RPL's short term outlook: 26-09-2008 by Be and Make

This month we are going to see a sudden spike in the RPL price due to the board meeting will be held in this month. Everybody expecting some news regarding the production date will come. But, use this rally to cover your positions because in the near term we cant expect more from RPL fundamentally.
1. Global financial crisis damaged the sentiment.
2. At home we are having very weak fundamentals like high inflation, interest rates,
Govts huge fiscal deficit, upcoming elections, a dip in GDP etc.,
3. Production is not ahead of schedule as announced by the management but is either in nov/dec.
4. Due to the start of commercial production in dec08 then the expected EPS would be around 6 for FY09.
5. All the leading analysts like Kotak, Merryl, downgraded the stock and put the price target of 150/- as the high (previously it was at 208/-)
6. Globally GRMs dropping
7. There are somany political uncertainities on Mukesh group and amar singh is trying to use every opportunity to create vulnerable conditions on RIL like ban on EOU status, ban on oil exporting etc., but in my they are not easy to change for a particular company hence they may not be as easy as amar said. But, the government is considering the imposition of a minimum alternate tax (MAT) on units in SEZ like RPL. MAT would mean an 8-9% cut in RPL's FY09-FY11E earnings and 4% (Rs6/share) cut in its PO.
8. Chevron stance still unclear.
9. One more important point is that RPL is having very high debt equity ratio, around 3. In these high interest rate times the companies will be will have high debt/equity ratio will badly hammered in margins. So, in this point RPL too have impact on its margins and will further effect the bottom line.
Yes, definetly there will be a spike in the upcoming days but I will not give any trading call and my advice is to use this rally to cover your positions and re-enter at lower levels.


With thanks
Be and make