Close: a week of global jitters; market selloffs and finally some hope !

It was a blood bath on the streets this week with global markets collapsing as the problems from the US Subprime loans accelerated and there was bad news almost everyday. Falling home prices, delinquencies and more than everything lower consumer confidence with consumption reflected in the results of the largest retailer Wal Mart only made things worse. This was accompanied by a strong Yen which led to the carry trade unwinding. It was massacre in Asia as all these worries got priced in.

It was a holiday shortened week and domestic news was dominated by political debate on the 123 agreement which the Leftists protested against and the Prime Minister threatening to resign. Not a big worry but really that contributed to the pail of global woes in its own way. Sectoral news was on cement where the Government seems to be trying its hand at softening prices still. Imports are being encouraged and that not needing certification. Cement stocks however were losers but not as much as the others Inflation came in at 4.05% for week ended August 4th and that was some comfort that this is not tending to be a problem anymore. Crude is cooling off though above $70 a barrel its still seen as a problem. Metals on the other hand really had a crushing week and all metal stocks were smashed to pulp. The banks also were on the receiving end as the parched liquidity conditions had them all down. The rupee rallied on lower inflows as the changed ECB norms with the FIIs now turning net sellers.

The software stocks were all hammered and that was not very unexpected. However the surprise was that this was in the face of a weaker rupee which hit Rs 41.5 rising from Rs 40.3 levels to a dollar. The software stocks priced in the negatives of the US economy and a probable negative fallout on their business.

Sensex and Nifty down by 5% for the week. BSE metal index was down by 10%; BSE capital goods slipped by 6%; BSE IT index down by 6%; Mid cap Index was down 5% and Small caps were down by 2.5%.

This week we had lots of research as always. We had a research note on Navneet publication. The company did not put out exciting results as was expected. This year was the sylabus change for standard tenth in Maharashtra and should have been a big year. However the company had its reasons and were justified. The growth in the publication business is finally being pushed and thats good news. The stationary business will also be aggressively pushed and thats good news. Do read this follow up note.

There was a detailed research note on Voltas and there was one on Blue star as well. Both businesses seem exciting and the order books are strong with good visibility. They are both dominant in the HVAC segment that they operate in. The prospects look mind blowing with the number of malls expected and expansion plans for the IT / ITES services and other infrastruture requirements of Airports not to mention in SEZs. However good businesses dont come cheap but these are extremely expensive. Do read the risks we mention in both these notes.

We had a research note on Honda Siel. This is one business we have been covering for some time now. The performance remains spectacular and the company is doing well with superb offtake of its LPG gensets and pumpsets. The cash holding per share adds to the positives. The Honda group company may find more focus over time.

Technically Speaking: Sensex took support on the trend line which has been a big support for many months. We had a Technical chart of the same. We mentioned in the day time that probably the worst was over for the near term. The markets closed higher from the lows. The low made around 13750 levels will probably be important support for now.

Fundamentally speaking: The problem which the global markets faced was global and there seems to be some solution put out by the US Fed. It cut its discount rate by 0.5 percent Feds 50 basis point cut in bank discount rate is nothing but liquidity infusion which it was anyway doing for the past few days. Liquidity infusion did not effect much in the past few days. However this is different this time as as it ensures unlimited liquidity at a particular cost and more than that it soothes nerves that liquidity crunch is over. Even more, it puts in an easing bias for the interest rates in US. Frankly, this should bring in some level of stability. Investors are likely to wait and the manic selling will stop. Some rationality is likely to come in. Markets may start off with a bounce on Monday.. but the core problem of poor home loans and consumer confidence needs to be addressed. Its that what needs to be tackled. So it would be wise not to jump into bouyant markets at the drop of a hat. It would be wise to use this as an opportunity. Performance will become tougher where stock specific selection would matter.

Performance for the week:::: Good week of performance despite what the market was doing. DTP was awesome with VJ's long calls on RIL and LNT & Short call on Infosys was bang on target. Quickies call on Timex watches was delightful which was booked half with 15% gains. Another call on Maruti by VJ was marvelous which fetched good gains and Rolta Short call in Futures was closed with fantastic Rs 40 gains per lot. Delivery Delights call W S Ind was wonderful which delivered 15% gains in falling market. There was a superlative short call on Suzlon and that delivered Rs 17000 per lot in a matter of two days. Unbelievable.. but this is available only from Delivery deights. Tata Power BTST by VJ was rocking one which delivered good gains. Wow calls was on target with Fedders lloyd delivering good performance on the market. More is expected. Bharat Fertiliser was another which showed major strength and is bound to deliver. Its these times that research pays off. It may seem odd but a cut in rates by the US is what we expected earlier in the week itself..and more.