Ahead of the G-20 summit to be held on 26-27 June at Toronto, China‘s declaration of freeing the yuan, surprised the global community sending ferocious bulls loose across stock exchanges, across continents. China said over the weekend that it would allow the yuan more flexibility in adjusting to market forces. The yuan, meanwhile, climbed on Monday to the highest level against the dollar for five years. The yuan closed at 6.7976 against the greenback on Monday, up 0.42 per cent from Friday's close of 6.8262 - nearing its trading band limit of 0.5 per cent. Kelvin Tay, chief investment strategist Singapore, UBS, said: "We believe that on a short-term basis, the Asian currencies and the Asian equity markets will basically see a positive upside and the reason for that is that because it's an endorsement of global economic recovery.
China kept the yuan undervalued, making Chinese exports cheaper and leading to massive job losses and factory closures in the United States and a ballooning trade deficit. Hence forth, imports from America will be cheaper for the Chinese. Contrary, Chinese goods will become costlier to Americans. Conspicuous consumption will hopefully slow down in America and the ever increasing trade deficit will start to narrow down in the months to come.
Amidst this US-China currency drama, the Sensex rose by 17876.55, up by 305.73 and the Nifty rose by 90.70 to rest at 5353.30. Thus, after considering last weeks net gain, the sensex has gained 811.60 points and is just away by 123.45 points to kiss 18000 mark, a passing reference of which was made in my commentary of 17 June. The market breadth as reflected by Nifty advances and declines was extremely positive and stood at 47:3 and the major gainers were – Tata Steel, Hindalco and Reliance Capital which gained by 6.55,5.68 and 4.41 per cent.. Consequent to the stock split and bonus issue, the share of Sterlite Industries was last traded on NSE at Rs. 182.90/share. And now the million dollar question that investors will face is : this whether to become more invested on weakness or less invested on strength
President Obama appointed a group of men and women to “study the causes of the Gulf of Mexico spill and make recommendations for the future of off-shore drilling.” Amazingly, this group consists of environmentalists and academics, but doesn’t include ANYONE from the oil industry! “ At the time of writing this, BP Plc was quoting at US $ 31.05, down by $ 0.71/share. BP just said in a statement on Monday, the 63rd day of the spill, that the cost of its response had hit $2 billion and it had paid out $105 million in damages to those affected. Meanwhile, stock market analysts continue to attempt to quantify BP’s liability even as the leak continues to spew 60000 to 100000 bpd. Experts opine that as the leak has no casing, a relief well will not work, and the only possible resolution is to use a small nuclear explosion to convert the rock to glass – now that’s some real tough technical stuff to comprehend!
There is positive development on Max India counter – promoters have increased their stake to about 35 per cent last week and are expected to raise it further in near future.
The 36 th AGM of RIL was conducted on 18 th June and few of the major highlights of the meeting are given below :
• Declaration of dividend @ Rs.7/share.
• RIL shall supply gas to ADAG when plants are ready.
• Gearing up for major investments in coal, hydro and nuclear power and telecom too
I dare not bore you all with other equally vital details of the AGM if the details don’t help us figure out whether RIL’s share will become a two bagger at least, from current levels – and that too when?
In short, Mukesh like his father loves to think big and shareholders can be rest assured that his word is his bond and I won’t be surprised if some savvy shareholders are trying hard to figure out the number of years it will take for RIL’s market cap to double[ read share price ]
Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd
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