– The government is finally making moves which the market has been waiting for decades. The good news is that government is moving towards deregulating fuel prices and the bad news is that individuals like us who are already burdened with huge inflation coupled with food inflation have to shell out more in the coming days. The move is a welcome step but some steps should have been taken so as to curtail the ever rising prices. When PM Manmohan Singh resumed office for the second time he mentioned that his govt will control prices within 100 days. He has already celebrated 1 year in office about a month back and we don’t know when will the 100 days promise happen!
– The government has decided to increase prices across the board and have further decided that diesel also will become deregulated commodity over a period of time. Kerosene remains to be regulated since it is a political issue and government would not risk meddling with kerosene or LPG. The move is good and the reaction we have already seen among the oil marketing companies on Friday. Though a welcome step the minute details on pertrol deregulation are still not clear. Will the prices change daily like crude and gold? or will their would be any time frame say quarterly once?
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– Immediately after the oil price deregulation announcement the oil and gas sector rallied but the overall market fell due to inflation concerns and possible RBI reaction. The fall was led by the banking sector. Inflation is already above 10% and which is further likely to move up. Market fears a 50 basis point increase in interest rates. MFF feels it would be unjustified if the rates are increased due to fuel price led inflation. The demand we may see is not going to be demand led but spill over effect of fuel prices hence punishing investors and general public for governments wrong policies will be totally unjustified.
– We had recommended investors to Buy ION Exchange Ltd at Rs.138/- and advised to hold for long term. The company is totally into water management and it’s brand known to everyone is Zero’B. India would be facing severe water crisis in future and hence we may slowly see every company having water management systems in place in their premises. ION Exchange Ltd would benefit from this and hence one can invest to benefit from a crisis! As a matter of disclosure we are also holding this company and would be delighted to see atleast Rs.200/- in near future and a bigger price in long term.
– Market would continue looking at the monsoon very closely and the deficit rains till now has been pegged at around 11% by the IMD. We will see good positive moves once there is good advancement of rains in coming days. If things continue as present and no negative news comes to haunt market then expect a short term target of 18360-18600 on Sensex and 5480-5555 for Nifty. Our year end target remains at 19300-20200 for Sense and 5760-6070 for Nifty.
Vivek Karwa, CFPCM