Strong start, only carry what you can
Results are what you expect, and consequences are what you get.
The bulls expected Infosys to take them out of the woods. But it was the bears who actually rescued the bulls, thanks to short covering. The outlook for today looks encouraging with markets in the US and Asia on a strong wicket and oil still trading below $53 per barrel mark. We expect the market to open higher, but things could cool off later ahead of the weekend. Indices will be deceiving in the coming days so again keep a close watch on your own portfolio instead of getting euphoric by the swings.
Despite Infosys ‘failing to positively surprise’ the bulls managed to rebound after a five-day losing sequence. Lower oil prices and firm regional markets partly helped their cause. Majority of the rally was due to short-covering of positions on the derivative side. The Nifty Futures closed at a premium to the Spot Nifty and open interest too declined. Players had built up short positions in the F&O in anticipation of a crack in the Nifty under 3800. But, as the expected correction didn't materialize. The bears then rushed to cover their short positions, in the process lifting the key indices.
The major concern is the selling by FIIs. They were net sellers of Rs246.6mn yesterday notwithstanding the sharp and swift bounce back. In the F&O segment, they pumped in Rs13.21bn. Foreign funds were net sellers of Rs11.07bn on Wednesday and Rs3.68bn on Tuesday.
As we have said before, the market is unlikely to go up too far from these levels given the rich valuations. The only way it can do so is if FIIs start pumping in a lot more than what they are doing at the moment. That may take a while. Everything looks good but it pays to remain cautious despite the bounce back.
The Dow Jones Industrial Average closed at its highest level and the Nasdaq Composite ended at its best level in almost six years.
Oil prices continued to slide, as they have since the start of the year, due to warm US weather and easing supply fears. US light crude oil for February delivery fell $2.14 to settle at $51.88 a barrel on the New York Mercantile Exchange. The contract was quoting 71 cents higher at $52.59 in extended trading in Asia.
Among the Indian ADRs, VSNL advanced 2.3%, Infy rose 3.7%, Wipro surged 5%, Satyam jumped 5.3%, Tata Motors gained 3.9%, Dr. Reddy's was up 2.5%, HDFC Bank put on 2.4%, ICICI Bank climbed 4.8% and MTNL shot up 5.3%.
Most markets in Asia were firm this morning. The Nikkei in Tokyo surged 280 points to 17,118 while the Hang Seng in Hong Kong was up 261 points at 19,647. The Kospi in Seoul surged 19 points to 1384 and the Straits Times in Singapore gained 31 points to 3001.
Results Today: UTI Bank, Ess Dee Aluminium, KEC International, S. Kumars Nationwide, Tata Sponge, Logix Micro, Rallis India, Supreme Industries.
Major Bulk Deals:
Lehman Brothers has picked up Champagne Indage; HDFC MF and Reliance MF have bought JK Industries while Fidelity has sold the stock; Deutsche Securities has purchased Nilkamal while Kotak Mahindra UK and Bear Stearns have sold it; HSBC Financial has bought SKF India while Fidelity has sold it.
Insider Trades:
Surana Telecom Ltd: Shri Narendra Surana, Managing Director has purchased from open market 34071 equity shares of Surana Telecom Ltd from 16th December, 2006 to 9th January, 2007.
Market Volumes:
The turnover on NSE was up by 14.9% to Rs98.55bn. BSE FMCG index was the major gainer and gained by 3.25%. BSE Consumer Durable index (up 2.67%), BSE Technology index (up 2.50%), BSE Auto index (up 1.94%) and Capital Good index (up 1.59%) were among the other major gainers.
Volume Toppers:
IFCI, IDBI, Cairn India, R Com, ITC, TTML, Satyam Computer, SAIL, HLL, Deccan Aviation, Shree Ashtavinayak, Polaris, IDFC, Infosys, MTNL, Gujarat Ambuja, Ashok Leyland, IVRCL Infrastructure and Bajaj Hindusthan.
Upper Circuit Filters:
Flex Industries, GTC Industries, Zandu Pharma, Shyam Telecom, Atlanta, Tulip IT, RPG Transmission, Tanla Solution, Ganesh Housing, Nirlon and Tricom India.
Brokers Recommendations:
Buy Tanla Solutions from Emkay with price target of Rs613.
Long Term Investment:
Infosys
Major News Headlines:
Infosys Q3 profit up 5.8% at Rs9.83bn (QoQ); revenues are up 5.9% sequentially at Rs36.55bn
HDFC Bank Q3 profit at Rs2.95bn (up 31.6%) and total income at Rs21.3bn (up 44%.4)
GEI Hammon gets orders worth Rs292.10mn
Ashok Leyland sets up unit in UAE
Patel Engineering bags Rs1.44bn order
PBA Infrastructure bags contract worth Rs603mn from NHAI
Tech Mahindra to set up software development centre in Hyderabad
Great Offshore Q3 profit at Rs375.4mn, revenues at Rs1.49bn
Hindustan Zinc Q3 profit at Rs13.35bn (up 305%), revenues at Rs25.4 (up 173%)