Sensex touches 2 year high in 2013, government may consider hiking fuel prices -Ajcon Global

The BSE Sensex edged higher on Friday to touch two-year high, posting its strongest weekly performance since the end of November, as oil companies such as ONGC rose on hopes a proposed change in the government's pricing formula would boost gas prices.

Domestically, diesel, kerosene and cooking gas LPG prices may be hiked soon as the government considers Vijay Kelkar Committee recommendations on cutting fiscal deficit. The Kelkar Committee, which was appointed by finance ministry to suggest a roadmap for fiscal consolidation, has suggested immediate hike in fuel prices and complete deregulation of diesel prices by start of 2014-15 fiscal. It also suggested raising kerosene and LPG rates. According to Oil Minister, M Veerappa Moily, Vijay Kelkar committee recommendation on deregulating diesel and raising kerosene and LPG rates) is at proposal stage. The (Petroleum) ministry is only processing that report and we are yet to take a decision. The panel had in September recommended "immediate increase in Petroleum prices. This should be continued in the next year in such a way that the prices of diesel are fully deregulated by the start of 2014-15. The prices of kerosene and LPG also should be revised regularly to keep the subsidy levels at affordable levels. Price of diesel, which currently costs Rs 47.15 per litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. Kerosene rates have not changed since June 2011 and it currently costs Rs 14.79 per litre in Delhi.

Globally, the benchmark Standard & Poor's 500 index ended at a five-year high on Friday, lifted by reports showing employers kept up a steady pace of hiring workers and the vast services sector expanded at a brisk rate.

The gains on the S&P 500 pushed the index to its highest close since December 2007 and its biggest weekly gain since December 2011. Most of the gains came early in the holiday-shortened week, including the largest one-day rise for the index in more than a year on Wednesday after politicians struck a deal to avert the "fiscal cliff."

The Dow Jones industrial average gained 43.85 points, or 0.33 percent, to 13,435.21. The Standard & Poor's 500 Index rose 7.10 points, or 0.49 percent, to 1,466.47. The Nasdaq Composite Index edged up 1.09 points, or 0.04 percent, to 3,101.66.

For the week, the S&P gained 4.6 percent, the Dow rose 3.8 percent and the Nasdaq jumped 4.8 percent to post their largest weekly percentage gains in more than a year.

The CBOE Volatility index, a measure of investor anxiety, dropped for a fourth straight session, giving the index weekly declines of nearly 40 percent, its biggest weekly fall ever. The close of 13.83 on the VIX marks its lowest level since August.

In Friday's economic reports, the Labor Department said non-farm payrolls grew by 155,000 jobs last month, slightly below November's level. Gains were distributed broadly throughout the economy, from manufacturing and construction to healthcare.

At the current levels, we suggest In the Housing Finance Sector, we recommend buying LIC Housing Finance, GIC Housing. India's home loan market is expected to grow 17%-19% in FY13 although affordability has dropped considerably among buyers due to high inflation, high property prices and lower rise in income levels amid a slowing economy. (Source: ICRA). The 17%-19% growth is expected to come on the back of likely reduction in home loan rates, special schemes offered by banks and higher ticket size.

In the Pharma sector, we advise to accumulate stocks like Wockhardt, Dr. Reddy’s, Jubilant Lifescience and Aurobindo Pharma. We recommend investors to book profits in Cipla, Lupin, Sun Pharma and IPCA Labs.

In the Auto space, we advise to accumulate stocks of companies like Maruti, Mahindra & Mahindra and Bajaj Auto. However, we would recommend sell on TVS Motors and Tata Motors.

In the Infrastructure space, we recommend investors to accumulate stocks like Pratibha Industries, IL and FS Engineering and Construction Company, Reliance Infrastructure, Sintex Industries and Unity Infraprojects.

In the Commodities space, we recommend investors to accumulate NMDC, Coal India, Manganese Ore and Hindalco Industries.

We advise investors to book partial profits in companies like Bajaj Finserv, Bajaj Finance, Power Finance Corporation, Rural Electrification Corporation, IDFC and Shriram Transport Finance, recommended earlier by us.

In the midcap space, we recommend investors to accumulate Sintex Industries, Dish TV and Hathway Cable. Eros International Media Ltd., the fully integrated entertainment company can also be considered. We also recommend to Accumulate CARE for long term as we feel there is potential for strong upside.

Your friendly advisor since 1986,    

 Ashoka Ajmera

Ajcon Global Services Ltd