Close: All eyes on Tech now ! Can they create history ?

Ups and down in the market for the week with volatile Global cues along with F&O settlement provided a recipe for a vvolatile week and tats what it lived up to its name. Market recovered in the last trading sessions of the week.. Economy and Inflation fear made indices shiver globally and subprime mortgage issues in the US also kept sentiments negative earlier in the week. Fed met yesterday to discuss on interest rate..as expected it kept interest rate unchanged but stated that outlook on economy as more or less the same. Near uncertainly about the US economy remains and the possibility of an interest rate cut in US has diminished. Cement was the real gainer this week as an interview of the FM indicated that he was not for any interference on cement companies. Sugar was up on sops talk from a UP budget but we really cant say. Banking was another winner. Inflation has touched the RBI targets and that is some comfort. The credit demand also seems to be cooling. Rupee was ranged but stiill strong though a spike to Re 41 kindled hopes for the IT sector which were short lived. IT was ranged.too.

Reliance was a bit weak for the week. There were reports which suggested that the value of the gas in the current arrangement would be less by 1/3rd the original estimates which implies a big downside. This was the biggest X factor for the Reliance but now things seem bit difficult for sustained gains unless this uncertainty is done away with. There is now scope for litigation and certainly thats unlikely to be liked.

This month textiles stocks were under pressure.. as strong rupee is expected to have adversely affected the textile exporters. The cotton textile exporters had all along worked on a 5 % margin and the rupee's appreciation nearly 12 % against the US dollar has therefore pushed the exporters in the red. The Govt. is looking to make life a bit easier here.

Tyres saw some interest Rubber prices have cooled off to below Rs.80 / kg. The tyre companies are not likely to lower the prices. However, slowdown from OEM demand is a worry. We are positive on the sector. Apollo, JK, Balkrishna are our picks. Ceat has another reason to be bullish and this stems from its restructuring. These are good investment plays.

Finance Minister is an interview clarified that Govt. never tried to control cement price neither do it intend to do. Monsoon is lean season for cement..however no weakness is witnessed here. Kesoram and Century were the big winners. Actually the reason was ownership transfer of BK Birla group companies to KK Birla group. The Aditya Bilra group would emerge as the largest entity along with Grasim and Ultratech.

Banks were in action and deals. IDBI sold its 2% stake in NSE for Rs.200crs. Bank Of Baroda also sold its 0.9% stake in NSE for Rs.906.5crs to Citi. Govt. made part payment for SBI stake to RBI..part payment will be made today. Inflation is under controls and that is good sign. All ended up.

Jet came out with results and some action was seen here. The management said that the industry is in consolidation mode. After the acquisition of Jet-Sahara, Air India-Indian and Kingfisher-Air Deccan..These three players will have around 80% of market share. Air Deccan has taken lead in leveraging itself by the acquisition. The company has already passed on congestion surcharge to passengers and intends to improve its yield by Rs.500 which means 10% upsides in passenger fare. Others would follow this trend soon. This indicates some confidence in the industry. Jet would encourage Sahara as Jet lite (LCC) to compete Air Deccan. Management also indicated that Sahara would turn profitable by Oct 2007. Air Deccan also changed its strategy. The Rs.1 to Rs.99 tickets now will be used to penetrate the virgin market whereas fares will be normal for regular airline passengers. Sees to be a good strategy but smacks of lesser competition. With consolidation in the industry pricing power would be in the hands of Airlines. We think Spice offers a good proposition.

Opto Circuits has announced a 1:1 bonus. There was a buy report on Opto circuits from a couple of brokerage houses and the stock rallied. However we read some interesting notes on Stents which were not heartening. One talked of a development of the biodegradable stent which won a prize and seems to be the future and there was another about Boston Scientific which is a big player in this. "Boston Scientific's problem with its huge drug-coated stent business has become so severe that the company is looking at selling some of its assets. The stents have been blamed for clotting and heart problems in a number of patients." That?s something to worry about . Opto has some saving grace that it has a stent for restenting earlier stents.. but the risks are high. The company will be spending a bomb to get the USFDA approval. Valuations do not leave too much room here though is electronic sensors business is one which is promising in terms of risk profile.

Zinc prices crashed 4% over the week. Impact of this was seen on Eveready which struggled on the back of lower offtakes. There was a coverage on Eveready by First global recently which talks about the property sale trigger. With Zinc now at $ 3400, the profitability of this company will increase. Zinc at below $ 3000 would have this stock at least double from here. The way we speak it may appear as if this is a reverse play on Zinc . Its not. The company has a distribution network to beat that of Colgate,. It has manufacturing strengths in batteries and a brand that is extremely strong. More efficient torches may appear a threat but the Management does not believe so. The per capita consumption of batteries is still less than one fifth of other countries such as Pakistan informs the management leaving strong scope for growth. The company is working to capitalize this distribution business and benefit from excise free manufacturing of batteries. Long term is good.. but short term stock performance will be dictated by Zinc prices.

Austin Engineering the manufacturer of specialty bearings reported good results for the Q4 and FY2006-07. EBITDA margins improved by 400 bps despite higher exports (up 47% for the year). The rupee was strong and that would have bit into margins as well. Valuations and future seems to be good, the only risk in the business is slow down globally and appreciating Rupee could impact on company?s revenues. We are positive on this company and the lack of interest is because of its small size, and hence lack of analyst following. Of course we would have liked the management to be a bit more aggressive given the current opportunities and their skills.

Zen Tech a company into manufacturer of high-end multimedia weapons simulator for security forces. The numbers were fantastic. It makes money only in the last quarter. A large order was being talked off for simulation but that would take another year we guess. Astra Micro continued to rally and also other defense related stocks such as Bharat Electronics. Interesting to note that there had been an offset policy for defense which came in place last year. As per this MNC defense companies have to outsource at least one third of the order from Indian companies. Interesting to read that so far only one offset contract has been awarded: a $55 million deal to buy medium-powered aircraft radar sets from Israel?s Elta, which has agreed to buy one-third of its parts from local firms. Astra is the big one in Radar and there were talks of the order from Elta but nothing got confirmed. HBL Power systems also attempted to enter here. Keep watching we will update you more.

Greenply is another stock which we are bullish on and the stock did well which trade at its all time of 166 levels.

Going ahead we are ending on a positive note and that also is near the all time highs. Can we break that. Well its results time and the tech stocks will be the ones to report. The tech stocks have been the laggards and they will set the tone for the near term. If they positively surprise in terms of guidance then we are headed for new highs. The numbers may be good but its the guidance about the growth and the competitiveness with a strong rupee of course. So its the tech stocks where the hopes will be placed on. The banks have rallied and we dont think that they could do much more from here. Crude at close to $ 70 is certainly something which will have the investors worried. We think markets will be ranged but clearly the ideas will run.