Close: A bounce from supports.. Can it sustain ?

Indian indices made a recovery today. It was a shaky start. Markets took off from where they ended a week ago. Index made gains in the early session but then saw profit taking with Indices briefly dipping into red. However post a ranged session ended the day in strong positive terrain. Asian and European cues supported the Indices equally to trade in the positive territory. Value buying interest was not just restricted to frontline stocks like Telecom, Energy, Engineering and Software led the advances. Asian indices ended in strong while European indices currently trading in green.

Sensex was up by 215 points at 12644.99. It was helped up by gains in BHEL (2079.25,+6 percent), RCVL (397.1,+5 percent), ONGC (793.05,+4 percent), Guj Ambuja (107.3,+4 percent) and Tata Motors (770.85,+3 percent). Restricting the gains were ITC (142,-2 percent), Hero Honda (640.25,-2 percent), Hindalco (128.6,-1 percent), Dr Reddys (677.65,-1 percent) and TISCO (429.75, 0 percent).

However, the important point was that volumes were muted and hence not much confidence can be taken from the current bounce. The confidence still is shaky.

MTNL showed signs of revival. This was despite negative news. The Telecom tribunal TDSAT directed the state-run MTNL to reduce infrastructure charges collected from private operators and asked sector regulator TRAI to frame guidelines for fixation of such charges. The tribunal also directed MTNL to return the extra amount charged from Reliance Infocom within 30 days. This is clearly negative. There could be something more which seems to have been missed. We would recommend to avoid this one on the long side.

The Energy sector traded mixed. The country's largest private entity Reliance Industries Ltd will invest more than $9 billion in developing a gas field off the east coast of India and building pipelines to sell the fuel to consumers. The company is expected to spend $5.2 billion in bringing to production Dhirubhai-1 and Dhirubhai-3 fields in block KG-D6 in Krishna Godavari basin by June 2008. It will invest another $4 billion in laying a 1,386-km pipeline from this city in Andhra Pradesh to Bharuch in Gujarat to transport the fuel. It will begin producing about 40 million standard cubic meters per day in June 2008 and raise it to peak output of 80 mmscmd in next five months. Reliance has so far drilled 22 exploratory wells in block KG-D6 (KG-DWN-98/3), off which 17 have resulted in discoveries. Stock traded up 1% marginally.

The Lok Sabha approved the bill to phase out Central Sales Tax. A new bill will also be passed which will empower states to levy over 4% VAT on Tobacco products. ITC remains the worst hit here. Around 60% of the company?s revenue comes from cigarette and over 80% of the profits. The stock has been hit badly for last few days on back of this VAT news. The impact on volumes needs to be seen. Expect a note on this ..

Technically Speaking: It was a smart recovery by Sensex today. Sensex is on its recovery path and is looking for 12725 as a near target. Index touched intraday high of 12655 and low of 12426. Resistance at 12724, 12803 levels and Support lies at 12495, 12347 levels. Market turnover stood low at Rs 2385 Cr. Overall breadth was in favor of Advancers where the Advancers were 1402 against Decliners of 1124.