Close: Above 14000 for the first time ! Will it hold ?

Keeping the jubilation on its back markets opened on a firm note but profit booking at higher levels saw gains eroded as the indices were dragged into the red. However investor interest in value buying pushed the indices back into positive and the drive continued to build till the final hour of trading. Bajaj Auto, Ranbaxy and Cipla emerged as the top gainers. Pharma, Software and Telecom stocks were in favor but selective stocks in the Energy and FMCG sectors surrendered to selling pressure. As we stressed that Small and Mid caps will see interest, that was apparent among investors and it showed. Asian indices closed mixed while the European indices were mixed with no clear direction.

Sensex ended up by 73 points at 14014.92. It was helped up by gains in Bajaj Auto (2842.65,+4 percent), Ranbaxy (412.25,+3 percent), TCS (1281.3,+3 percent), Cipla (257.85,+3 percent) and Infosys (2312.6001,+2 percent). Restricting the gains are HLL (212.2,-2 percent), ACC (1075.55,-2 percent), TISCO (471.6,-1 percent), ITC (175.35,-1 percent) and HDFC (1606.55,-1 percent).

ACC reported a 3% increase in dispatches at 1.65 million tonne in December 2006 when compared with 1.60 million tonne in December 2005. Cumulative dispatches (January - December 2006) increased 6% to 18.62 million tonne as against 17.46 million tonne in the corresponding period of the previous fiscal. Gujarat Ambuja Cements Ltd., India's third-biggest cement maker, said on Tuesday cement shipments for the year ending December 2006 rose 11.3 percent to 16.33 million tonnes, from 14.67 million a year earlier. ACC dispatch growth is disappointing and Ambuja?s is encouraging. But really in the scheme of things cement companies are having a good time. Demand remains robust. Mixed trend was seen in the stocks as ACC was down by 1.7% while Gujarat Ambuja was up marginally.

The press report about the progress on the demerger of Bajaj Auto had the stock flying. The process which will result in the financial business of the auto major is being demerged. Besides holding part of the investment portfolio worth Rs 7,200 crore (as of June 2006), the holding company would have shares of subsidiaries such as the listed Bajaj Auto and insurance subsidiaries like Bajaj Allianz Life Insurance Co, and Bajaj Allianz General Insurance Co. Bajaj Auto has an enviable investment portfolio. Among the major investments it holds in its books are 4.3% stake in ICICI Bank, 5.6% stake in Bajaj Hindustan, and 15% in Force Motors. Bajaj Auto generated 25% PBIT from its treasury last year. This year onwards rising interest rates and also Investment gains could be quite good. The demerger would give greater clarity to the valuation of the main auto business. We have a positive view on Bajaj Auto despite increasing competition. The stock rallied yesterday on the back of super dispatches. This news is some more reason to be bullish. However competitive pressures could keep immediate gains on hold unless this demerger story carries weight. The stock was up by almost 4% despite the Chairman clarifying that the proposal had not even reached the board stage. Value unlocking is the mantra and markets reacted to this news.

Sensex has closed above 14000 for the first time. Last time the markets could not sustain. This time the conviction is a bit higher as it comes post a correction. The results season is around the corner and the markets are pricing in lot of positives in anticipation post the advance tax numbers. However it will be performance which is needed for sustainance. FII buying is limited off late. There is a lot of money which will go into the huge IPOs planned. Its going to be tough to sustain the Sensex but we believe that action will shift to mid cap stocks where there is immense value still and the companies are delivering.

Technically Speaking: Market traded in a ranged manner. Sensex rallied between the channels of 13897 - 14035 level. However, the breadth had been in the favor of Advances as they were 1.84 times the Decliners. Volumes was decent at 4286cr. Sensex sees resistance at 14070 level if it holds above that then 14500 level could be seen and support is seen at 13700 levels.