Pre Open Thoughts: Shock and Awe!!!

Pre Open Thoughts: Shock and Awe!!!

Ø Truth makes many appeals, not the least of which is its power to shock. Just when Indian markets were beginning to settle down comes another jolt from reports that the proposed General Anti-Avoidance Rules (GAAR) could affect FII investments through participatory notes (P-notes), which runs into billions of dollars. The GAAR comes into effect from April 1. FIIs are worried that the Government could raise tax demands as a result of these new provisions.

Ø The key worry has been that policy making remains in a limbo. Opposition parties, though divergent in views are finding excuses to get together and put pressure on the ruling government. Valuations are not very compelling at the moment and the list of worries only gets bigger.

Ø The start will be positive following healthy gains in the US and European markets. Trading will be choppy due to the F&O expiry this week. Keep a close eye on the rupee and on the flip side Crude is again back above $125 a barrel. Also watch out for the Government’s borrowing calendar for H1 FY13.

Ø We advocate caution at current levels with immediate support likely around 5170.A break below this level might set the stage for re-testing of the recent lows. However, that is still some distance away. In the near term, the market could hold steady if FII flows remain positive.

Ø Watch auto stocks as buying a car in Maharashtra has always been a costly affair, but it's going to cost even more now with the Maharashtra government increasing the tax on petrol and diesel cars sold in the state. Along with cars, things like natural gas, LPG and dry fruits will become more expensive with the government imposing a new 12.5% tax on entry of natural gas into the state. A new 5% tax will also be levied on LPG. The tax rate on diesel cars and jeeps will be increased by 4%, while for petrol vehicles, it will go up by 2%.