Cairns or Essar Oil	CMP	Poor prospects for RIL in near future
SBI	CMP

Kalidas One Liner

None today, I am tired today.

Kalidas Chopai

PEP = Preferred Entry Point; How to use the following table?

Finding PEP is always difficult. So, it is advisable to use first point of entry so as not to miss the stock. It so happens that the stock goes down after your purchase, so you buy more on downside (2nd entry) and then stop. When the stock begins to go higher, and is up by at least 12% to 15%, with target still far away, you make third entry on the upside because upward trend is reasonably established. Similarly, while selling always get hold of first exit point. If the stock goes higher, sell some more to average up your selling price. Now stop. When the stock begins to go down after hitting recent top, you sell immediately at the bid price because the stock may develop downtrend. Never be cheesy while buying and never be greedy while selling. Money is in your pocket when you sell. Always smile first before buying or selling. Only large hearted investors make money all the time.

Stock				CMP		PEP	CMP
No comments today.
First Entry		2nd Entry on Downside			3rd Entry on Upside
Comments:
First Sell		2nd Sale on Upside			3rd Sale on Downside
Comments:
Ref. No.	12/KC/20	Date:	2012.mm.dd	Target (3M)		SENSEX now at

OVER

Stock Observatory India

Ref: ISO/12/59 of 2012-03-29, Thursday, India Time 9.30 am)

Overnight Events and Effects:

Only derivative markets are active. Low volume makes it easier for the COMEX inspired speculators to mark down the prices in few trades only. The spot market is opposite. How long this will continue, is difficult to know, but one thing is certain that we may see sudden failure of Enron tupe of companies who is being used to depress the commodity prices on non deliverable trades. With Bernanke set to announce in April something of QE 3, there is no way the commodity prices could end up lower. But they do, because if you look at the daily chart, that most trades were conducted in the space of 15 minutes to depress the prices.
What the Government of India is doing for so long, is being proposed in USA by Geithner, the Treasury Secretary, who is asking for the “forgiveness of the debt” of US Home owners, by proposing Fannie Mae and Freddie Mae to forgive some portion of loans to home owners to make the home loan more affordable. In other words, he is proposing absolute bankruptcy of these two national mortgage firms. While there may be hue and cry at the failure of the two giants, Geithner believes that his proposal will find support from the people at large, and who would not give support if his debt is proposed to be reduced. In other words, the forgiven loans will be reflected in the FED balance sheet eventually in the form of higher debts. Geithner believes that if Fannie Mae and Freddie Mae go Lehman way, there will be no scrutiny of these two firms who will be declared “dead” and the dead persons do not talk.
If we lose Rs 100 from our pocket, we instantly know. Not so in MF Global Holding which filed for bankruptcy. Headed by former CEO of Goldman Sachs, no one in the firm knows where the hell the billions of dollar disappeared or lost in matter of days. Yesterday, even the Assistant Treasurer at the bankrupt firm, said he did not know where the hell $1.6 billions of client money disappeared. Nowadays, the most important theories are that “too big to fail” and “too large money difficult to trace”. All are bluffing. Such large amount could be traced easily. This author has worked as “vigilance officer” in a bank to detect the frauds, and knows that such amount is traceable by all means.
Everyone is asking for more reforms in India, Goldman Sachs was another firm to join the chorus. No one asked for reforms at United States which engineered all the troubles everywhere. They are untouchable.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,126	13,198	-72
NASDAQ	3,104	3,120	-16
NIKKEI – Japan	10,095*	10,182	-87
Hang Sang -HK	20,652	20,885	-233
SENSEX – India	16,995	17,121	-126

* = live intra-day.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	79.096	79.126	-0.0300
Euro/US$	1.3319	1.3317	0.0002
Rs/US$	51.1375	50.8050	0.3325

Observation (Currency):

Nothing noteworthy. Except that Rupee is weakening day after day.

Interest Rates (US$)

LIBOR 1M	0.24125	LIBOR 3M	0.47315	LIBOR 6M	0.7409	LIBOR 1Y	1.0521
T 1M	…	T 3M	0.08	T 1Y	0.16	T 2Y	0.34
FED Target	0.25	T 5Y	1.06	T 10Y	2.20	T 30Y	3.31

Nothing significant

Commodities

Item	Latest	Previous		Change		Current OI	Prev OI		Change
Oil (WTI- USA)	105.29	106.79	-1.50		297,487		296,036	1451
Oil (Brent) …	124.98	125.59	-0.61		…		…	0
Gold …	1,661.8	1,682.60	-20.80		193,335		169,283	24052
Silver …	31.97	32.57	-0.60		51,111		52,945	-1834
Palladium …	647.35	655.25	-7.90		19,882		20,083	-201
Platinum …	1,638.70	1,644.30	-5.60		33,231		29,246	3985

Observation (Commodities)

The future market and Spot markets are diverging. In paper trades, or so called derivatives, the prices are depressed in low volume at sudden and swift selling on the COMEX and NYMEX. The main exchange and also CFTC are allowing manipulations.

Stocks: Our Observations and Comments

Kingfisher Airlines: Said the finance ministry officials ” We can not kill KFA, we can give them some more time to pay for the taxes”.

Who to believe “Banks who are not willing to lend, or Ministry of Finance who want to extend help by postponing the tax liability?
If KFA shuts down the banks will be the biggest losers. The crisis in India will spread like a wild fire
Our original assessment that Government will come to help in one form or other is amply borne out.
There is one positive – KFA records the best on-time performance. Obviously, because there are no planes, there are no flights etc.
There are also reports to suggest that Mallya may sell the United Brewery shares to save the Kingfisher Airlines. Why? Because he has no choice. The shares are pledged with the banks.

The Army Chief’s allegations of bribery of Rs 14 crores have been rattling the inside quarters of the government. Now there is a news that the Government has asked the Army Chief to go on leave. In other words, the situation is worsening. One more scandal after all. Such news help Anna Hazare.
State Bank of India is again on the roster of bad news. It says that it might have to restructure new loans of Rs 2500 crores. So the bad debt or provisions may rise. When the nation’s biggest bank is unwell or sick, how could be India’s economy so good? After all, all activities are finally translated into money which lies with the banks. Avoid this share. We have been saying this ever since the stock was at Rs 2800 or more.
Indian Rupee is hitting new low again and again. The pressure is on. If oil prices rise in $ terms and Rupee falls versus dollar, the net effect will be huge rise in India for oil. It will result in higher subsidies and also in higher deficits and eventually higher rates. There is no way that Indian rates could go down. To make it work, Subba Rao will need to be fired. But he has his community friend in Rangarajan who is economic adviser to Prime Minister. Even Prime Minister does not realize that the Rangrajan is no good, but he is in habit of tolerating nuisance.
Indian market is slated for a steep one way fall which process may begin soon. This is why we have been advising everyone to sell down their 70% of their portfolio. We will wait until May end to make a new more in India.
Sometime people do not know what they are writing about. Read this report from Bloomberg. Can you make any sense out of it? The report says that India will pay Iran in foreign currency whereas the fact is otherwise. If OMC are going to settle Iran India trades in Rupee, why should the dollar rise. It should fall and Rupee should rise, if that happens. It is one of the worst report I ever read on Bloomberg.

Special Situation:

None today

Something Right, Something Wrong….

None today

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
None	…	…	…
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reasons
Raise cash level

Kalidas One Liner

None

Kalidas Chopai

PEP = Preferred Entry Point; How to use the following table?

Stock				CMP		PEP	CMP
No comments today. May be tomorrow.
First Entry		2nd Entry on Downside			3rd Entry on Upside
Comments:
First Sell		2nd Sale on Upside			3rd Sale on Downside
Comments:
Ref. No.	12/KC/20	Date:	2012.mm.dd	Target (3M)		SENSEX now at

OVER

Stock Observatory India

Ref: ISO/12/58 of 2012-03-28, Wednesday, India Time 9.30 am)

Overnight Events and Effects:

Always mixed figures in United States. It is more like “Kabhi khushi, kabhi gam”. Housing starts up, but housing sales are down, jobs are down but consumer confidence is up. You may not be able to judge the direction nor you will know the truth. When the authorities are in charge of media, Gen Gobbel of Hitler Regime theory works well – that ” The people will believe a lie, if it is told 1000 times”. Since very long, I have discarded the numbers as churned out by US authorities.
More events are for buying or selling of Sports events or games, rather than buying or selling of businesses. Only yesterday, Magic Johnson, a start basketball player, bought city’s baseball club for massive $2 billions. In other words, genuine businesses are taking back seats.
Bernanke is dictating his whims and fancies again. Always saying that US economy is on recovery path, he is still willing to loosen his purse, qualified by if need be, to ensure job recovery campaign. In other words, he is hinting another round of quantitative easing, a phrase invented by Bernanke, called QE 3. Gold rosé in reaction, so Silver but Palladium fell. Platinum also fell sliding below Gold price.
China is giving another evidence that it is slowing down. Its real estate prices are moving down. Its metal consumption is also slowing down, hurting AUD and NzD who are major suppliers of Iron ore and other metal ore and concentrate. When China sneezes, Hong Kong gets the cold. So also other Asian nations.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,198	13,242	-44
NASDAQ	3,120	3,122	-2
NIKKEI – Japan	10,151*	10,254	-103*
Hang Sang -HK	20,905*	21,046	-141*
SENSEX – India	17,153*	17,257	-104*

* = live intra-day.

Except US and Japan, most of the markets are turning weaker day by day. Although Goldman Sachs talked up the Indian market, most fund managers are heading for the exit. Goldman wants to get out, so it is talking up the market so that they could sell. Smart ass.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	79.064	79.081	-0.0170		Stable
Euro/US$	1.3329	1.3316	0.0013		Rising a bit
Rs/US$	50.6000	50.8650	-0.2650		Slightly recovered

Observation (Currency):

Indian Rupee is going down the drain. Overall, Indian market are weak, and they are heading into 14,800 within 2 months. That may be the time to assume risk and buy more.

Interest Rates (US$)

LIBOR 1M	0.24125	LIBOR 3M	0.47315	LIBOR 6M	0.7409	LIBOR 1Y	1.0521
T 1M	…	T 3M	0.08	T 1Y	0.16	T 2Y	0.32
FED Target	0.25	T 5Y	1.02	T 10Y	2.19	T 30Y	3.31

No change in LIBOR rates. Still, 2Y T rates are higher than Bernanke’s FED rates.

Commodities

Item	Latest	Previous	Change	Current OI	Prev OI	Change
Oil (WTI- USA)	106.79	107.33	-0.54	296,036	NA		296036
Oil (Brent) …	125.59	125.99	-0.40	…	NA		0
Gold …	1,682.60	1,687.70	-5.10	169,283	NA		169283
Silver …	32.57	32.62	-0.05	52,945	NA		52945
Palladium …	655.25	663.00	-7.75	20,083	NA		20083
Platinum …	1,644.30	1,662.10	-17.80	29,246	NA		29246

Observation (Commodities)

Oil is still firm. The petrol prices have risen by 15% in last 20 days. Gold is up in post Bernanke statement.
Commodities are weaker on slowing China syndrome. The stocks are up only due to virtual nil cost in marginable trades.

Stocks: Our Observations and Comments

Kingfisher is again in news today. Vijay Mallya was called in New Delhi. He was tired, circling eyes and virtually dejected. Indian operations are now curtailed by 50%. They paid over Rs 44 crores to tax department. It is strange. Why does Government want to stay away from KFA? If it flies it will make more tax dollars because the employee would be forced to pay Income Tax on their salaries. The stock is heading into single digit soon, so be prepared to buy them aggressively. If KFA goes down, almost all lenders will be in trouble. Looks like KFA will be as valuable as dead elephant.
Government has let loose the tax dogs after the businessman and woman. If India is to have fast progress, both government and people should believe each other, trust each other, not hurt each other with tax raids, and other unpleasent actions.

Special Situation:

LIC Housing Finance is strong again on very high volume. Over 10 million shares have traded in first hour. There must be some good news.
Satyam is slumping after hitting recent high. Since the news is out, not much excitement is left in this counter.
Mukesh Ambani is again on defensive. RIL is going to have worst financial quarter in recent memory. This is what we were anticipating much ahead of others and advising switch from RIL to other good counters.

Something Right, Something Wrong….

Nothing is working right for India at the moment. Rates are high, taxes are raised, the excise duty and Sales Tax have risen, growth is slowing down, etc. Only Indian Petroism is keeping the market alive.

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
None	…	…	…
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reasons
MRPL	<62	Essar Oil	53.50
Any stock	<40	Essar Shipping	<26	Value

Kalidas One Liner

Pranab Mukherji has outlived his utility. India must have change at the top in Finance Ministry. Pranab is no longer good and deliverable.
Government should begin to trust the people and businesses, instead of widening tax nets. They should be treated as humans not as rats.
Let interest rates remain high, but lower the taxes. It is the only sure sign of success.

Kalidas Chopai

PEP = Preferred Entry Point; How to use the following table?

Stock				CMP		PEP	CMP
No comments today.
First Entry		2nd Entry on Downside			3rd Entry on Upside
Comments:
First Sell		2nd Sale on Upside			3rd Sale on Downside
Comments:
Ref. No.	12/KC/20	Date:	2012.mm.dd	Target (3M)		SENSEX now at

OVER

For READERS,Due to unavoidable circumstances, there will be no edition of Stock Observatory today. (Tuesday, 27 March, 2012)Regular edition will appear tomorrow.

Stock Observatory India

Ref: ISO/12/57 of 2012-03-25, Monday, India Time 10.30 am)

Overnight Events and Effects:

Nothing significant news except the statement by Bill Gross of Pimco, world’s biggest bond trader and investor, that FED may probably signal buying of further bonds (to impart liquidity) nicknamed QE 3. This is considered bullish for commodities, Gold, Silver and also for bonds. Why should FED resort to further quantitative easing when the economy is considered to be on rebound, is not known. Either the economy is rebounding or it is faltering. In our opinion, it is faltering, let the analysts say whatever they want.
China is reported to be slowing down. For the past 20 years, the China has been growing at double digit rate. As result, its base has become so large, that same growth rate can not be maintained. When the base is low, the growth rate is fast, such as in India, but when the base has become large, such as in China, the growth rate can not be same double digit rate, but considerably slower.
China is world;s biggest supplier. If its growth is slowing down, it means that Global economies, especially US, UK, Europe and Japan are not robust, but in fact very weak. However, almost all western markets are higher on the premise that the economies are on recovery track, but the China points it otherwise. We are heading towards “double dip recession.”
Indian may get exemption from US Sanctions on Iran. That is, India will be free to resume crude oil purchases from Iran and also make payment in dollar therefore. Why US is doing this? On one hand it imposes sanction, and on the other exempting major nations such as Japan and now India. The reason is simple. Dollar. If sanctions are imposed, there will be sale of dollars and buying of currency of settlement that Iran wants or in gold. US does not want dollar to go down, so it has no other alternative but to allow exemption so that there is no more selling of dollar. In other words, the US strategy on Iran is not working. US therefore slaps its own face to look it rosy again.
Indian government is coming to senses. It now proposes to call Hutchison to pay for the taxes. This is what we have been saying all along. May be the Pranab Mukherji saw our cartoon as following. Kalidas is right again what is right and wrong.
More under Indian stocks section.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,081	13,046	35
NASDAQ	3,069	3,063	6
NIKKEI – Japan	10,031	10,011	20
Hang Sang -HK	20,679	20,669	10
SENSEX – India	17,377	17,362	15

* = live intra-day.

Nothing significant movement.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	79.338	79.345	-0.0070
Euro/US$	1.3270	1.3268	0.0002
Rs/US$	51.0975		51.0975

Observation (Currency):

US$ is tad weaker. Rupee is also weak again, rising to above Rs 51, due to the fact that India may have to buy dollar again to pay the iran in dollars. How Iran will negotiate dollar is the event I can not foresee.

Interest Rates (US$)

LIBOR 1M	0.24175	LIBOR 3M	0.47365	LIBOR 6M	0.7409	LIBOR 1Y	1.0531
T 1M	…	T 3M	0.07	T 1Y	0.17	T 2Y	0.36
FED Target	0.25	T 5Y	1.11	T 10Y	2.25	T 30Y	3.32

The interest rates are showing rising trend. The fact that LIBOR 3 month is consistently higher than FED target rate of 0.25 suggest that the interest rates are rebounding slowly. This is a big negative event. How could LIBOR be at almost twice the FED rate? Either FED rate is wrong or LIBOR is right. Who to believe?

Commodities

Item	Latest	Previous	Change	Current OI	Prev OI	Change
Oil (WTI- USA)	106.65	106.87	-0.22	301,199	…		301199
Oil (Brent) …	125.59	125.85	-0.26	…	…		0
Gold …	1,663.56	1,661.38	2.18	137,937	…		137937
Silver …	32.25	32.27	-0.02	54,031	…		54031
Palladium …	663.60	659.90	3.70	19,645	…		19645
Platinum …	1,642.30	1,631.80	10.50	25,845	…		25845

Observation (Commodities)

Not much comments today, except that Gold again overtakes Platinum. Dollar being weaker, almost all commodities are higher. Good for metal stocks like Copper, Aluminum, Steel etc.
Due to expectation of FED easing again or resorting to QE gimmicks, commodity prices tend to go higher. Inflation will rise therefore

Stocks: Our Observations and Comments

The Income Tax department is now trying to rope in Hutchison for its liability under Capital Gain Tax. We do not think that Hutchison will agree to pay. It is for them off shore transaction. Hell with the Indian government and Income Tax department, it appears to be saying. There is no branch office for Hutchison in India.
Most people doubt whether Pranab Mukherji will be able to wither the deficit storm. He is desperate to get the revenue. Oil subsidy is causing heavy drain, stock market is not good enough to divest itself from some PSU to raise the resources, and finally, the courts are coming in its way.
Coal India is becoming hot issue again, this time a leading Investment Fund in UK, holding more that 1%, has sounded a notice to the Government to change the top management in the company.
Kingfisher is in news again. It has agreed to pay Rs 10 crores under Service Tax out of Rs 76 crores it owes to the Income Tax department. The question is, why the hell did not it pay the collected tax to the government immediately. It means that it was misusing the “Government funds” under its control. This is criminal. Anyway, Kingfisher is having its troubled days enlarging. The stock may fall below Rs 18 soon, may be today or tomorrow.
The market is still in weaker mod. While FII funds appear to be coming in, but it is more directed to “Bond market” than equity.

Special Situation:

None today. Be a SELLER to raise cash.

Something Right, Something Wrong….

Spotless Pranab Mukherji is having dirty mind.

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
SELL TO CASH	…	…	…
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reasons
None today

Kalidas One Liner

None today.

Kalidas Chopai

PEP = Preferred Entry Point; How to use the following table?

Stock				CMP		PEP	CMP
No comments today. Stay with Cash
First Entry		2nd Entry on Downside			3rd Entry on Upside
Comments:
First Sell		2nd Sale on Upside			3rd Sale on Downside
Comments:
Ref. No.	12/KC/20	Date:	2012.mm.dd	Target (3M)		SENSEX now at

OVER

Stock Observatory India

Ref: ISO/12/56 of 2012-03-22, Friday, India Time 9.30 am)

Overnight Events and Effects:

Only yesterday, the higher housing starts gave further evidence of slow recovery of the US economy. Today however, the housing sales fell 0.9% which was very disappointing. So when the sales are very slow, below average, why the housing starts improve? It is a million dollar question.
While they beat in the media that the housing is in recovery mode, the largest mortgage lenders are in different mode. JP Morgan Chase is now joining Bank of America to cut the size of Mortgage Bond traders. That is, they feel that this business is declining when the press media says otherwise. Who would you believe – the lenders who as matter of fact inform you of the present status in the Mortgage market or the various bond traders, analysts who go on hyping the recovery in US economy?
The views are gathering ground that the near Zero rates are no longer sustainable. It is also reported that FED might resort to QE 3 as soon as in its April meeting due to steep rise in yield in treasuries in long end and also short end. FED reportedly bought over $400 billion in long dated bonds and sold equivalent in short term so that short term rates remain below its benchmark of 0.25%, but the pressure on short term rates is increasing for over 10 days. Unless the Fed resorts to QE 3 soon, the rally in short term rates may puncture the rising stock markets, cause treasury yield to go high, hurt derivative markets seriously and also cause Gold and Silver prices to rise more than average of recent months.
More under Indian Stocks

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,125	13,170	-45
NASDAQ	3,077	3,074	3
NIKKEI – Japan	10,100	10,087	13
Hang Sang -HK	20,856	20,887	-31
SENSEX – India		17,602	-17602

* = live intra-day.

Currency:

Pair/Index	LATEST	PREVIOUS	CHANGE	Comments
US$ Index	79.546	79.387	0.1590	Slightly firm.
Euro/US$	1.3235	1.3274	-0.0039	Slightly weaker
Rs/US$	50.6850	50.3050	0.3800	Getting weaker post budget

Observation (Currency):

Rupee is getting weaker every day, while the market rose by 300 points yesterday, first day of rally after the budget. The people are eying for reduction in rates in next RBI meeting. It all depends on inflation picture and what view is taken by RBI in government’s ability to reduce the budget deficits.

Interest Rates (US$)

LIBOR 1M	0.24175	LIBOR 3M	0.47365	LIBOR 6M	0.7409	LIBOR 1Y	1.0531
T 1M	…	T 3M	0.09	T 1Y	0.19	T 2Y	0.37
FED Target	0.25	T 5Y	1.14	T 10Y	2.30	T 30Y	3.38

The rates are firming up for over 10 days. The rumors are QE 3 is on the way in April since recent intervention by FED did not lower the rates. While 10Y T and 30Y T were down for the first time in 10 days, the short term rates are still firming up. FED recently sold $400 billion bonds (as quoted by bloomberg special columnist Carolyn Baum, an expert FED watcher, on short end and bought equal amount long term with a view to lowering the pressure on short term rates, but the relief is dying down. In short, the main enemy of Stock Market and Derivatives, the short term interest rates, is raising its head. If the rates rise fast, it will cause the precipitate collapse of future trades and derivatives, which is the mainstay of the market nowadays.

Commodities

Item	Latest	Previous	Change	Current OI	Prev OI	Change
Oil (WTI- USA)	106.87	106.71	0.16	305,581	304,927	654
Oil (Brent) …	124.45	125.02	-0.57	NA	NA	0
Gold …	1,649.50	1,654.00	-4.50	146,734	153,866	-7132
Silver …	32.125	32.260	-0.13	55,169	55,424	-255
Palladium …	687.80	699.35	-11.55	21,139	21,223	-84
Platinum …	1,640.40	1,660.60	-20.20	22,734	25,451	-2717

Observation (Commodities)

Oil prices are still rising in US and world wide. It is causing trouble at the FED. The President Obama is also very slow in reacting to situation in Iran. The US treasury is asking China, India and South Korea not to buy oil from Iran whereas it is exempting Japan and 10 other European nations from the ban order. They can continue to buy Iranian Oil for another six months at least. Brent is stable in London with upward bias. Government of India is shuddering in its pants at the prospects of higher oil prices and weakening rupee which raises the cost of oil within domestic India.
If we use the market reports that the FED will resort to QE 3 in April meeting, the gold and silver prices may jump by 10% and 16% from current level. It is now the time to buy Gold and also Silver.

Stocks: Our Observations and Comments

Now that the Government is under intense pressure to resort to divestment to reduce the budget deficits, Anil Agarwal of Vedanta fame and owner of Sterlite/Sesa Goa group, offered $3.4 billion to the Government of India to buy its remaining stake in Hindustan Zinc Ltd and Bharat Aluminum Company. That is cool, Rs 17,000 crores. The government that failed to divest during this financial year, (ending 31/3/2012), will be prompted to accept the offer to please RBI so that it could lower the rates. Anil Agarwal is very smart, and he picked the right vein and right time to force the government to accept his offer. There will be action in Sterlite group today but we do not know who will buy the stake – Sterlite who is heavily stretched in debt after merger, or Vedanta group in London? We are therefore overly bullish on Sterlite stock which will be known as Sesa Sterlite or something similar.
Kingfisher has wisely but under market coercion agreed to terminate unprofitable International Flight operation and focus solely on domestic operations. DGCA agreed not to terminate its flight license and IT Tribunal also decided in favor of KFA, so KFA will have more access to the bank accounts. Still, it is required to pay over Rs 67 crores before month end and if it does not, it will face bank freezing actions from the IT department. There are mixed signals from government. On one hand it is asking Airlines to get the foreign partner, it is limiting borrowing up to $ 1 billion. What is $1 billion in Airline industry? Why limit their borrowings? You may limit equity holding to 49% but why the hell there is limit on borrowings? Give the free hand.
Bank of India raised its deposit rates from 8.75% to 9.25% for 5 years and above. It means that banks are finding difficult to raise the short term money, so seeking long term funds in the form of 5 Year deposits. This is a dangerous trend. How could banks take a view of 5 years and agree to pay 9.25%? What happens if the rates begin to fall? It can not make downward adjustment. Its future profitability will be severely impaired. It underscore the fact that the “money market is very tight” whether RBI lowers the CRR or not.
Mahindra Satyam is valued by TM at $ 1.8 billions if offered swap rate is any indication. The stock was heavily traded with over 37 million shares in up price of 77.40 (up 4.38%). Most of the negatives are now out and will be buried fathoms deep. The only difficulty is that TM was wrongly advised to merge Satyam with itself in stead of TM merging into Satyam. As result, lower priced shares are replaced by higher prices shares – not a good move. We have to lower the price target of Satyam from high of Rs 160 to Rs 130 due to simple arithmetic. It is not ruled out that TM might cause forward split of merged TM shares in the same ratio of 1: 8.5 or 1:10 which will boost the prices. If that happens then we will restore original target price.
ITC and Hindustan Lever are rising, giving indication that the markets are slated for a fall in coming days. These stocks are market contrarians. These are good parking stocks. When the market is near peak, better buy them because they shine in darkness.
We see unusual activity in Tata Motors where over 23 Million shares traded yesterday.

Special Situation:

None today. Sell more than Buy.

Something Right, Something Wrong….

The Government’s action in proposing IT legislation retrospectively to 1962, or 50 years back, is at best a funny move. It is self damaging sword.
Another action of the Government to empower the IT Official with extra ordinary force for recovery of taxes will encourage the corruption. We are sliding back to “License Raj” and “Bureaucratic Dictatorship”

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
Banking	…	Software/Pharma	…	Weakening Rupee
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reasons
MRPL	@69.85	Essar Oil	57.50	Double the money in Essar Oil
Reliance Industries	@785	Cairns	356	For about 6 months, because RIL 4Q result will be very bad due to refinery shut down and also very low production in Kg6.
BPCL	685	Essar Oil	58	You get nearly 12 shares for sale of 1 share of BPCL. While Essar could double, BPCL can not in short term of 8 months
MTNL/Suzlon	30.5	Essar Shipping	28	More prospects in next 6 months
SBI	2,230	LIC Hsg Finance	CMP	More prospects
…	…	IOC/ONGC/HPCL	CMP	Add some more shares at CMP, not over 5% of portfolio individually.This is second stage of entry.
…	…	ADSL	24.30	Good price to enter.
Hindalco/Tata Steel or any stock below Rs 160 that is losing over 30%	CMP	Sesa Sterlite	116	Excellent swap. Fast recovery of losses or making even good money

Kalidas One Liner

None today

Kalidas Chopai

PEP = Preferred Entry Point;

Finding PEP is always difficult. So, it is advisable to use first point of entry so as not to miss the stock.
It so happens that the stock goes down after your purchase, so you buy more on downside (2nd entry) and then stop.
When the stock begins to go higher, and is up by at least 12% to 15%, with target still far away, you make the third entry on the upside because upward trend is reasonably established.
Similarly, while selling always get hold of first exit point.
If the stock goes higher, sell some more to average up your selling price. Now stop.
When the stock begins to go down after hitting recent top, you sell immediately at the bid price because the stock may develop downtrend.
Never be cheesy while buying and never be greedy while selling. Money is in your pocket when you sell.
Always smile first before buying or selling. Only large hearted investors make money all the time.

Stock	None today			CMP		PEP	CMP
No comments today.
First Entry		2nd Entry on Downside			3rd Entry on Upside
Comments:
First Sell		2nd Sale on Upside			3rd Sale on Downside
Comments:
Ref. No.	12/KC/20	Date:	2012.mm.dd	Target (3M)		SENSEX

OVER

Stock Observatory India

Ref: ISO/12/55 of 2012-03-21, Wednesday, India Time 10.30 am)

Overnight Events and Effects:

While US was expressing anger at India’s continued trading with Iran, it exempted Japan and 10 EU nations from Iran Oil sanctions. It allowed them 180 days extensions for reducing import of oil from Iran. China, India and South Korea still remain on “unfavorable list” and they are required to comply with sanction by June 2012
US Housing start was reported at 3 year high, suggesting continuing recovery.
While the stock markets are trading at near term high, JP Morgan, a proxy for US economy, dismissed 5% of equity trading desk today. So, if the economy is recovering, the stocks are recovering then why the hell the biggest bank in US is curtailing its equity trading desk? If the economy is recovering, then the equity trading desk should have recruited more staff. Reading in reverse, if the equity trading desk is curtailed, then the stocks at over 13000 must be overpriced.
Only tech companies are doing better than others. Apart from Apple, Oracle reported better numbers in Sales and also in profits. This is the only saving grace of the US economy
Treasury yield is still rising, suggesting that the market interest rates are on climb up.
China Banks’ profit appear to be rising, and bad debts are also rising. The economy is reported to have slowing growth. They say that Chinese economy is slowing down, if that was so, how does the US economy is rising when 60% supply originates from China.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,170	13,239	-69
NASDAQ	3,074	3,078	-4
NIKKEI – Japan	10,121	10,142	-21
Hang Sang -HK	20,879	20,935	-56
SENSEX – India		17,316	-17316

* = live intra-day.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	79.387	79.494	-0.1070
Euro/US$	1.3274	1.3235	0.0039
Rs/US$	50.3050	50.2680	0.0370

Observation (Currency):

Interest Rates (US$)

LIBOR 1M	0.24175	LIBOR 3M	0.47365	LIBOR 6M	0.7409	LIBOR 1Y	1.0531
T 1M	…	T 3M	0.10	T 1Y	0.20	T 2Y	0.38
FED Target	0.25	T 5Y	1.20	T 10Y	2.37	T 30Y	3.46

Commodities

Item	Latest	Previous		Change	Current OI	Prev OI			Change
Oil (WTI- USA)	106.71	108.03	-1.32		304,927		291,902	13025
Oil (Brent) …	125.02	124.50	0.52		NA		5,422	-5422
Gold …	1,654.00	1,656.30	-2.30		153,866		163,517	-9651
Silver …	32.260	32.67	-0.41		55,424		55,591	-167
Palladium …	699.35	706.75	-7.40		21,223		21,217	6
Platinum …	1660.60	1,677.50	-16.90		25,451		27,159	-1708

Observation (Commodities)

Commodities were hammered down in futures trades. Look at oil, its open interest rose to the highest level in last 2 days. Gold was also lower at $1654, so also Silver. The short interest in Crude Oil rosé by another 13,000 contracts today. There is no let up in oil prices in London where the Brent crude is trading just above $125 level.
We still suggest buying of gold. We did ask you to wait for 2 or 3 days last week, and it has turned out to be true – gold was forced down giving opportunity to buy. Now, we are asking readers to increase their position in Gold and Silver

Stocks: Our Observations and Comments

Supreme Court did not allow review petition of the Government. The decision was taken in few minutes inside the chambers, not in open house press. Vodafone was returned Rs 2500 crores + 4% interest yesterday. However the battle is not over. When the Income Tax amendment allowing retrospective effect from 1962 become a law after passage in parliament, the government may raise the Tax demand again on Vodafone. It must be a taxing time for Vodafone who spent several crores in legal fees for over 4 years.
Foreign investors, especially Private Equity players, will not come in so easily. They are still in India only for one reason – good yield on GOI Bonds fetching over 9% yield, one of the highest in the world. FII are buying bonds and selling equity
Tech Mahindra and Mahindra Satyam are forging ahead with merger. The market reports the swap ratio of 8:1 or 9:1 (Satyam to TM shares). The stock was up smartly to Rs 75 – or in other words, the real gains have started accruing already. The stock will be up by another 10% before the merger announcement is made. Mahindra Satyam is therefore a good buy at the moment. Swap from TCS/Infosys/Wipro to Satyam. Also any stock trading below Rs 92 may be swapped into Satyam. The uncertainty, the biggest obstacle to stock price rise, is coming to an end. This is real opportune time to buy Satyam.
Allied Digital (ADSL) is another buy at critical buy level. Do not buy for trading but buy from real perspective. Most of the negatives of the company are now over.
Kingfisher Airlines says it has stopped the International Operations. It will focus only on domestic flights. The rumors that Kingfisher may be asked to surrender the license to fly were not true. DGCA approved the company’s plans. Since the oil prices are firm, the KFA may continued to face problems. While our judgment is faltering about the immediate help arriving at KFA, we are still on buy list with enhanced risk of safety.
Watch out for Petronet. If you do not own any, just buy some shares. It will be one of the best stock to own from growth perspective.
Avoid auto stocks which are suffering from two decades of the law
Start buying OMC stocks such as ONGC, IOC, HPCL and BPCL. In all probabilty, diesel prices may be decontrolled though partially.
While we maintain stock specific idea, make sure that your go

Special Situation:

None today

Something Right, Something Wrong….

Supreme Court was right in refusing to review petition. Government was wrong in amending tax act retrospectively for enlarging tax income. The correct course for the Government is to do away from subsidy which will put less pressure on Government’s finances. If the government decides to revive its tax demand after IT Amendment is passed by house into a law, FDI will suffer badly in India and Rupee may slide to Rs 55.
To conceal one lie, the government is resorting to hundreds of lies. When the government needs money badly, just with a stroke of pen abolish all cash and kind subsidy so that pressure on raising finance will be reduced significantly.

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
None	…	…	…
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reasons
Any stock	<92	Satyam	<75	Value, News and business.
MRPL	CMP	Essar Oil	<55	Value

Kalidas One Liner

Kalidas Chopai

PEP = Preferred Entry Point; How to use the following table? Finding PEP is always difficult. So, it is advisable to use first point of entry so as not to miss the stock. It so happens that the stock goes down after your purchase, so you buy more on downside (2nd entry) and then stop. When the stock begins to go higher, and is up by at least 12% to 15%, with target still far away, you make third entry on the upside because upward trend is reasonably established. Similarly, while selling always get hold of first exit point. If the stock goes higher, sell some more to average up your selling price. Now stop. When the stock begins to go down after hitting recent top, you sell immediately at the bid price because the stock may develop downtrend. Never be cheesy while buying and never be greedy while selling. Money is in your pocket when you sell. Always smile first before buying or selling. Only large hearted investors make money all the time.

Stock	Mahindra Satyam			CMP	75	PEP		CMP
All uncertaity will be ove soon. The merger may be completed within next few days, in any case before 31/3 to help TM set off losses on account of recent Acquisitions. One of the best growth stocks.
First Entry	75 now	2nd Entry on Downside		69.50	3rd Entry on Upside		108
Comments:
First Sell	108	2nd Sale on Upside		141	3rd Sale on Downside		171
Comments:
Ref. No.	12/KC/23	Date:	2012.03.21	Target (3M)	92	SENSEX now at

OVER

Stock Observatory India

Ref: ISO/12/54 of 2012-03-20, Tuesday, India Time 10.30 am)

Overnight Events and Effects:

Except for Apple news to pay some dividend and buy back $10 Billion of its own stock, there was no significant economic event. Dow remained stable, dollar sank a bit, treasury prices fell (yield rosé) on expectation of improving economy to continue. While this author does not see any palpable sign of economic recovery in US, the majority of analysts are singing in chorus that the “US economy is on upswing”. It is difficult to fight the masses, so the equity markets world over rise not by looking at its own economy, but some one else’s economy.

Apple Computer: We never believe in idea of stock buy back. When you can issue the stock free of cost, the way the FED, ECB, BOE and India’s RBI do for their currencies, why should a company buy back its own stock? Have you ever heard any of the central banks, including FED, buying back its own currencies at any time? No, then why the companies do? While Apple may be having technological bright idea, it is numb in its financial management. It has run out of idea what to do with so much money? It rarely buys another company the way the Microsoft does.

Crude Oil is still surging. The parity between the Crude Oil as traded in US and Brent Crude in London has narrowed to less than 5 points from 20 points a few months ago. Since this is taking place at higher price, it means that many speculators in US have lost a fortune in trading oil in futures market. May be another Enron is on the horizon.
Australia imposed mining tax on Iron Ore by 30% sending the shock waves. Poor Ratan Tata – after taking over Corus, he does not have enough iron ore, and whatever available, it is at higher price.
Almost all countries in charge of commodities from Oil to Iron ore, are imposing lot of taxes from what comes out of the ground. They are jealous of the private companies making money. They feel that the royalty is not enough. Government of India will pick up this clue and start charging 20% or 30% extraction taxes on the quarry owners. Metal prices therefore have established another support factor – the Taxes from governments. As such, the chances of major correction in metal prices are much less. Stay with the metals whenever the prices contracts for metal scrips – is our advice.
China raised the fuel prices by 6.6% yesterday, its second move in last 2 months. Pranab Mukherji should learn something from China. There is no point of simply subsidizing oil or diesel any more.
More under Indian Stocks section.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,239	13,233	6
NASDAQ	3,078	3,054	24
NIKKEI – Japan	10,142	10,130	12
Hang Sang -HK	20,935	21,115	-180
SENSEX – India	17,375	17,265	110

* = live intra-day.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	79.494	79.76	-0.2660
Euro/US$	1.3235	1.3180	0.0055
Rs/US$	50.2680	50.1912	0.0768

Observation (Currency):

Interest Rates (US$)

LIBOR 1M	0.24175	LIBOR 3M	0.47365	LIBOR 6M	0.7409	LIBOR 1Y	1.0531
T 1M	…	T 3M	0.08	T 1Y	0.20	T 2Y	0.38
FED Target	0.25	T 5Y	1.19	T 10Y	2.38	T 30Y	3.48

Commodities

Item	Latest	Previous		Change		Current OI	Prev OI	Change
Oil (WTI- USA)	108.03	107.92	0.11		291,902		266,251	25651
Oil (Brent) …	113.07	113.15	-0.08		5,422		5,422	0
Gold …	1,656.30	1,659	-2.70		163,517		160,135	3382
Silver …	32.67	32.49	0.18		55,591		52,909	2682
Palladium …	706.75	701.70	5.05		21,217		21,077	140
Platinum …	1,677.50	1,674.3	3.20		27,159		26,988	171

Observation (Commodities)

The oil speculators are losing in billions, and based on saying that “losing gambler gambles more” the oil speculators increased their short position by massive 25,651 contracts or = 25 million barrels of oil or nearly one day of oil consumption of United States. Other commodities also saw rise in short interest, with gold being more prominent, followed by Silver. It looks like the speculators have received some hints which encouraged them to short these metals.
If you want to buy Gold or Silver, better wait for a day or more to see whether these speculators succeeds. If they do, you may have better price to enter it. Please note that one can not hold position for long in future market (not physical), so he should trade to book the profit at every 3% to 5% rise.

Stocks: Our Observations and Comments

Indian market have marked downward bias. In spite of many analysts voicing satisfaction with the budget, smart money is going out of the market. Bonds are gaining because of expectation of lower interest rates in April policy meeting of RBI
Pranab Mukherji met RBI Subba Rao and obviously Rangarajan, to convince RBI that Government is taking actions to address burgeoning deficits, and that RBI should reduce the rates to encourage the market. Where is the independence of RBI?
Satyam Computer saw a big volume yesterday and the stock rosé into 71. We suggest readers to buy strongly now, before it makes a major move upwards. Looks like that some news are about to hit the market with positive surprises.
Kingfisher Airlines is likely to lose flying license. While Income Tax Appellate Tribunal stayed the order of the department, a small victory for the company, the Service Tax department is proposing to freeze all bank accounts. Our judgment that the Government might do something at this time, is faltering. Still we believe that any precipitate fall in prices may offer us second and final stage of buying. Remember, do not increase exposure beyond Rs 50,000 or about 2000 shares.
OMC Stocks may benefit soon as the government is likely to allow rise in prices of Petrol, Gas and LNG. Some rise in diesel may also be allowed. We suggest readers to buy more of IOC, HPCL and ONGC now, but buy small, not over 500 shares at a time.
Petronet has returned to our strong buy list. If you do not have any, better buy some now. The stock is entering second growth stage.
Reliance Industries Ltd., reported the lowest ever gas production due to shutting down many rigs there due to sand and water ingress. RIL may report very bad numbers this quarter end due to closure of refinery for maintenance purpose and loss of gas production in KG basin. RIL alone will drag down SENSEX by at least 150 points.
LIC Hsg Finance is a buy again due to prospective announcement of RBI on interest rate. This is positive for some housing finance stocks. This stock is holding up even in this down market.
Gold and Silver: Raise more exposure to these metals especially for Silver. Buy them in next two days, after watching what happens to the speculators in futures market.
Vodafone: The government has preferred petition before Supreme Court for review of its decision. It will be taken up today. The government passed “retrospective law on taxation to force Vodafone to pay. The government is insisting why did not Vodafone deduct TDS at source while making payment to Hutchison. What we do not understand is that the real tax liability is of Hutchison, not of Vodafone. Why not government is filing a law suit in Hong Kong and also in India or even international court against Hutchison who will be liable for tax, not Vodafone. Vodafone’s rôle is limited only to TDS, but the government is suing them as if they were the guarantor for Hutchison liability. This is why I always say that Government is taking medicine for headache when the pain is in the stomach. If Supreme Court reverses its decision, it will send extremely bad message to global investors that in India anything goes.
The market is turning green at the time of this writing. It is just a dead cat’s bounce. We are certainly heading lower to 15,800 level at least.

Special Situation:

Satyam Computer is a strong buy. Its days of lower numbers are about to end soon.

Something Right, Something Wrong….

When Hutchison is liable for taxes, why is this government chasing Vodafone? Why not Pranab Mukherji or Manmohan Singh understand this basic tenet that Tax Liability of a corporate is not transferable to another entity. To make a law retrospective is nothing but an inveritable nonsense. It will have profound and most negative effect on Indian economy and stock markets in future. We are showing FII the exit gate.

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
None	…	…	…
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reasons
Any stock <100	<100	Satyam Computer	<73	Something is happening there.

Kalidas One Liner

None today

Kalidas Chopai

Stock				CMP		PEP	CMP
No comments today.
First Entry		2nd Entry on Downside			3rd Entry on Upside
Comments:
First Sell		2nd Sale on Upside			3rd Sale on Downside
Comments:
Ref. No.	12/KC/20	Date:	2012.mm.dd	Target (3M)		SENSEX now at

OVER

Stock Observatory India

Ref: ISO/12/53 of 2012-03-19, Monday, India Time 9.30 am)

Overnight Events and Effects:

Dow fell marginally. US$ was also weak. Euro rebounded strongly. It could be due to buying of Euro by UPS who agreed to buy TNT, a European based Courier company, for over Euro 5.18 billion ($6.8 billions).
Too much money causes problems – this time it is Apple Computer – who with over $97.6 billions in cash does not know what to do. It may announce a cash dividend of $2 per share, that is, you invest $575 and you make $2 in dividend to make you happy. They call it as most valuable company ahead of Exxon with market cap of over $525 billion against Exxon’s $405 billions. When the stock rises beyond belief, such abnormalities emerge.
Chinese currency “Yuan” is assuming greater and greater role in Asian and Global finance. The talks are taking place in close quarters in UK financial circles that “London should become principal Offshore Trading Center for Yuan” against the present role of Hong Kong and a close contestant Singapore. In other words, the chances of Yuan convertibility are becoming brighter and brighter but the Chinese government is so stubborn that it will not allow Yuan to be traded in centers like London. For them, Hong Kong is the best place where they can exercise total control.
India declared Budget 2012 open when the Finance Minister Pranab Mukherji presented it last week. More under Indian stocks
There are no other major news that warrant any comment.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,233	13,253	-20
NASDAQ	3,054	3,057	-3
NIKKEI – Japan	10,130	10,116	14
Hang Sang -HK	21,318	21,323	-5
SENSEX – India		17,466	-17466

* = live intra-day. No significant movement except in currency where dollar index fell little bit. It is finding difficult to go beyond 81, the most critical level. Indian markets are weak and judging from Industries reaction to the budget proposal, it does appear that the Indian stocks might run into turbulence and will find lower and lower level. Pranab Mukherji finally sealed approval of recession to come and deceleration of growth. I expected only slow down in growth, but it now very much appears that in less than 12 months, most possibly from 2nd half of the new financial year (2012-13), India may head into self engineered recession.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	79.76	80.205	-0.4450
Euro/US$	1.3180	1.3102	0.0078
Rs/US$	50.1912	50.1750	0.0162

Observation (Currency):

Nothing special except some weakness in dollar which may be transaction specific of UPS trying to buy European entity TNT for $6.8 billion equivalent value of Euro 5.1 billion. It means that Euro may be bought selling dollars which may upset the balance.

Interest Rates (US$)

LIBOR 1M	0.24175	LIBOR 3M	0.47365	LIBOR 6M	0.7409	LIBOR 1Y	1.0531
T 1M	…	T 3M	0.08	T 1Y	0.19	T 2Y	0.36
FED Target	0.25	T 5Y	1.11	T 10Y	2.29	T 30Y	3.41

It looks like FED decided to intervene in interest rate market by buying short end bonds and selling medium to long term. The rates from 5 year onwards are stubbornly higher which may puncture the short term strategy soon. If this week does not see the lower interest rates, it is likely that difficult days are likely to come soon. It is better to stay away from US market which may fall sharply. We do expect some bank failure of really reputed name. The 10Y yield has moved from low of 1.89 t0 2.29 (+0.40) which is rise in finance cost by 20%. Similarly rise in 30Y yield has moved from 2.89 to 3.41 (+0.52 or 17%). This is going to cause consternation in derivative markets soon which was thriving on near zero interest rates.

Commodities

Item	Latest	Previous		Change		Current OI	Prev OI	Change
Oil (WTI- USA)	107.92	106.15	1.77		266,251		262,393	3858
Oil (Brent) …	113.15	111.42*	1.73		5,422		5,422	0
Gold …	1,659	1,661.8	-2.80		160,135		177,283	-17148
Silver …	32.49	32.65	-0.16		52,909		56,658	-3749
Palladium …	701.70	707.10	-5.40		21,077		20,691	386
Platinum …	1,674.3	1,689.9	-15.60		26,988		28,969	-1981

Observation (Commodities)

Look at US WTI Oil price ($107.92) compared to Brent Crude prices (113.15). The parity has come down to just 5 points or 4.5% from nearly 20%. It means that someone is selling the Brent Crude and buying US oil. This is the reason why the petrol prices have risen in USA on retail front by almost 15% in last 2 months. It is likely that WTI may overtake the Brent crude prices by 5% as in the past.

Stocks: Our Observations and Comments

Budget 2012:

There was clear evidence that Pranab Mukherji finally decided to mortgage his common sense and intelligence. His budgetary proposals were smacked of tools which are certain to lead Indian into recession. In order to conceal one lie, he has to speak hundreds of lies. The best solution for him was to allow diesel prices to move freely, reduce or abolish subsidy altogether, and raise not less than Rs 120,000 crores by divestment from more than 200 PSU, and then allow lower taxes. Instead, he was harping on the personal vendetta against companies like Vodafone, and also permit the revengeful Income Tax department to pursue any one who has concealed profits. How could he trace back history and make the Income Tax Law Amendments retrospective from as long as 1962? Has he gone mad?
His act of imposing 2% extra duty on gold import was preposterous move. Gold is money, how could he think of taxing money? Even the present 2% import duty is illegal and unconstitutional. Gold is also recognized form of legal tender and no legal tender can be subject to taxes under any circumstances. He is hurting the common masses and is asking them not to invest into gold which is prime source of savings of all Indians. The Gold prices will go higher by 3% at least with the result that the gold may trade higher from today by at least Rs 750 per 10 grams.
His move to raise taxes on Cars also defy common sense. The Car is no longer a luxury item. Auto industry now provides more cogent employment than any other tangible sector. More cars means more repair shops which may provide employment to skilled but not so much computer literate masses. Auto Industry is leading every nation into major employment provider source. It also helps the steel sector who is supplying hundreds of thousands of tons of steel to this industry. The development of car industry is sort of a “Mother Industry” just as the “Chip Industry” is Mother industry for Computers. On one hand he is encouraging building of 4 to 6 lane roads, and on the other he drives away the car, buses and trucks off the road. What the empty roads will do if the consumption of car comes down drastically?
If Pranab just allows the diesel prices to be market driven, almost all negative pressures on the government will disappear. At the same time, if he divests quickly, even at lower prices, from 200 PSU @ 20% per year, then it would raise almost Rs 100,000 crores quickly. Reduction of subsidy on diesel and petrol might reduce the deficits by another Rs 100,000 crores. This will bring the deficits under the control and force RBI to reduce the interest rate by at least 2.5% in 12 months, reducing interest financing cost of the Government by Rs 40,000 crores. Thus, net cash surplus of over Rs 250,000 crores could allow him to reduce the Corporate Income Tax from 30% at the moment (33% effectively) to 22% and also abolish all kinds of surcharge. It will boost the Stock market so much that the market cap of all PSU even at lower holding at higher prices will be higher than current higher holding at lower prices. Thus, the economy will benefit from such move and drive India away from the path of recession to real growth.

Special Situation:

The markets are expected down. We have to see how various sectors are going to react to the Budget Proposals.
There are hints that diesel price regulation may take place during this financial year. As such we are poised for rally for OMC stocks. Use the current downturn in prices for next few sessions to buy the OMC stocks progressively
JKS is not for J K Singhania, but Jet Airways, Kingfisher and Spice jet. There are no relief set for these Airlines, On the contrary, the Income tax department, Excise department and Customs departments are running after these severely beaten industry. These tax authorities are taking sadistic pleasure in attaching bank accounts and subjecting the entire industry to terrible shocks, when they deserve real help. Will tax authorities seal the bank accounts of Air India for similar troubles?
We have to watch the markets for at least next 3 days, and take firm view only after Wednesday. Until such time, we neither suggest buy nor sell.

Something Right, Something Wrong….

Everything is wrong in the budgetary proposal of the Pranab Mukherji. He did look charming and highly personable in his new tailor made suit but the budget stinks. He has aggravated the problems of the industries.
The only safe sector will be Software which is overseas dependent, not India dependent. Another sector will be “Pharma” sector which does not suffer from price control.
Petronet will benefit from elimination of duty on Gas. We now believe that this stock that is, Petronet, may be bought now, instead of waiting for major correction. Watch this stock for next few days and buy it even if the price is higher. It will have volume growth, profit growth and overall growth.

SWAPS:(All in Rupees)

Following swaps are suggested to maximize gains on the capital. The idea is to get out of stagnating or weakening sectors into growth or strengthening sectors

SECTOR SWAP
From		To		Reason
Banking	…	Software/Pharma	…
STOCK SWAP Following situations are suggested. The idea is to sell the overpriced stocks and switch the proceeds to underpriced stocks or those stocks which gained or regained favors of the investors. These are not necessarily long term recommendations. Read the comments with the following tables to make sure that you understand what you are going to do.
SELL	@< or >	BUY	@< or >	Reason
Any stock < 230	CMP	Petronet	< 165	Better prospects
Any stock < 108	CMP	GSPL	< 73	Better prospects

Kalidas One Liner

If only Pranab Mukherji opened up his confused mind before Kalidas, he would have found the Best Budget to the liking of all
India will be moving back into the regime of bureaucracy and license raj.
The infra structure stocks will suffer steeply in spite of token help.
Power stocks, especially Gas based, will benefit from Zero duty. RPOWER may benefit.
Major index stocks like State Bank of India, Reliance, ONGC and ICICI may suffer which may bring down the index by almost 400 points.

Kalidas Chopai

Stock	Petronet			CMP	165	PEP		141
The budgetary proposal to abolish import duty on Natural Gas (LNG) will help this company tremendously. Furher the company has decided to shorten time to develop its Gujarat terminal. In short, we expect Petronet to have tremendous volume growth due to higher production and import, AND higher profit margin.
First Entry	161	2nd Entry on Downside		181	3rd Entry on Upside		235
Comments: The budgetary proposal is beneficial to the company. Gas is the only sector which is a bright spot of otherwise suicidal budget of Pranab Mukherji. Even in severe downturn of the market, this stock will not only protect the investment but also lead to growth path.
First Sell	285	2nd Sale on Upside		330	3rd Sale on Downside		>400
Comments: We have lowered the sell target due to weaker market, not due to the stock. Do not get out of this stock entirely. Keep at least 15% of stock for longer time.
Ref. No.	12/KC/23	Date:	2012.03.19	Target (3M)	210	SENSEX now at		17,466

OVER

Stock Observatory India

Ref: ISO/12/52 of 2012-03-16, Friday, Time 9.30 am IST)

Overnight Events and Effects:

Dow continues its upward streak, this time on news that unemployment claim benefits went down by 14,000 suggesting improvement in Job market. Almost all analysts are in agreement that the US economy is on firm recovery track. When almost all are in agreement, it will be difficult to oppose their views because it is they who make market. For traders, such daily statement constitute tonic for their daily trades.
Apple is in lime light again. Its i pad 3 (known only as ipad) is released today for delivery and about 1 million pieces will be sold and delivered today as per media report, that is, cool US$ 500 million sale in one day alone. Whatever opinion one may have, Apple is the dream story of any investor, and those who owned it even during last one year rally, are benefited by 100% almost.

I regret and my daughter also deeply feel sorry, when I first suggested her a few years ago (when Apple was in trouble) to buy it when it was $18. We had bought Sun Microsystem instead at around $3.20. It was a wrong move, because Apple today is trading at $585 or nearly 31 times, that is, appreciation of 400% per year for over 7 to 9 years.

Gold fell so much that it fell below Platinum prices, that is,Platinum raced ahead of Gold. About 2 months back, we boldly predicted that Platinum would overtake Gold, and it has turned out to be true assessment, although our expectation was in higher 1700 prices. Yes, we were proved right, and not happy with the way Platinum is going to stay ahead of Gold. We thought that the cut off point may come between $1750 to $1800, not at lower end.
A negative in US market was rise in interest rates for period 2 years to 30 years. Even short end also went up . The rates are staying at higher level for almost 6 days in a row which does not bode well for the market.
Subba Rao again missed the boat, he should have been bold enough to cut the rates even symbolically by 0.25%. It was the perfect time, but again, instead of acting pro-actively, he surrendered and reacted to news from North Block (parliament). There is no doubt that he is lacking imagination and guts to manage RBI, and it is not so late not to fire him from his present job. When someone does not perform, the rule of efficiency says that the non performer should be sacrificed or fired. Firing is better than Resignation because “Firing ” instills fear to perform better, resignation does not.

US & Asian Markets today

INDEX	CURRENT	PREVIOUS	CHANGE	COMMENTS
Dow Jones USA	13,253	13,194	59	Momentum rising
NASDAQ	3,057	3,041	16	Same as abve
NIKKEI – Japan	10,116	10,123	-7	Fell due to Japanese exporters
Hang Sang -HK	21,323	21,353	-30	Reacting to China and US
SENSEX – India	Not Opened	17,676	-17676

* = live intra-day.

Currency:

Pair/Index	LATEST	PREVIOUS		CHANGE	Comments
US$ Index	80.205	80.589	-0.3840
Euro/US$	1.3102	1.3030	0.0072
Rs/US$	50.1750	50.3550	-0.1800

Observation (Currency):

Sterling is firmer than Euro. That is, some people are reluctant to buy dollar, and prefer any none US$ currency.
Rupee is still weaker. Let us wait for budget what the Government of India is upto.

Interest Rates (US$)

LIBOR 1M	0.24275	LIBOR 3M	0.47575	LIBOR 6M	0.74525	LIBOR 1Y	1.0552
T 1M	…	T 3M	0.08	T 1Y	0.20	T 2Y	0.37
FED Target	0.25	T 5Y	1.09	T 10Y	2.28	T 30Y	3.41

Higher rates are sticking at last. If LIBOR reacts, then it would be confirmation that the higher rates are about to become permanent feature – a big negative for stock market – although the melt down is still months away. As we mentioned yesterday, the massive Mark to Market related losses may force the interest rates higher. The first sign of trouble is emerging from oblivion, so pay attention to this section in future.

Commodities

Item	Latest	Previous		Change	Current OI	Prev OI		Change
Oil (WTI- USA)	106.15	106.28	-0.13		262,393	257,742	4651
Oil (Brent) …	111.42*	120.47	-9.05		5,422	5,345	77
Gold …	1,661.8	1,646.8	15.00		177,283	190,121	-12838
Silver …	32.65	32.155	0.49

Important Change from 1st April, 2012

Stock Observatory India

Overnight Events and Effects:

US & Asian Markets today

Currency:

Observation (Currency):

Interest Rates (US$)

Commodities

Observation (Commodities)

Stocks: Our Observations and Comments

Special Situation:

Something Right, Something Wrong….

SWAPS:(All in Rupees)

SECTOR SWAP

From

To

Reason

STOCK SWAP

SELL

@< or >

BUY

@< or >

Reasons

Kalidas One Liner

Kalidas Chopai

Stock Observatory India

Overnight Events and Effects:

US & Asian Markets today

Currency:

Observation (Currency):

Interest Rates (US$)

Commodities

Observation (Commodities)

Stocks: Our Observations and Comments

Special Situation:

Something Right, Something Wrong….

SWAPS:(All in Rupees)

SECTOR SWAP

From

To

Reason

STOCK SWAP

SELL

@< or >

BUY

@< or >

Reasons

Kalidas One Liner

Kalidas Chopai

Stock Observatory India

Overnight Events and Effects:

US & Asian Markets today

Currency:

Observation (Currency):

Interest Rates (US$)

Commodities

Observation (Commodities)

Stocks: Our Observations and Comments

Special Situation:

Something Right, Something Wrong….

SWAPS:(All in Rupees)

SECTOR SWAP

From

To

Reason

STOCK SWAP

SELL

@< or >

BUY

@< or >

Reasons

Kalidas One Liner

Kalidas Chopai

Overnight Events and Effects:

US & Asian Markets today

Currency:

Observation (Currency):

Interest Rates (US$)

Commodities

Observation (Commodities)