Wednesday, July 23, 2008

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Another Ride in RNRL

Whether the victory of the UPA government in the trust vote has any good for the country or not, for speculators it was a field day today. Market breadth was too positive. In NSE, 1000 stocks gained vs. 90 stocks which declined. A 11:1 ration in bulls favor.

Now forget about all bad news. There is no more bad news at least for 3-4 weeks. Let America go down drain in the name of recession. We can ignore all overnight gap downs for the time being.

Now we need to see whether the govt. will remove FM PC and RBI Reddy not to violate the rust of SP. What I had not seen in this political gambit is the effect on Reliance stocks.

In the recent market turmoil, the stocks of Anil Ambani were battered down more than that of Mukesh’s. It was reported that Anil had lost 137,000crores of rupees in six months from his peak net worth of 280,000crore. And it was the highest amount any Indian had lost in this gamble.

Now with the positive relationship between Amar Singh of SP (a close ally of and which bailed out UPA govt.), all Anil group’s stocks are set to skyrocket like hell. At the same time Mukesh’s stocks which missed bigger downward move might end up in a range trading pattern for some time.

Whether some good will be really done to ADAG or not is not important for a speculator. Stock market is there for speculators. Investor is already dead if not will be butchered over the course of time. For a speculator what is important is the future prospect that it might happen. It means that RNRL-RIL dispute which was on the verge of ending as a negative to Anil is now under expectations of bringing some positives. That means already volatile RNRL will find its way northwards.

That is the precise reason why of all the stocks, ADAG’s stocks rallied strongly today. Adlabsfilm was up 17%, Relcapital was up 15%, RNRL was up a big 23%! I think it will decisively move till 150 in the coming days. But when to take position is really a matter of concern because of its extreme volatility.

One dip must be surely expected if it were to reach 150. That dip must be for only one day because of profit taking. To imply that the stock was not just short covered but indeed bought by long players. On the other hand if it continues dipping consecutively for five days, we can give up hopes. The today’s rally can be attributed to purely short covering. That time will come soon and we need to get set for the next bull ride.

If you think RNRL is too costly, buy MRPL and JPHYDRO as hedge.

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