Posts Tagged ‘SAIL

02
Aug
11

SAIL poor Q1 results

Steel Authority of India Ltd. announced poor Q1 results on Friday. Results were below estimates. Sales were up 19.6% but PAT was down 29% YoY on account high raw material prices primarily coking coal. SAIL imports 70% of its coking coal requirements and its prices were up from USD 200 per tonne to USD 300 per tonne. Apart from raw material cost, employee costs were also up 12% YoY. Yesterday SAIL stock got sharp negative reaction from market and stock was down close to 5%. I was not confident about the extent of fall, so didn’t shorted SAIL. But I am confident that poor results coupled with FPO overhang will keep stock under pressure. Even mining scam news flow will keep pressure on metal and mining stocks. I sold August series 140 calls. These calls will yield 4.62% in 25 days.

08
Jun
11

Why Congress government rocks..

Yesterday, I read an article on Kirtan’s blog (http://www.insearchofnirvana.in/) on politicians. Sometime back, I used to share same level of frustration about politicians but not anymore. As an option writer Indian government is my best friend because they allow me to play on time decay. They will never be able to take any decisions and even if they will, it would be too late in the day. As per congress government, it is extremely difficult to decide on what is of  national interest in Cairn-Vedanta deal. After several months of delay, they are yet to decide on the deal with ball moving from GOM to CCEA and back. I could easily sell Cairn India 320 Put in April with confidence that government won’t take any decision soon.

The Government is too busy with Baba Ramdev and they don’t have time to decide on diesel price hike. One can easily create short strangle in Oil marketing companies. I haven’t done that, since my plate is currently full with Sun TV, R Comm, Tata Motors. After destroying investors wealth in Oil marketing companies, government is all set to do the same with ONGC by increasing its subsidy share just before Follow-on Public Offer (FPO).

They still cannot decide on the best way to dilute stake in Public Sector Units (PSU’s). FPO has become a dreadful word which, if associated with any PSU, becomes target of bears and option writers like me. I don’t think FPO is the best way to dilute stake in PSU’s with government not getting best possible value. I made money by selling SAIL 180 Call in May, 160 Calls in June. I missed the chance in Power Finance Corporation (PFC).

When UPA got clear mandate in 2009, market gave it a big thumbs up by rallying 10% plus. Market thought, with comfortable mandate, government would be able move faster on reforms. After 2 years, we are still waiting for any kind of reforms with many important bills pending. With BJP ruled states opposing, one important tax reform Goods and Services Tax (GST) can’t find its way. GST has the potential to add several bps to India‘s GDP growth. Next 1-1.5 years is the best possible window for government since as they go into the election mode.

Our Finance Minister(FM) still says investors should not be negative on India. I agree, but that would be because of private companies and not the government. I wish the government was a listed entity then one could have entered into Pair Trade (Short government, Long private corporations). Congress government rocks!!!…please keep adding some more scams to your already long list!!!!




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