Market Close: Profit taking hits markets yet again !

It was poor day for the market. Global cues were weak and Indian market followed the same trend. It started the day on a subdued note but witnessed high selling pressure ahead. Pressure intensified further as index heavy weights started losing support. Market talks about basket selling in heavy weights by a couple of foreign funds intensified the selling pressure further. This was just ahead of the European Central Bank interest rate hike. The auto sector was major loser for the day. As per the newspaper reports the high interest rates is affecting auto sales. The report indicated that Tata motors may cut production on account of slowdown. All sectors closed in red; Banking and Oil & Gas were the other major losers. Steel majors Tata Steel and SAIL closed in deep red on back of lower prices of steel. Even the Mid and Small caps were hit badly.

Sensex closed down by 279 points at 14255.93. Weighing on the Sensex were losses in TISCO (617.7,-4 percent), HDFC (1830.7,-4 percent), Tata Motors (687,-3 percent), SBI (1388.2,-3 percent) and RIL (1687.35,-3 percent). Losses were restricted by gains in Hindalco (148.75,+2 percent), RCVL (515.55,+1 percent), Satyam (465.35,+0 percent), Grasim (2451.8,+0 percent).

Telco saw 17% fall in sales in May. The truck sales was 20,665 units in May 2006, while in May 2007 the figure was down to 17,195 units. Reasons given are lesser cargo offerings from agriculture and manufacturing sectors, excessive overloading, shortage of trained drivers and an increase in the auto finance interest rates during the last six months as per Indian Foundation of Transport Research and Training report. After remaining robust for 18 months, the truck rentals had dropped by 3-5% in April 2007 says the report. There has been a decline of about 6-10% in truck rentals on trunk routes in the last four weeks due to lower cargo offerings from manufacturing sector. There is another report which says that Tata Motors and Leyland have cut the tyre orders from the Try manufacturers. They also plans to cut production as well. Bad news and the possible implication is the high interest rates. Tyre manufacturers supplying to OEMs is where the pressure will be immediate. Some reason for caution though our discussion with tyre manufacturers indicates that its the capacity for the industry which is a constraint and thats the reason for expansion plans. Also profitability was the best in last many years. We would agree. In our visit to the North we saw hectic Road construction activity. We remain positive on tyre sector. Weakness may actually give an opportunity. Automobile and Tyre stocks closed in deep red. Tata Motors closed down by 3.48%, Eicher Motors closed down by 1.94%, Ceat closed down by 5.12% and MRF ended down by 2.98%.

Sugar futures hit a 2 year low. World sugar production may exceed demand by 10 million metric tons this year, Futures have plunged 44% in the past year. Brazil will have a domestic surplus of 20.4 million metric tons this year. According to London-based ED&F Man Holdings Ltd. India's will be 5.5 million tons and Thailand's is forecast at 4.2 million tons, says the report. Sugar is a write off for now. However the cycle continues. Over the last one year, the industry has seen sugar prices swing from peak levels of about Rs 20 a kg to a low of about Rs 13 currently, where sugar mills are not recovering even the cost of sugarcane. Next year sugarcane production will be down and that?s for sure because the farmers having burnt their fingers will shift crops. Some interest in sugar is seen in advance by the contra players. Sugar is a commodity and that's the way it has to be traded. The doing away of the sops to the EU farmers will also help. Sugar stocks closed in deep red, the major losers were Bajaj Hind (-2.96%) and Rajashree Sugar (-2.69%).

Technically Speaking: It was a bearish session today. Sensex touched an intraday high of 14591 and low of 14234. Resistance lies at 14625 levels and Support lies at 14030 levels. Market turnover was pretty good at Rs 5256 cr. Overall breadth was in favor of Declines, where the Advances stood at 852, Declines stood at 1733.