Share Market Tips of The Day 12 - May, 2008

TRIVENI Action - Sell Price - Below 122 Stop Loss - 124.50 Target - 118-116

Pre Market Watch - 12th May 2008

Pre-Open
Market worries, business hopes & more

What’s worrying the markets?
There’s no stopping the spectre of rising inflation as it continues to cast its spell on Indian stock markets. Rising prices of fuel and food and now a sharp depreciation in the currency has led to enhanced fears regarding inflation touching even higher levels. And even then, it is important to note, the inflation figures (measured by wholesale and consumer price indices) outlined by the RBI and other statistical organisations remain understated, for facts like the rising crude prices that have not been passed on to the consumers by way of higher prices for petrol, diesel and kerosene.

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What's keeping policymakers worried?

In this scenario, stocks from the oil and gas and rate sensitive sectors have been particularly hit. Pressure on stocks of companies that require high levels of capital investment is also showing no signs of abating. And then there is the fear of the economy slowing down on the back of high interest rates that have curbed money demand, both for consumption and investment. Without trying to sound overtly unnerved about these issues that dog sentiments, we believe that the pain is here to stay for the short to medium term.

Oil’s boiling over
As experts at Goldman Sachs, the US investment banker, discuss the ‘super spike’ that crude prices can take en route to the US$ 200 per barrel mark over the next 6 to 24 months, the commodity is showing no signs of costing any lesser than its current highs. Factors that have kept oil at the current high levels (of nearly US$ 120 per barrel) include – continued strong demand from guzzlers like India and China, supply side issues from oil’s largest producers, and of course, the US Federal Reserve induced dollar hammering that has led to speculative buying in crude and other commodities.

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Will the boiling oil spill over?

To make things simpler, since most of the world commodities are traded in US dollar terms, depreciation of the greenback makes its cheaper to buy these commodities, even when the users are finding it difficult to bear the ‘rising’ prices. Not only crude, you name a key commodity and it has witnessed a sharp spike in prices over the past few months – steel, copper and aluminium to name a few.

Taking the India model abroad
The news concerning Indian telecom major, Bharti acquiring a major stake in its South African counterpart, MTN, is heating up. The fact that the Indian company is aiming to replicate its low cost model across other geographies with similar income levels as India, is a rationale that carries much weight. As a matter of fact, India is adding 3 mobile subscribers every second. This is up from 1.5 four years back.

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Understand fundamentals of identifying a telecom stock

Unlike most of the consumption stories doing rounds in India and which show huge potential in the untapped rural markets, home to two-thirds of the country’s one billion-plus population, the increasing penetration of mobile telecom services is being acted out in reality. In rural India, carrying a US$ 20 mobile phone can be something of a status symbol. This is clearly indicative of the much-larger drama unfolding in the Indian telecom market, once considered a backwater and now the fastest growing in the world.