i Develop Stocks Advisory

FED testimony....

U.S. investors will focus their attention Thursday on testimony from Federal Reserve Chairman Ben Bernanke and quarterly results from Merrill Lynch.

Merrill is expected to take a massive write-down related to mortgage investments when it posts results before the market open. The results could further roil the financial sector, which has been pummeled by the subprime crisis. Citigroup took a massive $18.1 billion write-down in its fourth quarter while JP Morgan Chase reported a $1.3 billion hit.

But Wall Street could get a boost as Bernanke heads to Capitol Hill. The central bank chief is due to testify before the House Budget Committee at 10 a.m. ET and is widely expected to express support for plans to goose the weakening economy. As always, investors will also parse his testimony for clues about where interest rates are headed.

In global trade, Asian markets rebounded to finish higher, and European stocks rose in early trading.

Re-rating trigger in RIL....

Reliance Industries Ltd reported net profit of Rs 8079 crs on equity of Rs 1454 crs post IPCL merger. This includes Rs 4733 crs extra ordinary income. Yet the nos are better than expected. However, the catch of RIL is not in nos (it is always underperformed stocks in comparison with global peers) ; the catch is in its value unlocking.

Reliance also announced that “

1. Reliance Digital Retail Ltd,
2. Reliance Brands Pvt Ltd,
3. Reliance Wellness Ltd,
4. Reliance Footprint Ltd,
5. Reliance Integrated Agri Solutions Pvt Ltd,
6. Reliance Trends Ltd,
7. Reliance Lifestyle Holdings Pvt Ltd,
8. Reliance Universal Ventures Pvt Ltd,
9. Reliance Autozone Pvt Ltd,
10. Strategic Manpower Solutions Pvt Ltd,
11. Reliance Gems and Jewels Ltd,
12. Delight Proteins Pvt Ltd,
13. Reliance F&B Services Pvt Ltd,
14. Reliance Agri Products Distribution Pvt Ltd,
15. Reliance Leisures Pvt Ltd,
16. Reliance Retail Securities and Broking Company Pvt Ltd,
17. Reliance Home Store Pvt Ltd,
18. Reliance Trade Services Centre Pvt Ltd,
19. Reliance Food Processing Solutions Pvt Ltd,
20. Reliance Supply Chain Solutions Pvt Ltd,
21. Reliance Digital Media Pvt Ltd,
22. Reliance Loyalty & Analytics Pvt Ltd” ie 22 companies have become subsidiaries of the Company.

This has potential value unlocking entities of RIL gr of companies. If RIL gr decides to unlock value in any of these entities which is basically part of retail chain then RIL gr’s market cap may rise substantially again. This is a pointer to the fact the some value unlocking may happen in coming months.

We suggest investors to remain invested in RIL stock and our target of 3350 in intact. The correction in the stock was the immediate reaction of winding up of long positions traders had taken on various buy calls in last 2 weeks. Not only our target is intact but also the story is intact and those who wish to increase commitments may take call on RIL again with the target of 3350.

Con....soli...dating......?

Devil will be at work today this was the feeling and it did. Market opened very strong and lost in a moment due to huge short selling by front runners. Wait….this short selling which is tossed up in the open market like an open book and made known to each and every trader got to know this and the work for system maker was done….

The Bull resilience has not lost its momentum and every weakness in the U S market is positive for India and every correction is a welcome sign and an opportunity to buy. But it requires lot of guts to go out in windy climate like and bat likes the WALL of India. It is a mind game and no ordinary investors can do this because most of them go with the wind.

Most of the investors as well as traders have psychology that whenever they buy a stock that should become a bottom and they always stay invested till the last penny in the coffers and hence even a small drag of 100 odd points dither them and wane bull. This is time if prices are hammered with Sensex breaking below the technical triggers the stop losses and margin calls starts triggering.

This is now a regular feature which I have been telling you and probably in time to come the volatility may rise because each and every broker is expanding its reach to 5 to 10 time of its normal franchises due to huge inflow through stake sales. Simply the margin biz can offer them nothing less than 22% pa. E g a broker has raised Rs 1000 crs and used 300 crs expansion and Rs 700 crs margin funding then 150 crs straight added to the bottom line from margin funding alone. Who cares….who’s body and who’s coffin….

This do have reverse impact too because when market recovers and starts moving in new orbit the same breed starts funding and in haste to earn those who have lost jump in the band wagon again making a real chaos at any junction.

The genius and genuine investor can make money by identifying the stock early, understanding business dynamics and assessing himself the so called valuation and exit price and then calls his shot. For this he can rely on any professional agency including I DEVELOP. But at the same time he has to take his call against all odds. In Equity market 30 to 50% deviation in share price is nothing unusual due to demand and supply situation and the sentiments running at the given point in time.

Always the uncertain times gives you the best chance to acquire the quality stocks at cheaper valuations.

Coming back to market, 5910 or 5850 are the different levels where accumulation can happen because when Nifty was 6300 the volumes had happened at 5800 levels in PUT which was suggesting sell off but for sure now again the calls of 6300 are active which is again pointer to higher closing. For us we have call on stocks like Bombay Dyeing, IFCI ITC and IDBI where we will remain positive. At the moment we have crossed the max barrier of 10 calls which we always do when market falls vertically. ITC may see 2 positive triggers very soon one that FDI in cig may be allowed beyond 50% and if that happens then ITC may bid for UTI stake at much higher price and 2 that ITC is set to de-merge its hotel biz. It is interesting to note how ITC reacts to the latest robust data released by paper manufacturing association showing first time major improvement in the demand of paper in Dec quarter close to 8 to 9% which is 50% higher than the expected nos. This is a very positive trigger for re rating for PAPER as a whole proving once again that I DEVELOP’s belief in this sector was again ahead of the market. As such ITC could be a stock of 2008 and I think it can surprise street in 2008. We could stop our temptation to generate buy call on ITC though we exceeded limits. Even RNRL, BOI and LIC housing will rise very fast which is seen from derivative volumes but we can’t initiate more calls. We know for sure FED will cut rate and India will salute FED cut by 500 to 700 point rally which will bridge the entire damage.

Jo dar gaya samzo mar gaya……This kind of correction always erase

Many a man fails to become a thinker for the sole reason that his memory is too good.

Asian Stocks Fall to 5-Month Low on U.S. Slowdown

Asian shares fell, extending a slump that has wiped $4 trillion from global stock markets this year, after reports added to concern the U.S. economy is in recession.

Toyota Motor Corp. and LG. Philips LCD Co., the world's No. 2 liquid crystal display maker, led declines among companies reliant on U.S. consumers. BHP Billiton Ltd., the biggest mining company, dropped along with metal and oil prices. Mitsubishi UFJ Financial Group Inc. fell after Merrill Lynch & Co. reported a record loss.

``The market's running on fear and uncertainty at just how big the slump in the U.S. will be,'' said Shane Oliver, who helps manage the equivalent of $113 billion at AMP Capital Investors in Sydney. ``There are serious worries about the Asian growth outlook in response to the U.S. downturn.''

The MSCI Asia Pacific Index lost 2.5 percent to 143.11 at 11:15 a.m. in Tokyo, taking its decline this week to 5.5 percent. About seven stocks dropped for each that gained on the measure, which was set for its lowest close since Aug. 20. All benchmarks open for trading declined.

Japan's Nikkei 225 Stock Average slid 2.8 percent to 13,395.78, while the broader Topix plunged 2.5 percent, falling below 1,300 for the first time since September 2005. Australia's S&P/ASX 200 Index slipped 2.1 percent, its 10th-straight fall.

U.S. shares posted their worst three-day decline since 2002 yesterday after the Federal Reserve said manufacturing in the Philadelphia region slid to a six-year low.

Reliance Power gets record 2.2 m applications

The Rs 11,700-crore initial share sale by Anil Ambani’s Reliance Power Ltd is setting several new benchmarks, as frenzied bidding by investors continued on the eve of the close of issue tomorrow. The issue has set a new record for the total number of applications received for an initial public offering (IPO) in India. It also created a new record for the biggest total demand created for an IPO in the country. A total of 3 million applications were received from investors for the Rs 11,700 crore IPO at 5 pm today, surpassing the 1.95 million applications received for Mukesh Ambani’s Reliance Petroleum IPO in May 2006. NTPC’s initial share sale saw 1.44 million applications. Powergrid (1.27 million) and the just-concluded Future Capital IPO (1.17 million) were the other IPOs that generated big demand. With one more day to go for the close of the IPO, the Reliance Power IPO generated demand for Rs 248,000 crore — a new record. The previous highest demand was for the Mundra Port SEZ issue at Rs 203,708 crore. Meanwhile, the Reliance Power IPO was subscribed 24 times at 6 pm, with the retail investor segment subscribed by 8 times. The Qualified Institutional Bidders (QIB) segment was subscribed over 34 times; foreign institutional investors accounted for nearly 90 per cent of the bids in this segment. The high net worth investors portion was subscribed by 22 times.

Ispat may sell Mumbai flats at Rs 50K/sq ft

Steel producer Ispat Industries is hoping to sell its property at Mumbai’s Pedder Road at a rate of about Rs 50,000 per sq.ft.

The company may sell the property as duplex flats, implying an area of 8,000 sq ft, costing approximately Rs 40 crore, or as single flats of 4,000 sq ft, valued at Rs 20 crore.

The company is in talks with property consultant Cushman and Wakefield for sale of the 112,000 sq ft residential property it has developed. The going rate in the area is close to Rs 50,000 per sq ft and the company hopes to realise similar rates.

“It is one of the prime locations in the city and we are expecting valuations of about Rs 50,000 per sq ft,” said Vinod Garg, the company’s executive director (marketing).

The company, however, has no plans of getting into the real estate business at present.

“Our strength is steel and power and we want to be restricted to that,” he added.

The company has the capacity to produce 3 million tonnes steel annually and is planning to increase it to 5 million tonnes in another 3 years.

It has signed a memorandum of understanding (MoU) with the Chattisgarh government for setting up a thermal power plant with a capacity of 1,200 mw.

Another MoU has been signed with Maharashtra for setting up a 1,000 mw power plant.

Construction of a 110 mw captive power plant at our Dolvi (Maharashtra) plant is underway and the power generated here will help us meet part of our 300 mw requirement that we currently purchase, he added.

Bernanke Says Fiscal Stimulus Could Revive Expansion

Federal Reserve Chairman Ben S. Bernanke said fiscal stimulus of as much as $150 billion would help revive economic growth, while warning against any widening of the budget deficit in coming years.

Bernanke's acknowledgment that the economy is weak enough to need stimulus validates forecasts that the Fed will lower interest rates by at least half a percentage point this month. President George W. Bush will tomorrow lay out the general principles he favors for a short-term stimulus, Deputy Press Secretary Tony Fratto said today.

A temporary package of at least $60 billion to $70 billion in spending by early 2009 would have a ``significant'' effect in the second half of this year, Bernanke said.

``It would certainly be measurable, it would not be window dressing,'' he told the House Budget Committee in Washington today in response to a question.

He repeated remarks from last week that the Fed is ready to take ``substantive additional action'' on interest rates to insure against risks of a recession. Treasury notes rallied and the dollar dropped after Bernanke's remarks and a report from the Fed's Philadelphia branch showing manufacturing shrank.

``Support of a temporary fiscal stimulus suggests great concern on Bernanke's part about the downside risks,'' said Robert Eisenbeis, a former research director at the Atlanta Fed. ``He certainly doesn't want to be held responsible for a recession, even though the seeds were laid'' in final years of former chairman Alan Greenspan's tenure, he said.

India can withstand impact of US rate cut

The Union Finance Minister, P. Chidambaram, today said that interest rates cut in the US would affect India but the India’s high exports to other countries, including China and Japan, would insulate it from any crisis.

Though a drastic cut in interest rates by the US to avert a recession will affect India, the Government would take steps to counter such an impact, Chidambaram said at the CII Partnership Summit here today.

Commenting on the impact of a US recession on India, the Minister said that although India enjoys a trade surplus with the US, which also happens to be its largest trading partner, India has “equally large exports to Europe, to eastern countries like China and Japan. Therefore, I don’t think that a slight slowdown in US economy will immediately or drastically affect India’s growth prospects,” he said.

India’s exports to the US at $15.6 billion against an import of $6.1 billion last year gave it a huge trade surplus over the world’s biggest economy.

“If the US goes through recession, there will be global consequences and India will also have to bear a part of the consequences. I hope the US Government will also take measures to stimulate growth and we will also respond by taking necessary steps,” Chidambaram said.