Sunday, May 27, 2012

Petrol price hike raises hopes

The Government bit the bullet and raised the Petrol prices by Rs 7.5 raising expectations that further reforms will take place in this small window of opportunity. The markets responded by closing 0.6 pc higher after several weeks of losses.
1. The Government raised Petrol prices but the real losses come from the sale of Diesel where there is under recovery of almost Rs 14. Only when these prices are raised or taxes increased on Diesel vehicles and extra tax amount paid to OMCs (Oil Marketing Companies) will the real losses be stemmed.

2. The Facebook IPO disaster will ensure that there are no more mega IPOs in the global markets in the near future.

3. The Indian markets now will be affected by the global cues only after the Greece elections on June 17th. Expect the markets to edge up till then. If Greece stays in the Eurozone, expect a rally in the global markets.

4. Domestically, also the key results are out of the way and the Parliament is shut. Only, some initiatives on reforms by the Government can lead the markets to rise.

5. Technically if one goes by the Elliot, we are till in the corrective way B to the up move from 4532. We are in the last leg of correction. B can be sub divided in w-x-y. w was from 5629 to 5136, x was from 5136 to 5342 and y -a from 5342 - 4789. y-b is on going and the a final fall up to 4750-4800.

6. Any fall below 4750 is a matter of concern and would place the entire up move in doubt.

Strategy remains to buy on dips below 5000 with a stop loss of 4750. One should look at good quality, high dividend yield stocks.
For those interested in individual stocks, we have the picks by me and Lakshmi.

The Government at least started taking tough decisions. For me, I still feel a Petrol car is a better bet with all the discounts available. In a  Diesel car, you save about Rs 3.75 per km. So, if your break even point will be around 33000 kilometers. For this your annual running should be more than 11000 kilometers or roughly 900-1000 km per month.

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