Index Trends & Stocks In Action For 20th August 2013

There was no relief from the freefall as investor sentiment was badly bruised for the second consecutive session. It sent the Sensex nearly 300 points down. The India Rupee closed at a new record low of 63.13 to the dollar, down 2.4% compared to its previous day’s close. It marks the biggest single day fall in a decade. The daily charts suggest a 140 points candlestick with a 50 point lower shadow. This is usually considered a bullish sign if found after a strong downfall. However, the strong cluster of resistance will limit gains. Going ahead, after a strong bear attack, there could be a bounce back of 30-40 points. On the upside the Nifty could face stiff resistance around levels of 5455-5470. On the downside 5340 will act as a strong support level.

ONGC Videsh Ltd, the overseas arm of state oil explorer Oil & Natural Gas Corp (ONGC), is mulling exercising its pre-emption rights to block China's Sinochem Group from buying a 35% stake in Brazilian oilfields for USD 1.54 billion. OVL holds a 15% stake in the block BC-10, known as Parque das Conchas, where Brazilian state-controlled oil firm Petroleo Brasileiro SA or Petrobras is selling its 35% stake to Sinopec. The ONGC stock could remain in focus following these developments today.

Reliance Communications (RCom) has said it is open to new acquisitions and will explore consolidation opportunities in the telecom market, which is expected to see a hectic M&A activity. The government is expected to come out with detailed M&A norms in September. The stock which has been quite in the focus for some time now will continue to do so following developments like these.

According to Credit Suisse annual House of Debt report for India, the country’s ten leading business houses, including the Reliance Group, Vedanta, Essar and Adani, have seen their total debt levels soar by 15 per cent to over Rs 6 lakh crore during the last fiscal while profitability continues to remain under pressure. The cumulative debt of these groups, which also include Jaypee, GMR, GVK, JSW, Lanco and Videocon, is likely to further increase in the current fiscal because of the drastic rupee depreciation and delays in projects being undertaken by many of them. Keep an eye on these stocks as the market absorbs the report details over the next couple of days.

India is open to further reducing the reserve price for the next round of spectrum auctions if the sector regulator proposes such a move. Such a step would bring further cheer to the debt-laden telecom industry. The latest comments come in a few weeks after the chairman of the telecom regulator, Rahul Khullar, echoed the struggling industry's views saying that the failure of the recently-concluded auctions in November and later in March was because of the high reserve price for spectrum. Telecom stocks could well remain in the focus following this announcement.