Outcome of EGOM meeting

The Empowered Group of Ministers (EGoM) has decided to increase the auto and cooking fuel prices and reduce the custom and excise duty on crude oil and other petroleum products.

• EGOM has decided to hike Rs.3/ltr on diesel, Rs.2/ltr on kerosene and Rs.50/cyl on LPG. However it has considered steep cut in custom duty by 5% in crude oil (from 5% to nil) and in all petroleum products (from 7.5% to 2.5%)
• The total under recovery for FY12E previously was at Rs.1700bn considering the steps taken by the EGOM, the total under recovery will reduce by Rs.490bn to Rs.1200bn in FY12E.
• Reduction in custom and excise duty will lead to revenue loss of ~Rs.490bn to the government.

Comparison of fuel price with other neighbouring countries:

Based on the below mention table the prices of PDS Kerosene in India is the cheapest in the region and is 66% lower than the price in Pakistan, 65% lower than Nepal, 47% lower than Bangladesh and 41% lower than Sri Lanka. The prices of domestic LPG in India is also the cheapest in the region and is 55% lower than
the Sri Lanka, 52% lower than Nepal, 35% lower than Pakistan and 18% lower than Bangladesh.

                        Diesel / Rs. Ltr        Kerosene / Rs. Ltr           LPG / Rs. cyl
India                      37.75                       12.73                             345
Pakistan                 48.89                       43.95                              614
Bangladesh            27.81                       27.81                              484
Sri Lanka               34.53                       25.12                              878
Nepal                    42.61                       42.61                              821
Source:MoPNG

What is the Implication on Government and Companies?
A) Implication on Government
Reduction in Custom and Excise duty will lead to revenue loss of ~Rs.490bn to the government.

Breakup of Revenue loss to the government In billion
Reduction in custom duty                                                                                   Rs.260
Reduction in Excise duty                                                                                    Rs.230
Total Loss                                                                                                       Rs.490


Break up of Revenue loss due to Import Duty cut from 5% to 0% on crude oil
Particulars                                                                                                             Amount
Crude Imported in India (MMT)                                                                                     140
Current Indian Crude oil Basket ($/bbl)                                                                        112.7
Import Duty @ 5% ($/bbl)                                                                                             5.6
Import Duty for the Government (Rs. in bn)                                                                  260.2
Loss for the Govt due to duty cut from 5 % to 0% (Rs.in bn)                                    260.2
Note: Indian basket ($/bbl) as per first fortnight June 1-15


Excise Duty cut on diesel by Rs.2.6/Ltr (from Rs.4.6 to Rs.2/Ltr)
Consumption of Diesel (MMT)                                                                                                       65
Cut in Excise Duty (Rs./Ltr)                                                                                                          2.6
Revenue Loss for the Government (Rs. In bn)                                                                               236.9 
Total Loss for the Government (Rs. In bn)                                                                               496.9


B) Implication on companies
Total under recovery will reduced by 26% to Rs.1200bn for FY12E
The increase in fuel prices and duty cut will help oil marketing companies to cut under recoveries by 29.4% from Rs.1700 bn to Rs.1200bn in FY12E. This is at an assumed Indian crude oil basket at $112/bbl on June, 1-15, 2011 fortnight. However, the subsidy sharing mechanism is not yet decided for remaining under recovery by the EGOM.

Due to lack of clarity we have assumed subsidy sharing mechanism based on Q1 FY12E sharing formula as 52.5% of Government, 33.3% for upstream companies and balance would be provide by OMC’s. After the EGOM meet government indicated that they will see the situation at the end of the year and decide the subsidy sharing formula later part of the year.

Nifty Futures for Monday 27th June

The fight between the bulls and bears was at its best during last week. The BEARS won the first round by hammering down the markets at the start of the week. However, the BULLS turn the tables on the bears and left them in a state of shock with a strong 3.16% gain (AUSTIN Power 3:16) on Friday 24^th June 2011 creating a Bullish Hammer Pattern on weekly basis as recommended to Subscribers on 20^th June 2011 .

Now, there could be two possibilities for Monday/Tuesday. (One), some profit-booking in Nifty would take the Futures lower to 5410 levels, where it could find support and restart its upward journey Monday/Tuesday for possible upside targets in excess of 5504. (Two), which looks more likely, the market rises, and the Nifty faces resistance around its recent high in the range of 5565 - 5604, and then slips again to the lower levels of 5410 - 5360.

Please note: We have to understand what happens on Monday, based on one of the two possibilities; to be able to analyze June 2011 Expiry in conjunction with the recommendations made on 8^th & 20^th June 2011 by me.

Although I see, the short term trend is likely to remain bullish, if Nifty future manages to trade above 5504 level but if Nifty future breaches the strong support level of 5410, trend may be reversal and it may test the lower levels like 5304-5254 levels…

.Just Stay tuned Nifty June Expiry special would be uploaded very soon

Learn n Earn Series brought to you by:

J2k

Nifty on Track as recomended on 8th June

Hi,

Lot of you would be wondering how come we gave a prediction of bottom formation at 5180 once 5304 is broken... the answer is very simple charts.

Over a period of time i have learn that charts are formed once the movement is clear but Fibonacci is the ONLY method which gives direction to the chart and tells us what the chart will do and how it will be formed.

In Simple words Fibonacci is like a fortune teller for the numbers. Hence mastering this strategy to certain extent; i had found some learning whereby I could see a double bottom formation happening at 5180 level for NIFTY and hence I had given a specific date of 16th June as well for a support to watch and the same was tested but no visible support was seen and hence today NIFTY had a INTRADAY low of 5182. 

Thus, the finding of “Fundamental challenge for the Month of June '11” was a great success.

Now remember one thing Nifty has made a weekly low of 5182 and the same should not be broken this week on closing basis or ELSE 4900 for NIFTY will come for sure.

On Upside Nifty expiry should be above 5360.

Watch out for this space for the next big thing ...FY12 Q1 expectation are just round the corner and stay tuned for the Learn n Earn series calls.

Regards

J2k.

Fundamental challenge for the Month of June '11

After the OPEC announcement on not to increase the oil production, crude oil prices have gone up and Global economic recovery remains a big question mark ???


Indian economy overview for June 11

1. Diesel Price Hike V/S Inflation rise also Rs 3-4 per liter in diesel prices and Rs 30 increase in LPG is expected to happen soon. (Meeting was to be held on 09-06-2011 )
2. Monsoon Assumption Unclear 
3. Banking sector interest rates are up 
4. URO Zone Problem
5. Food inflation shot up to 8.55% for the week ended May 14, the highest level in four weeks

Overall in Short for June 2011; I still expect more downside may be upto 5304 or 5180 till 5626 is not broken on closing basis. 5360 should be target till 16th June 2011 and act as a support

Oil jumps as OPEC fails to agree on more output

Please check the post made in the month of March 2011 we had already hinted the crude price could touch all time high and today the OPEC meeting has just confirmed that ..please find below an overview of the OPEC meeting happened on Wednesday 8th June 11

Oil prices jumped by USD 2 on Wednesday after OPEC failed to reach a deal to increase output, raising fears of supply shortages later this year and a price rally that could damage global economic recovery.

OPEC talks broke down without an agreement to raise output after Saudi Arabia failed to convince other members to lift production.

"We were unable to reach an agreement -- this is one of the worst meetings we have ever had," Saudi oil minister Ali al-Naimi said.

By 1355 GMT US light crude was up USD 1.40 dollars at USD 100.50 while Brent added USD 1.08 at USD 117.86.

"It came as a surprise. It is bullish for prices. If you look at demand it will be very robust in the next months and there is a big need for extra OPEC oil," said Amrita Sen from Barclays Capital.

OPEC's Secretary General Abdullah El-Badri said the effective decision was no change in policy and that OPEC hoped to meet again in three months' time.

The US Energy Information Administration will issue its weekly inventory data later on Wednesday.

Analysts expected US crude oil inventories to have fallen 300,000 barrels last week, while gasoline stocks climbed 1 million barrels, according to a Reuters poll.