Market Close: Consolidation after new high!

After yesterday's phenomenal rally markets witnessed some consolidation at higher levels. Indian indices started the day on a fair note on back positive global cues but shortly volatility was seen. Indices moved in and out of positive grounds through out the day. Choppiness was seen as investors booked profit at higher level which kept the indices down. Markets finally managed to close marginally high with modest gains. Even though the indices were ranged bound, turnover on BSE remained high for the second day in a row.

Euphoria continued in Reality stocks. Except Banking, Health Care and IT sector most of the sectors ended in green. IT stocks were hit very badly due to Rupee appreciation against US $. Rupee touched nine year high and trading at 39.87. Mid and Small caps closed in line with front line indices. European markets are in red

Sensex closed up by 25 points at 16347. It was helped up by gains in REL (+4.53%), ITC (+3.69%), M&M (+3.25%), L&T (+2.93%) and Grasim (+1.56%). Restricting the gains are Wipro (-3.25%), Infosys (-2.88%), TCS (-2.17%), ACC (-1.90%) and Maruti (-1.90%).

Cement is the pure domestic play and it's in the sweetest spot ever in its lifetime. Capacity additions are expected to change the picture in next 18 months. The companies have hiked prices by Rs 3 per bag, especially across the western region. The major players in western region are Ambuja Cement, Ultratech, Shree Cement, ACC and Binani Cement are the major beneficiaries. This is certainly good for the company's; due to supply demand mismatch the companies are taking the benefit. We expect the companies to post good results for another 6-8 quarters. But valuations are too expensive at this level. We are not comfortable here at this level to enter. One can look for down side for long term opportunity.

Debeers is the biggest diamond miner globally with 50-60% market share in value (43% in volumes). For the years diamond industry had an oligopoly with Debeers controlling 70-80% of the market. This has gradually reduced with new players emerging. Argyle is the second largest player. It is the largest diamond producer in the world by volume but not in value due to the low quality diamonds (Brown, Pink and Red). It is the only known significant source of pink diamonds, producing 90 to 95% of the world's supply. Russia is the third largest player with 25% of market share by value. For years, Russia sold nearly all its production through De Beers' Central Selling Organisation. In 2006 European Commission disallowed Debeers to buy diamonds from Russia after 2009 in order to open market to more competition. Alrosa (23% market share) is the major supplier to Debeers from Russia. However in July 2007 EU Justice overruled the European Commission restriction on De Beers. Competition is emerging for Europe and Australia which made Debeers concentrate on emerging markets for growth. Most of the DTC (marketing arm of Debeers) brands are with Gitanjali. Gitantali hit a lottery with the 200 acre SEZ which it has in Hyderabad. The new airport is planned just next door and those are the positives. There are other SEZs as well. All in all, we believe that the story is not ripe yet. Major business is commodity and ROEs are low. The real estate seems to be a diversion where we are not comfortable.

Technically Speaking: It was a choppy session for the whole day before closing in green. Sensex touched intraday high of 16416 and low of 16261. Overall breadth was in favor of Declines. The Advances stood at 1196, while Declines at 1574. The turnover was extremely good for the second day in a row as it chruned out Rs 7033 cr. Sensex has done our target of 16100+ which we have been advocating for long. The rally is strong and 16600 is the next target for Sensex..