Market Close: Is this a sign of correction ?

Global cues were mixed and nothing to settle on...But buying in Index heavyweights particularly Reliace helped the indices to gain. However profit booking crept in the mid session and pared off all the gains. Reliance Industries continued to support the indices right from the start of the session on the back of Gas discovery news. Technology counter continued to bear the brunt of Rupee appreciation. Profit booking was witnessed on the Auto, Banking and Metal stocks along with small and mid caps. Celestial Labs which got listed today closed at a premium. Higher Crude continued to impact the Aviation counter along with the Oil marketing companies. Some stock specific action was seen ahead of resutls. However we believe that normally stocks run up ahead of numbers and see profit taking once the results are out. So its better to avoid buying post good numbers. Better to wait for the cool off.

Sensex closed down by 32 points at 15278.95. Weighing on the Sensex were losses in RCVL (561.15,-2 percent), BHEL (1622,-2 percent), SBI (1579.5,-2 percent), TISCO (680.25,-2 percent) and Bharti Tele (862.05,-2 percent). Losses were restricted by gains in Guj Ambuja (137.2,+3 percent), RIL (1825.95,+3 percent), TCS (1155.95,+2 percent), Dr Reddys (674,+2 percent) and Hero Honda (695.5,+2 percent).

Reliance communication ended 2% lower. Company increased its subscriber base by 1.45 million in the month of June. This makes Reliance the fastest growing CDMA service provider in the country. The talk time registered by the company is 50 crore minutes per day. Company continues to grow aggressively by lowering the price barrier. The Rs.777 plan launched by the company helped in adding a million customers in just a week. Company intends to add 100 million customers in the next few years. In order to support the increasing subscriber base Company intends to set up a network of 23,000 towers through out the country. This will involve a capex of Rs.16,000 cr. A $ 400 million contract was recently awarded by the company to expand its wireless network to over 20,000 towns and 600,000 villages in the country. Tower business of the company would get listed once the private equity placement deals of the company is through. Mr. Anil Ambani also informed that the private placement of the equity deal is in advanced stages. We believe company is well placed in the telecom sector and could be considered as a long term investment option.

Bajaj Auto continued its weakness. Company reported a net profit of Rs 226 Cr against Rs 266 Cr in the corresponding quarter of the previous year, down by 15%. PAT margins saw a 134 bps yoy decline. Net Revenues were down 4% at Rs 2109 crore from Rs 2202 crore (YoY). Company intends to launch a new model in the month of September. The new bike will provide comforts of 125 cc bike However, The price and economy would be in line with the 100 cc bikes. We believe that could help in bringing the volumes, which would be the key to success. This will help in beating Hero Honda the arch rival of the company in the Two wheeler business. Bajaj was also looking for a big-ticket acquisition in the European motorcycle market. We believe that the margins pressure is unlikely to ease much on the back of cut throat competition. The dependence on the new platform is excessive. This launch is due in September. There is also the demerger which has to take effect. Its not a very clean demerger and it seems more like a family rearrangement of holdings. Do read our note for more details.

Nitin Fire was 3% higher. The company is into manufacturing of Fire protection equipments and Cylinders (Industrial and CNG). Fire protection is growing at 20-25% but it is CNG cylinder where we see exponetial growth. To cater this growth Nitin has put plant in Vishakhapatnam which was suppose to go on strem by July 2nd week. Probably this was the reason for action in stock. EKC is the biggest player here (3rd largest globally) and agressively expanding to become world no. 1. We remain positive on both the company but valuation is what makes it unattractive.

Technically Speaking : Sensex traded between an intra day high of 15,440 and low of 15,272. Declines outnumbered Declines in the ratio of 2:1. Support lies at 15,225 levels. The resistance is at 15,000 levels. Turnover was to the tune of Rs.6,023 cr for the day.