i Develop Stocks Advisory

Inflation the Villain One more field day where inflation made major dent to the sentiments of investors. Market was expecting 10.2% whereas I was expecting 9.8% and the actual no has come 11.05%. I think Indian economy is growing at pace larger than anybody’s expectations which is reflected in inflation rise. The question is whether all the negative has come in one week and this inflation is topped one….? Or will it rise to 12% next week…? Some political hiccups could resolve this embargo… It seems Madam Sonia has patched up with S P which was reflected in the SC battle and then solution through RBI in a leading gr’s case where SP has a large say. This equation was enough to call cards on N deal which Madam did call. Left too know this position and at the most can dare to just walk out and withdraw support but have lost the power to destabilize the Govt. Neither NDA nor Left would like to take the debit of destabilizing the Govt just ahead of elections. Therefore at least political front now seems to be alright. Market reaction to 11% inflation in not fully unwarranted. But at the end of the day market run on positions and most of the traders are short in the market. Nifty O I stands at 11.50 cr shares and put alone accounts for 5 cr plus and futures at 4 crs shares which means the PCR is as high as 3 which makes me to compare market with the 1.28 lac crs position in Dec 07 on long side. The boat is over tilted on one side and hence it has to sink with all passengers on board too will sink. It is better to travel next time. I mean either take calculated risk and go long where the risk reward will remain in your favour irrespective of all odds at the moment. Alternatively just stay away from the market. But do not be on selling side. So far we have seen only worst and worst factors and now it is time to see good factors surfacing from hereon. Next week itself oil will start falling. Suadi may raise oil production whereas Iraq too ready to supply oil after Osaba promised to withdraw troops from Iraq. The 190 bn USD satta in oil is unsustainable and will break any time. Monsoon is on track which will bring down food prices in next 2 months. This will control inflation. N deal will be a pleasant surprise. This was the last shock I was expecting which will set all speculation at rest. Since market has decisively breached 14700 which was never envisaged there is possibility of another 500 to 700 points downside if my projections of oil falling steeply does not come through. If oil falls then chances today’s low could make a bottom. Yet I would stick my neck in taking risk at this level so that my risk reward ratio remains in my favour. This has given vibrant impact only because this was timed along the rollover dates. Only Rs 14000 crs OI is rolled over out of Rs 86000 crs and just 4 days left for doing the same. The lack of buying depth will not allow to rollover positions at very low carrying cost. There will remain huge upside irrespective of huge inflation nos. If oil is sustaining at these levels then at least one co needs mention is Minda which will the largest beneficiary. Honda came out to announce a hybrid car for Rs 22 lacs in order to resolve the oil issue. Tata launched new CNG car and Martui too launched 800 cng version. Toyato has announced Innova and Corrola with CNG im Mumbai and Delhi. The excise differential of 8% for hybrid car makes CNG kit free rather lower than the normal car. I think the expected top line from CNG kit could be close to Rs 600 crs which will be added in MAGL in which Minda holds 23% stake. This is a high margin biz which is making some investors to consolidate holding in this co. Counter has completely dried up and chances of flare up is not ruled out. I am not trying to boost the stock but for sure it shows that this stock has failed to buzz in any falling market. Yet only long term investors should hold this stock. Jeyswal Neco reported net profit of Rs 86 crs which is stunning. At cmp of Rs 47 it trades at pe of 5 and based on 09 estimates it is at 2 pe which makes a very strong case of investment. You cannot live on other people's promises, but if you promise others enough, you can live on your own