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Friday, May 25, 2007

STRATEGY INPUTS FOR THE DAY


A weak end in store!

You cannot run away from a weakness; you must sometimes fight it out or perish. And if that be so, why not now, and where you stand? – Robert Louis Stevenson

At the end of the week, the last thing we want to do is start with a pessimistic note. But that’s the way the markets are set to open. Though we wouldn't want to spoil your weekend, looks like the bulls may have a tough day today amid weakness across global markets. The benchmark Brent crude oil futures have shot up above the US$71 per barrel mark owing to nagging concerns over supplies from key producers such as Nigeria and Iran. To make the matters worse, Thursday’s provisional figures show that both FIIs and local institutions were big sellers. Add to that rumours of another CRR hike and we have all the ingredients for a black Friday. Inflation figures will add to the swing by noon. Look at select opportunities inside and outside the m ain indices for the medium to short term. Be extremely choosy as the market appears to be in an overbought situation. We expect the intra-day gyrations to continue, which will only make life difficult for traders.

Suzlon will see lots of action as it has finally won the bid for acquiring Germany's REpower. HLL and other FMCG companies like Godrej Consumer may attract some attention amid reports of a fresh round of price increases. Cairn India is surely going to tank as the Government has rejected its offer of building a pipeline for evacuating crude from the Rajasthan block. It has instead been asked to set up a refinery. The government has also asked Cairn India to cut its daily peak production from 150,000 barrels per day.

BPCL may also be under attack as its Q4 net profit is down 60%. Centurion Bank of Punjab could also see some pressure due to lower than expected fourth-quarter earnings, though there was an extraordinary one-time hit. IT shares will remain in the limelight given the persistent rally in the rupee. L&T, Tata Motors, Ashok Leyland and M&M may benefit from a newspaper report that the Government will give them the Raksha Udyog Ratna status for lucrative defence procurements and defence contracts. PTC is partnering with MCX for a national electricity exchange. Real Estate companies will be in action as DLF has set a price band of Rs500-500. Fortis may gain amid reports of an out of court settlement with Dr. Naresh Trehan and the company management.

FIIs were net sellers to the tune of Rs1.6bn (provisional) in the cash segment, while the domestic investors offloaded stocks worth Rs1.36bn. In the F&O segment too, FIIs were net sellers of Rs13.48bn. On Wednesday, foreign funds pumped in Rs4.46bn in the cash segment. Mutual Fund were net buyers of just Rs162mn.

US stocks slumped on Thursday, as investors locked in gains after the recent rally. Government reports today showed that new home sales climbed the most in April since 1993 and durable-goods orders gained for a third month. Yields on 10-year Treasuries traded near the highest in almost four months. All financial markets in the US are closed on Monday for Memorial Day and many investors and other Wall Street professionals are taking a long weekend.

The Dow Jones Industrial Average decreased 84.52 points, or 0.6%, to 13,441.13. The 30-stock benchmark fell for a fourth day, its longest losing streak since Feb. 27, the day it tumbled 416 points amid a global stock rout sparked by a selloff in China. The Standard & Poor's 500 Index slipped 14.77 points, or 1%, to 1507.51. The Nasdaq Composite Index lost 39.13 points, or 1.5%, to 2537.92.

US Treasury prices rose, recovering from early weakness. The advance lowered the yields on the 10-year note to 4.84% from 4.85% late on Wednesday. In currency trading, the dollar rose versus the euro and fell versus the yen. COMEX gold for June delivery fell $9.30 to settle at $653.30 an ounce.

US light crude oil for July delivery fell $1.59 to settle at $64.18 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 20 cents higher at $64.38 a barrel in extended trading in Asia. The London Brent crude gained 12 cents at $70.72 a barrel after surging to $71.80 earlier, the highest since Aug. 28, 2006.

European stocks dropped. The pan-European Dow Jones Stoxx 600 index slipped 0.7% to 393.60. The UK's FTSE 100 lost 0.8% at 6,565.40, the French CAC-40 slipped 1.2% to 6,048.31 and the German DAX Xetra 30 declined 0.5% to 7,697.38.

Asian stocks posted the biggest drop in five weeks today after signs of growth in the US economy damped speculation that the Fed will slash borrowing costs.

Toyota suffered its biggest drop in a month while BHP Billiton fell to a two-week low amid concerns that demand for their products will decline. Miners also fell after metals prices slumped.

The Morgan Stanley Capital International Asia-Pacific Index fell 1.2% to 147.59 at 11:20 a.m. in Tokyo. The drop, the most since April 19, pared the measure's advance this week to 0.2%. The Nikkei 225 Stock Average slid 1.6% to 17,416.11.

China's CSI 300 Index gained 0.8%, the only advance among Asia's stock benchmarks today.

A measure of six metals traded on the London Metal Exchange (LME), including copper and zinc, slumped 2.4% yesterday to the lowest since April 2. Copper slid 2.8%, zinc fell 2.2% and nickel dropped 2.6%.

Markets ended lower amid grapevine that the RBI may go for another CRR hike further delay in monsoon also dampened the sentiments. Global cues also were weak as former Federal Reserve Chairman Alan Greenspan said he fears a dramatic contraction for Chinese stocks.

Markets were unable to find any momentum to carry on as many of the large cap stocks witnessed profit booking, scrip’s like Tata Steel, ACC, Reliance Industries, ONGC, Bharti Airtel were among the major losers. All the major Oil & Gas stocks had a sluggish session, the Metal stocks also lost shine led by fall in the index heavy weight Tata Steel, the index was the major losers and lost 1.62%.

However stocks specific action continued, Divi’s Lab rallied by over 17% to Rs4751 as the company recommended stock split from face value of Rs10 to Rs2 each and TVS Motors also outperformed as the scrip rose over 6%. Finally, the 30-share Sensex ended lower by 145 points to close at 14218. NSE-50 Nifty lost 41 points to close at 4204.

ICICI Bank edged lower by 0.8% to Rs911 amid reports that the RBI has allowed Temasek and Government of Singapore Investment Corporation (GIC) to pick up 10% each in the country's largest private bank. The scrip touched intra-day of Rs930 and a low of Rs905 and recorded volumes of over 10,00,000 shares on NSE.

ABG Shipyard edged lower by 0.2% to Rs412 after the company announced that they have signed a MOU for acquisition of Vipul Shipyard. The scrip touched intra-day of Rs435 and a low of Rs409 and recorded volumes of over 1,00,000 shares on NSE.

Divi's Lab rallied by over 16% to Rs4727 after the company recommended stock split from face value of Rs10 to Rs2 each. The scrip touched intra-day of Rs4788 and a low of Rs4150 and recorded volumes of over 5,00,000 shares on NSE.

Opto Circuit edged higher by 0.5% to Rs356 after the Board of Directors of the company would meet today to consider issue of warrants to promoters, and issue of securities on a preferential basis to strategic investors. The scrip touched intra-day of Rs362 and a low of Rs354 and recorded volumes of over 34,000 shares on NSE.

Select FMCG stocks held firm in a falling market. HLL advanced by 1.4% to Rs201, Dabur was up by 1% to Rs378, Colgate surged by over 3.5% to Rs378 and Tata Tea added 0.9% to Rs882. However, McDowell slipped 2% to Rs1145.

Oil & Gas stocks witnessed selling pressure. Reliance Industries slipped by 1.7% to Rs1727, ONGC was down by 1.5% to Rs900, BPCL dropped by 3.5% to Rs371 and HPCL declined 4% to Rs287.

Lower metal prices on LME dragged the metal stocks lower. Sterlite Industries slipped by 1% to Rs533, Hindalco edged lower by 0.7% to Rs143 and JSW Steel dropped by 1.2% to Rs614. Tata Steel slipped by overt 4% to Rs631 after overseas investors will have to get RBI’s approval to buy shares of the company.

Banking stocks also lost ground on reports that RBI would consider another hike in CRR. Frontline stock SBI dropped by 1.7% to Rs1286, HDFC Bank was down by over 2% to Rs1091 and ICICI Bank edged lower by 0.8% to Rs911. PNB, OBC and Union Bank were among the major losers.

Telecom stocks also were in the receiving end. Reliance Communication fell over 3.5% to Rs493, Bharti Airtel was down by 1.6% to Rs837 and VSNL edged lower by 0.8% to Rs473.

Insider Trades: Sakthi Sugars Ltd: Merrill Lynch Capital Markets Espana S A SV has purchased from open market 330000 equity shares of Sakthi Sugars Ltd on 18th May, 2007

Sectoral Movement: BSE Metal index was the major loser and lost 1.62%, BSE Oil & Gas index (down 1.47%), BSE Bank index (down 1.45%) and BSE Technology index (down 0.57%) were among the other major losers. However, BSE FMCG index gained 0.24%.

Volume Toppers: RNRL, IFCI, Idea, SAIL, RPL, Hilton Metal, TTML, R Com, NTPC, Voltas, Tata Steel, Raj Tele, Deccan Aviation, BRFL, Ashok Leyland, Reliance Industries, ITC and Satyam Computer.

Upper Circuit: Atlanta, Eicher Motors, Advanta, Agro Tech, Tripex Overseas and Mefcom Agro.

Delivery Delight: Andhra Bank, Crompton Greaves, Dabur India, India Cements and TVS Motor Company.

Abnormal Delivery: Titan Industries, Hindustan Motors, Escorts, GNFC, CEAT, Tata Chemicals, ACC, Bank of Baroda, Federal Bank, Indian Oil Corporation, Bajaj Auto, Union Bank of India and Grasim Industries.

Stock Futures with largest increases in OI: United Phosphorous, GE Shipping, Educomp Solutions, ABB, Divi’s Lab, Financial Technology, EKC, Renuka Sugar and Reliance Capital.

Stock Futures with Decreases in OI: Jindal Steel, Matrix Lab, Sun TV, JSW Steel, Aban Offshore, HDFC Bank, Bank of India and Reliance Energy.

Results Today: BHEL, Denso India, Godrej Industries, Gulf Oil, IndusInd Bank, Ipca Labs, ITC, IndusInd Bank, Monsanto India, Orient Paper, Ramkrishna Forgings, Ugar Sugar Works, Usha International and VSNL.

Results Corner: Centurion Bank of Punjab Q4 profit at Rs6.7bn (down 60%), revenues at Rs243.8mn (up 7%).

Brokers Recommendations: GMR Infra – Outperform from Macquarie with target of Rs560

Bharat Forge – Under Performer from Prabhudas Liladhar.

Long Term investment: Wipro

Major News Headlines: Chidambaram says increasing overseas inflows create problems

India must learn to manage overseas inflows: FM

Ramunia, Punj to jointly bid for $1bn project

NTPC plans to set up power plant in Nigeria

Essar Oil starts a new 10.5mn tons a year refinery in Gujarat

K Sera Sera to meet on 30th May to discuss fund raising programme

ABG Shipyard to acquire Vipul Shipyard

Accentia Technologies gets order worth $2mn