*EU SUMMIT – HO-HUM….ERRR… WELL… * *By Ruma Dubey*
The biggest expectation from the much hyped EU Summit was announcement of a large scale purchase of bonds by the European Central Bank (ECB). Well that did not happen. The summit did not come out with immediate ‘fire dousing’ kind of measures but what it came out with instead are measures which will at least henceforth reduce risks of another similar debt crisis in the EU zone. Yes, the summit, as expected was more hype and less action. Why were Asian and Indian markets so hung up about this summit? Maybe because as this point of time, we have nothing much to cheer about and thus, anything, anywhere which has even a semblance of some good news was enough. The summit was more of a palliative care – it brought forth measures to alleviate symptoms, whether or not there is hope of a cure by other means. The European Union leaders agreed on measures to address the region's sovereign debt crisis, and significant amongst those was stricter budget rules for the euro zone, which they believe will cure reduce if not cure structural problems behind the bloc's debt crisis. The summit could not bring about changes to the EU treaty among all the member countries. The summit was more about how to avoid such risks in the future and had nothing or very little to talk about the overcoming crisis in Greece, Italy and the European banking system. The EU Summit, as was expected, did nothing to bring down the interest costs for Italy and Spain and despite the summit, we still do not know how EU Govts and banks will finance themselves over the next three months. The EU leaders announced on Friday that an intergovernmental agreement will go ahead and be written by March, but without the full, immediate support of all 27 members. U.K. said it will not take part in any new deal. Sweden, the Czech Republic and Hungary initially did not commit themselves to an agreement. All countries, which are the remaining 23, that commit to the new EU treaty cannot allow their annual deficits to exceed 0.5% of economic output in normal times. The cap is set at 3% if there is a recession or other exceptional circumstances. And there will be automatic penalties for countries whose deficits exceed 3% of GDP. As the Economist magazine rightly puts it - Whether the agreement does anything to stabilise the euro is moot. The agreement is heavily tilted towards budget discipline and austerity. It does little to generate money in the short term to arrest the run on sovereigns, nor does it provide a longer-term perspective of jointly-issued bonds. Much will depend on how the European Central Bank responds in the coming days and weeks. Now that we kind of know that the EU summit is not going to be like the Santa Claus, handing out ‘gifts’ to bring cheer and reduce misery, the next big question is – will this cause downgrades? Like the doomsday predictor, S&P had warned earlier this week that it would decide whether to downgrade 15 euro zone countries, including Germany and France, depending on whether an EU summit in Brussels on Thursday and Friday produced a convincing response to the debt crisis. Well, we now know that nothing much has come out of the summit. Does that mean that we are staring ahead at a downgrade? And the consequence of downgrade on the markets would not exactly be very kind. Well, the US markets ended on a happy note despite the not-so-firecracker results from the summit. For us in India, well, we have to move on and deal with the gaffe which the Govt has admitted to on the export front - goof-up in export data inflated the figure by $9 b in April-Oct 2011. And then we have the IIP data too on Monday, which, expectedly, may not be too palatable. Enjoy the weekend before the tough week ahead. On Sat, Dec 10, 2011 at 3:14 PM, karishma suvarna < [email protected]> wrote: > Chief Market Strategist, ashwanigujral. talks to ET Now on the market > outlook and trades to get into. > > What is the call on markets right now? > > It is possible that we will start underperforming global markets and even > when we see a lot of green overnight, chances are that we will start well > but in the second half of the day, we will start slackening out. So it is > possible that the next couple of days, next week could be a bit positive > but if at higher levels you are unable to cross 5000, then chances are that > finally the market will start declining and this time, the decline will go > past 4850. > > Today, a trading bottom of sorts may have been formed but the rallies from > there will be extremely weak like we saw it happen today. Right now, Europe > looks positive, maybe US also has a 150-piont rally. So you will see our > market gap up 60-70 points but that would not get sustained at a higher > level. > > We will underperform global markets, not go up when they go up and when > they come down, we will go down much more than those markets. That is the > sense we are getting because at 5100, this market the way it has turned > does not show a lot of strength. > > How bad could it get for stocks like BHEL from hereon and is it still time > to initiate fresh shorts? > > They have been in deep downtrends and last 8-10 days was a good pullback > rally and we have seen that high pedigree stocks have also come down a lot. > People should tend to buy these stocks only when they go up consistently > and right now, it is not the right time. > > Maybe these stocks are basing out, that time will tell but as of now there > is no evidence. BHEL could easily get down to 250 and maybe on a bad day > even go lower. Similarly with L&T, it has completed its pullback. It is now > moving down again and chances are that could as well test 1200-1220. > > So capital goods should not be your first choice, the first choices have > to be the non-rate sensitive type defensive style consumption stories > because consumption probably has not been affected as much as these > investment group stocks have been. They would rally once RBI actually > starts reducing rates. > > Your thoughts on stocks like Wipro and Infy and whether come next week we > can still see sustainable gains in these stocks? > > The keyword here is sustainable. Yes as long as the global markets remain > positive, tech would do better than other stocks but it is difficult to say > that they will sustain these gains and keep moving higher. > > Wipro, targets of 435 to about 440 in a stable market are easily possible. > On the downside, it should find support around 385. The only reason it is > going up is because it got beaten up and was underperforming and now it is > just catching up with the other stocks in the large cap IT. > > What is the call on Pantaloon? > > That is also going into an avoid category. You need the stock to cool off. > You need all of this kind of news flow to die down and then see if the > stock moves up. There is no chance that from 180 it moves up to 220 and > then it goes back again because the news flow expected did not happen. > > It was in a downtrend earlier and that downtrend has just restarted. Most > of these retail stocks should get it back to their lows because I do not > see if over the next 2 years how any kind of FDI can happen and these will > only move higher only once this kind of news actually happens. So retail > also is going to go down with the rest of the market. > > Come Monday morning, what are the kind of traders you would undertake? > > You can look to buy something like an HPCL with a stop of about 288, > target of about 305. Crompton Greaves post the pullback can be sold again > with a stop of about 130, target of about 115 and Educomp has also had a > bit of a rally. That can be sold with a stop of about 220, target of about > 180. > > Some of the consumption names, you have been very bearish on VIP, does the > call still remain a sell come Monday morning as well? > > That is what happens, that is what is happening with the Bank Nifty. Last > year everybody was extremely bullish on banks and now when an overbought > over-owned sector or a stock starts coming down, there may not be bad news > but just that everybody has it and there are some big sellers trying to > unload, levels of 90 are the next support. > > But I would not be surprised if it goes even lower and below 90 there is a > straight plunge towards levels of 65-70. That is also possible but clearly > there is no sign of any respite here. > > On Sat, Dec 10, 2011 at 1:44 PM, kuch kuch kehna hai < > [email protected]> wrote: > >> Merrill Lynch has upgraded Wipro to a Buy from Neutral and *upped its >> target to Rs 470.* This is triggered by its forecast of a rebound in >> earnings growth to 20% over the next 3 years >> >> >> > > > -- > > > > Karishma Suvarna > > -- CA. Rajesh Desai -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. 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