A Positive Move...

Government finally bit the bullet...

Hiked Diesel price by Rs 5 a Liter and limited subsidized LPG cylinder to 6 per family per year. Now this is very very long overdue step and one surely in positive direction. For, first, Diesel subsidy is hardly useful to poor people (apart from lower transportation costs) and it is mostly used by affluent middle class for their SUVs. Second, the poor people for whom the LPG subsidy is intended will usually never use more than 4 cylinders in a year. They have probably single stove and make simple food (hopefully) twice a day and for that 6 cylinders are usually more than sufficient. It was always the best way to  solve the wrongly directed LPG subsidy. I have to say, got a pleasant surprise with the news.

NIFTY today made a doji and Bulls and Bears were really fighting hard for an upper hand but given this development, I do not think that we will have a reversal tomorrow (with the rider that US Markets don't spoil the party).

US Markets as of this moment are in positive territory and if they close like that (or even stay flat) we should see positive opening tomorrow. We are not in any danger area as far as RSI or MACD are concerned and I am pretty sure that had it been otherwise... even then Markets would have cheered this move emphatically.

I can only hope that Mamata Di or someone similar do not start some political vote bank drama and push for rollback by blackmailing the Government. Lets hope GoI shows some spine this time.

As for my end, then I am stuck in 'Aamchi Mumbai' for some conference and usually having working dinners everyday. Will be back in Pune on Sunday and should be able to chill out a little then. Sorry for repeated  delay in tutorial post. Thanks for your comments, mails and wishes for 100th post. Happy Trading.

Addition:
I am modifying this post a little as just reading the news that Fed has decided to formally announce that they will continue with Quantitative Easing and this time it will be open ended. This is very very interesting. Fed has never committed itself to such a degree before. Will have to read between the lines and see what prompted this.

It says it will continue with policy action till it sees 'substantial' improvement in employment conditions. I am too tired to go through the Fed statement fully but can sense that it can actually start a short term rally afresh (as if we are not in it already). Very interesting times and I am ruing the fact that I am short of energy to grasp everything right now. Guess, will have to write about it during the weekend if I observe something unusual. Please blame Fed not me if tutorial post gets delayed again... I know you won't mind it though.

Apologies

Hey guys, I am sorry for doing the hollow man (disappearing) act once again. My mailbox was crying out loud as a proof of how angry you guys are.

This time though I was not having any problem in writing. I was just kind of disappointed with the budget. Not that it was a bad budget, but it did not create any sensation. There was hardly any noteworthy change in Income Tax slabs... reduction in STT was a good move though. There is another change of Service Tax which was expected.

I guess it may be kind of late now for a budget post so I am more inclined towards a trade post or a post on Equity Blog to continue our Technical Analysis series.

Do lemme know what you prefer?

Budget Tomorrow

Finally the D-day is here. All preparations have been done and the great General Budget Circus will play out tomorrow. Hope it does not create a storm the way Rail Budget did which you would know if you are not in the jungles of Amazon... As I said, Mr. Trivedi has definitely appealed to a rational mind. His new statement that he does not want Indian Railways to go Air India way speaks a lot about how practical and pragmatic this fellow is. There are not many people who would understand, care to admit and defy someone like Mamata for this. He is definitely a 'like' on FB from me.

Coming back to General Budget, then today's Economic Survey had all the predictable information and hardly anything new was mentioned. It is hopeful that Growth will pick up and rates will drop. Zee News gave good summary of Economic Survey highlights and it can be seen here.

Disclaimer: I am not related to Zee News and I gave the link just because I liked it.

On the sidelines, RBI's monetary policy meeting too ended without any action (a.k.a. rate cut) however the statement made by them raises the hope that there can be a rate cut when they meet again in April. That will be a good move for economy as well as for home loan holders (I included). Present high bond yields are a deterrent in the form of high borrowing cost for everyone and it needs to come down.

As for the budget tomorrow... Fiscal Deficit Target of 4.6% seems like stuff of dreams as of now and it will be violated by a wide margin. Situation is not expected to improve with Brent Crude near $125 and Rupee at 50 vs Dollar. Various commodities (of which we import a lot) are also getting dearer. 2G Spectrum sales may bring some respite and additional much needed mullah for Government in next fiscal. Still the target deficit in next fiscal may not be less than 5%.

Economic Survey showered lot of praise on Services Sector and there are chances that it may see some positives. Increase in Import Duty for some goods is also on cards particularly for our imports from China. That may be good news for domestic Telecom and Power companies. However, the largest beneficiary of this budget may actually be the common man for a change. With the drubbing that Congress got in latest elections, it may try to woo back it's middle class vote bank through budget. Specifically because of this reason, there may be some stupid populist move in budget which may put off the market. Abolishing STT (highly unlikely) is the kind of move which can really propel markets to upside.

Lets see if NIFTY Chart gives any clue...

NIFTY is at 21EMA and I feel that we may see a bounce back tomorrow. As for trading, I will prefer if you revisit the Straddle and Strangle Posts before deciding anything.

NIFTY 5400 Call is at 118 and 5200 Put is at 42. This Strangle will have upper break-even at 5560 and lower break-even at 5040 level of NIFTY if you carry them till expiry. Now I don't expect we will see these levels immediately but booking half of the gain of one of the position tomorrow itself during the day can be a good strategy. I mean to say that if you enter in to this (or similar) Strangle tomorrow morning and then during budget book profits partially on one of the position to cover most of your costs could be one way of trading budget (I am kicking myself for not making this post yesterday so that we could have entered today itself). E.g. if NIFTYgoes up by a modest 50 points and Call Option Premium is now at a level which also covers your Put Option Premium, you can square off half of your position to recover your monies and let the remaining position wait for a suitable time before expiry. I am asking you to book some profit because Budget moves can be real ephemeral and gains can be made or lost quickly and as usual I like to play safe.

Will post tomorrow during trading hours if something worth mentioning comes up. Wish you good luck for tomorrow and have a happy budget. Happy Trading goes without saying.

Rail Budget

Rail Budget, well, it turned out a damp squib as usual to say the least. Still I am not disappointed totally. Also we were not off the mark by long way... None of the stock showed any positive movement. Shorting was an option but none of this stock trades in Derivatives segment and direct shorting of stocks without owning them is something I don't advise. While NIFTY did not show any positive movement (induced by budget), stocks were bad. Just to mention;

• Titagarh Wagons Down 4.5%
• Kalindee Rail Down 7.5%
• Kernex Microsystem Down 5.5%
• Texmaco Rail Down 7.0%

Rail Budget, with hike in passenger fares, has already created a storm. However Rail Minister at least got his priorities perfectly in order... Country First, Family Second and Party (TMC) Third. It will be a pity if TMC removes him from Rail Ministry.

Tomorrow is the day of Economic Survey. The survey is the summary and analysis of the state of the Economy and its performance in previous fiscal. The survey contains various key economic figures and indicators and it is usually a precursor in determining what lies ahead in General Budget. It is Governments reading of the state of the Economy and how it fared in last year. Depending on survey, Government prepares budget for coming year. All about Economic Surveys can be found here.

I will be back with more on Budget... either tonight or tomorrow.

Rail Budget Tomorrow

As I had promised, I am back with budget special posts. Tomorrow Mr. Dinesh Trivedi will present his first Rail Budget. Apart from some new Trains, I guess Fares will be hiked first time since 2003. There is also a possibility that some kind of Safety Cess may be born tomorrow to improve security situation of our trains.

I am listing some of the stocks that are watched around rail budget.

• Titagarh Wagons
• Kalindee Rail
• Kernex Microsystem
• Stone India
• Texmaco Rail

Now, I do not follow any of these stocks fundamentally but we can definitely look at the charts.

Kernex is already anticipating positives from budget and has been going up for last 3-4 days. Kalindee and Titagarh have not shown any particular budget related moves.

I would not like to trade any of these stocks with the budget. I would rather play on NIFTY which looks good after bouncing from the support mentioned in earlier posts.

I would not be surprised if NIFTY as a whole moves in positive direction as compared to individual stocks. I may open a small position on the Long Side depending on the general tone of the budget speech if it sounds rational and does not utter too many populist things to start with.

All this is too uncertain but one thing is very likely... Railway Budget may arrive in Parliament tomorrow in a suitcase and not in a bag like last three years.

I will be back with a more definitive post on General Budget soon.

Happy Trading.