Markets are expected to remain buoyant in the days ahead, as oceans of liquid cash are all set to flow in the Indian bourses: Orient Beverages Ltd shines in a falling market after the news broke out that it is also into Real Estate & Construction Space: Look at Gravity (I) Ltd, which is also venturing into this space along with Shopping Mall & Hotel business:
Yesterday, my recently recommended scrip Orient Beverages Ltd could stay above the mud after hitting the buyer freeze in the early morning trade, even when the Sensex crashed by 134.95 points. Today also it will remain buoyant. Today oil prices might rise slightly in the international markets due to OPEC's cutting production, but I think this will not be sustained and again it will fall. Yesterday RIL, killing all apprehensions came out with better than expected results for the September quarter, 2006. Yesterday, the market was marred by a stray news in a web-site that RIL will come out with disappointing numbers. I had earlier mentioned in this blog that the though GRM is expected to come down substantially[RIL has one of the highest GRM in the entire sub-continent] it will benefit from high Naptha prices, which rose more than 22% during the last couple of months. As a corollary to it, we can expect "Deewali" on Dalal Street as Indian markets as RIL's share price rises. Hold on to all ur positions. Now since it is confirmed that Naptha prices have started to fall look for the sectors which will be benefited from the fall. Also look for companies which will be benfitted from the fall in certain petrochemcial prices or increase in margins from the petrochemical business.
Apcotex Industries Ltd which makes Artificial Rubber from Petro-chemicals, is one such company which I have already recommended. The most striking feature is that when most of the Tyre or Rubber companies are trading at a substantial multiple to their book values; it is trading at less than half of its book value of Rs.91. It is expected to cross its Rs.90 soon; as petrochemical prices are sure to fall drastically, as evident from the RIL results.
Now speaking about oil it is now almost certain that crude oil prices will fall further, which is apparent from the nevours attitutue of OPEC cartel. The oil almost reached my target price of Rs.$55 / barrel. Fall in the oil price will be aggrevated by slowing down of the Chinese and US economies. Also a compartively warm winter is predicted in the US. It is to be noted that US is the largest uses of petrogenated fuel in the world.
My estimation is that oil might fall to sub-$50 /barrel by December, 2006, after which it might start to rise again. Unless there are too much high decibel exchanges between Iran and the rest of the world & too much unrest persists in Venezuala and Nigera; oil prices should not cross $65/barrel till March, 2007. Besides this Iraqi oil will start to flow in large quantitites from end of 2007 or start of 2008. This will further make the situation fluid. Also strees on the use of non-conventional sources like hydrogen filled cars, solar powered vehicles, bio-diesel, ocean energy etc. are expected to keep the energy prices cool. Hence my prediction of 15, 000 by March, 2007 on the BSE Sensex.
Below is a report on production cut by OPEC which has been culled from the Internet:
OPEC Decides to Cut Oil Production by a Greater-Than-Expected 1.2 Million Barrels a Day:
DOHA, Qatar -- Oil cartel OPEC decided to cut production by a greater-than-expected 1.2 million barrels a day on Friday, and some members indicated it was open to further cuts.
United Arab Emirates oil minister Mohammed bin Dhaen al-Hamili made the announcement at a news conference after OPEC's oil ministers held an emergency meeting in the capital of Qatar.
Support for the move by the de facto leader of the cartel, Saudi Arabia oil minister Ali Naimi, shows the group's unity on the issue of price, said one analyst after the announcement.
"If the market doesn't stabilize, they are going to continue to cut production," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "Prices from $57 to $60 is an area they are willing to defend."
Prices have declined more than 25 percent since mid-July. A barrel of light sweet crude rose 85 cents to $58.50 on the New York Mercantile Exchange Thursday before the announcement.
UAE's Al-Hamili did not specify the amount of production that each member country would cut, but said the reductions will affect all countries except Iraq. It is to take effect Nov. 1.
The cuts will come from actual production levels, he said, and are more than the 1 million barrels a day being called for earlier by cartel members.
The cuts are the first time OPEC has trimmed its output since December 2004, when oil traded slightly above $40 a barrel and the cartel lowered its official production quota by 1 million barrels a day.
However, many observers expect further production cuts in the near future.
Michael Fitzpatrick, a New York-based oil broker at Fimat USA, said "I'm not sure that a million barrels is going to be enough" of a cut to keep oil prices from further declines.
Qatar's Energy Minister Abdullah bin Hamid Al-Attiyah said the cartel's members are not excluding making further cuts.
Asked whether another cut could come in December, he said, "Everything is possible. We are working with the market and it is an open market."
Al-Hamili echoed the possibility, saying "We will monitor the market and review the situation and take a decision accordingly."
OPEC is scheduled to meet again in December in Nigeria and many analysts believe a further cut could be implemented then. "They better act quickly and decisively," Fitzpatrick said.
The organization's president, Edmund Daukoru of Nigeria, said talk of the possible need of a further 500,000-barrel cut was "in line with my own thinking," Dow Jones Newswires reported.
OPEC price hawks such as Nigeria and Venezuela have strongly advocated a cartel-wide production cut since the start of the month.
But without public support from Saudi Arabia, the market took with a grain of salt the likelihood of any cuts.
--Suman Mukherjee
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