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FII: - Rs 225 cr, MF + Rs 0.75 cr

Mkt Sources:

FII Gross purchases Rs 3257 Cr Gross Sellers Rs 3482 Cr Net Sellers Rs 225 Cr.
MF Gross Purchases Rs 1063.85 Cr Gross Sellers Rs 1063.10 Cr Net Buyers Rs 0.75 Cr.

Our View:

This is pre budget profit booking... Expect the market to trade weak and volatile till budget... The rally after budget depends upon how the FM tackles the major issues... (Inflation and agriculture growth)...

Markets this week: A bloody nose after a long time !

It was the worst week for the markets since the last 32 weeks.There was mayhem across board. The losses this week were Sensex (5%), Nifty(5%), BSE Mid cap(4.5%), BSE Small cap(5%), FMCG(5.5%), Bank(5.5%), IT(5%) among others and none were spared.

Monday saw some marginal gains in the momentum of last wonderful Friday last week which saw a cut in fuel prices though inflation was high at 6.73. Inflation numbers came in at 6.63% for week ended Feb 10th as well against expectations of 6.68% which was some positive but really these numbers continue to spook investors. This was the week when the government took serious action of lowering duties on metals, and edible oil scrapping duty on cement etc. Inflation remains a supply side problem really and its tough to guestimate when things will change. The base effect will continue for at least 6-8 more weeks.

Japan increased interest rates middle of the week though really there was no knee jerk reaction as the markets had been kind of expecting it. There were hikes in interest rates by SBI and ICICI bank as well and thats the big negative. Market participants have been waiting for the budget.

Its a combination of everything. Its just the lack of money inflow to support the market. And keeping this money away is high inflation, higher interest rates domestically, higher interest rates in Japan which will now reduce liquidity. There is also a fall in real estate prices which has taken the shine off the real estate stocks.

Overall there has been a feeling that markets have been overvalued and now conditions are such that good news will be tough to come by. Growth numbers for the corporates will suddenly not appear too bright or positive given the base effect.

Its just this which has led to buyers moving away. The last 2000 points run has largely been led by large caps such as Reliance, Bharti, ICICI, Bhel, Bajaj , Larsen and a couple of others. So really a crack in some heavyweights leads to such downsides across the board.

The scenario is certainly not positive.. however, we expect that the Budget will give some upsides. The FM this time is less constrained because of Bouyant revenues. The markets are pricing in a non event really. So.. its fingers crossed.

Cement stocks were hammered this week. This had been post the scrapping of the import duty. There was also the note of Crisil which made a cautionary statement. However, as per talks there are worries that increased cement prices may be countered by the Government with a ban on cement exports. (This looks unlikely give that cement has less than 2% contribution to the basket of goods used for calculation of wholesale price index.). There is also talk that in the budget the duty may be made advalorem from the fixed duty for now. Its a possibility to keep the Cement companies from charging higher. This appears difficult given the implementation issues for the same. Important to note that cement stocks continue to sag expecting the worst and our guess is that there will be no major negatives and this sector will see positives post the budget. However it will be tough for them to announce big price hikes on the worries of Government backlash.

Bank of Japan (BOJ) raised interest rates for the first time in seven months, by a quarter percentage point to 0.5 percent. This was an attempt to rectify what the central bank itself views as the "abnormal" state of the credit policy. The target for the unsecured overnight call rate, which the BOJ uses as the key target rate in the short-term money market, was increased to 0.5 percent from 0.25 percent. It is for the first time since September 1998 that the key policy rate has been at 0.5 percent or higher. The BOJ's stance on rates has significant implications for the entire world economy as the cheap Yen has been used to fuel markets globally and more specifically India.

HLL announced results with revenues up 7.4% and Profits up 10% which were somewhat disappointing. The growth of 8.5% domestically is the issue. However, a warmer winter is to blame partly as skincare volumes were impacted by lower sales. Valuations at 23X FY07 with slow growth on cards is something which does not excite us. The pressures will be from increasing advertising costs going ahead. Its at best likely to be a market performer.

The plastic products major Sintex Industries and the Gujarat government entered into an agreement for the construction of 50,000 economically weaker sections (EWS) quarters with monolithic construction technology. The proposed investment in the project is about Rs 75 0 Cr. Monolithic constructions are housing solutions designed by Sintex to address mass and low-cost housing needs. With the company's range of plastic products with manufacturing units at 8 regions across India. These broadly fall under the categories of water storage tanks (16% of 9mFY07 plastic revenues), pre-fabricated structures (47%) and industrial custom molding (37%). This deal should be a promising one for Sintex Inds and should add to the topline as well in the bottom line too. We had a call and note here..Booming Real estate will be beneficial for for Sintex..

Technically too it was a bad move today as 13700 was taken out. This was a big support and that means that if todays low 13568 is taken out early next week we could be headed to as low as 13040. On the upside there are resistance is at 14120 which could be seen. Please note that the range is large and it could be really wild swinging. So hold your horses. Selling calls and Puts may not be a bad idea to capture the volatility but thats for the big players who tend to trade than invest. For investors, its best to lighten positions on upsides.

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Market may remain cautious

Th market is expected to stay on the sidelines ahead of a key event –The Union Budget 2007-08, which will be presented in Parliament on Wednesday (28 February 2007). The market will take directions, depending on the announcements made at the annual event.

Caution on the bourses is evident in that the market-breadth has turned weak, whenever the key indices have corrected over the past few days. Concerns that the government may raise short-term capital gains tax on sale of shares from the current 10% have gained currency. The securities transaction tax (STT) may also go up further. The STT was raised in the previous budget. The removal of 10% corporate surcharge may be offset by removal of certain open-ended exemptions.

Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget.

Also, the Railway Budget will be announced on 26 February 2007. It is also closely watched by market players as some sectors are directly or indirectly impacted due to the announcements made. Continuing the trend witnessed during the past two years of the UPA government, Lalu Yadav is all set to present his third "people friendly" Railway Budget in which no hike is expected in ordinary class passenger fares or freight rates.

Crude oil prices have started going up, and have reached above $60 per barrel. Any sharp upmove may dampen the sentiment further.

Visaka Industries, Crisil, Peninsula Land, Alfa Laval India, ESAB India, Vesuvius India and 3M India will be announcing their December quarterly results

Pre-Budget, Sensex sheds 723 points

The market declined through the week amidst high volatility. Factors like the CRR-hike, rising inflation, concern over rising domestic interest rates, unwinding in derivatives ahead of the expiry of February 2007 contracts on 22 February 2007, and fear that short-term capital gains tax may be hiked in the Union Budget 2007-08 to be presented in Parliament on 28 February 2007 were the major triggers for the fall.

Caution was also partly due to worries of a possible interest rate hike by the Bank of Japan (BoJ), which raised benchmark lending rates in the country to 0.50% on 22 February 2007.

The BSE Sensex shed 723.02 points for the week ended 23 February 2007, to settle at 13,632.53 compared with the previous week’s closing of 14,355.55 on 15 February 2007. The S&P CNX Nifty lost 207.30 points, to settle at 3,938.90 compared with the previous week’s closing at 4,146.20.

The BSE Mid-Cap Index shed 288.12 points for the week ended 23 February 2007, to settle at 5,664.89 compared with the previous week’s closing of 5,953.01. The BSE Small-Cap Index shed 385.83 points, to 6,904.43 compared with previous week’s closing at 7,290.26.

On Monday (19 February), the BSE Sensex settled 47.35 points higher, at 14,402.90. It had opened firm, at 14,436.18, tracking the 346-point surge of Thursday (15 February 2007). After staying firm throughout the day, the market appeared to tire in the late-afternoon session. Profit-booking in index-pivotals capped gains. On that day, banks, which had sharply declined in the past few sessions following the CRR hike, were in demand.

On Tuesday (20 February), the Sensex lost 149.52 points (1%), to 14,253.38 in what was a broad-based correction. The undertone was cautious due to rising domestic interest rates, and also due to concerns that the short-term capital gains tax may be hiked in the Union Budget 2007-08, which will be tabled in Parliament on 28 February 2007. Caution was also partly due to worries of a possible interest rate hike by the Bank of Japan, whose board was to meet the next day.

The Sensex lost 64.89 points, at 14,188.49, on Wednesday (21 February 2007). The Sensex remained volatile throughout. Although trading was devoid of wild swings, the benchmark Sensex frequently moved in and out of the red. After opening weak, the Sensex had recovered but finally succumbed to pressure at higher levels in the late-afternoon.

Volatility continued on Thursday, (22 February) as well, when the February derivative contracts expired. A sudden sell-off gripped the market in late trading due to expiry of February 2007 derivative contracts. Much of the fall materialised in the last 50 minutes of trade. Cement, auto, banking shares and pharma pivotal weakened in late trading.

The Sensex closed at 14,021.31, a fall of 167.18 points. On that day, it came off the lower level after briefly falling below 14,000. But for a relatively firm trend in index heavyweight Reliance Industries (RIL), the fall in the BSE Sensex could have been much steeper.

Friday (23 February 2007) saw the BSE Sensex falling below the psychological level of 14,000 in the opening session itself, as selling continued unabated throughout the day. A host of stocks from the small-cap and mid-cap space were being heavily sold. The 30-shares BSE Sensex plunged 388.78 points (2.77%), to settle at 13,659.53. Market men are unwinding their long positions, choosing to watch from the sidelines, cautious, ahead of the Union Budget for 2007-08.

Ranbaxy was down 9.42% for the week to Rs 356.45. The stock came under pressure as market men continued to fret over possible equity dilution if Ranbaxy acquired Merck's generic drugs business. The stock has declined even as the company on Wednesday dismissed media reports that it was planning an issue of shares in the US, or dilution in stake by founders to fund the acquisition.

Reliance Industries (RIL) was up 0.42% to Rs 1412.80. RIL has a substantial 10.8% weightage in the Sensex. As per reports, global oil major, Chevron Corporation, may assist RIL in developing an exploration block in the oil-gas rich Krishna-Godavari (KG) basin. Chevron Chief David J O’Reilly is expected to meet RIL Chairman & Managing Director Mukesh Ambani during the Chevron chief's Mumbai visit.

Infosys Technologies lost 5.77% to Rs 2237.35, on reports of the company scouting for mid-sized BPO companies in Europe, with a value of over Rs 400 crore.

The week saw the banking sector come under selling pressure post CRR hike by the Reserve Bank of India. The BSE Bankex lost 183.74% to 6,998.97 compared to the previous week’s closing at 7,182.71. Oriental Bank of Commerce (down 10.19% to Rs 200), Kotak Mahindra Bank (down 8.81% to Rs 439.85), Federal Bank (down 5.02% to Rs 224.15), Canara Bank (down 3.03% to Rs 209.75), ICICI Bank (down 4.27% to Rs 907.95), and SBI (down 5.77% to Rs 1058.40) were major losers from the banking space.

ABB was down 2.47% to Rs 3707.15, down from a high of Rs 4000. The company announced a 42.6% growth in net profit in the December 2006 quarter along with a 5-for-1 stock-split. Income from operations surged 44.6% to Rs 1426.31 crore (Rs 985.72 crore).

ABB India plans to invest Rs 250 crore over the next two years to set up new factories, augment existing capacities and foray into new areas. The company will set up factories in Delhi, Baroda, Nasik, Mumbai and parts of Karnataka.

Biocon surged 5.40% to Rs 462.40, on news that the firm plans to invest Rs 1000 crore in setting up a bio-pharma plant in Andhra. The bio-pharma plant will come up at the special economic zone (SEZ) near the port city of Visakhapatnam. Andhra Pradesh Chief Minister, Y S Rajasekhara Reddy, on Friday (16 February 2007), handed over the land needed for the plant to Biocon Chairman, Kiran Mazumdar Shaw.

IFCI topped the volume chart on BSE all in most of the trading sessions of the week. The scrip price lost 4.63%, to close at Rs 27.80.

Manugraph India gained 2.53% to Rs 190.60, after the company said on Tuesday that Reliance Mutual Fund had acquired a further 3.7% in the company, taking its stake to 5.96%. On 15 February 2007, Reliance Mutual Fund purchased shares of 11.25 lakh shares of Manugraph (3.7% stake) at Rs 185 through the open market purchases on BSE – of which 9.08 lakh shares were obtained from foreign fund Citigroup Global Markets.

Two stocks got listed on the BSE for the week ended 23 February 2007. First was BPO firm, Firstsource Solutions, which debuted at Rs 75.10 on Thursday (22 February) compared to the IPO price of Rs 64. It settled at Rs 79.60 on the day of its debut.

The second was Power Finance Corporation that got listed on 23 February 2007. The stock debuted at Rs 104 compared to the IPO price of Rs 85. It settled at Rs 111.55. Volumes in the stock were high at 4.06 crore shares on the first day.

Maruti Udyog (MUL) was down 3.23% to Rs 863.30. Moving ahead with its plan to exit the carmaker, the Central Government on Thursday invited expressions of interest (EoIs) from public sector financial institutions, banks and mutual funds for selling its remaining 10.27% stake in the company.

The process is likely to fetch the government at least Rs 2,555 crore, based on Friday's closing of Rs 863.30 on the BSE. The government had said last year it will completely exit MUL, in which Japan's Suzuki owns a controlling 54.2% stake, by selling its residual 2.96 crore shares (Rs 5 face value). The money raised from the sale will go to the government, and not the National Investment Fund (NIF), as MUL is no longer a public sector enterprise.

India's wholesale price index rose 6.63% in the 12 months to 10 February 2007, lower than previous week's annual increase of 6.73% due to a fall in some food and textile prices, data showed on Friday (23 February 2007). Analysts had forecast the figure at 6.70%. The annual inflation rate was 3.81% during the corresponding week of the previous year.

Meanwhile, the Union Cabinet approved bringing out necessary changes in the law in the forthcoming Budget session to phase out central sales tax (CST), on Thursday. CST is collected by the Central Government and is distributed among the states.

The CST rate will be cut from 4% to 3% from 1 April. The phase-out is expected to be completed by 2010-11. This reduction in CST is likely to result in a loss of Rs 6,250 crore to the states’ exchequer in 2007-08. The Centre will introduce a legislation to allow states to tax certain identified services, and impose additional duties on excise goods like tobacco to compensate states for the loss of revenue due to the phase-out. Besides, the Union Government is understood to have assured states of budgetary support to cover any shortfalls.

The Bank of Japan (BoJ) raised its key short-term interest rate from 0.25% to 0.5% - the first hike since July 2006. The hike is in line with analysts' expectations. The move came after the country's economy was confirmed to have recorded stronger-than-expected growth during October-December 2006.

Finance Minister P Chidambaram said on Thursday he expects the inflation rate to moderate as supply shortages ease in the coming days.

The Central Board of Direct Taxes (CBDT) on Thursday shot down reports of nationwide raids on stock brokers. TV channels had reported that such raids were being conducted from Thursday morning.

FIIs were net buyers to the tune of Rs 653.90 crore during the first three days of the week, to 23 February 2007. For February 2007, till 23 February 2007, FIIs purchased shares worth Rs 4175.40 crore. The strong inflow was triggered by an upgrade in India's sovereign rating to investment grade by global ratings agency, Standard & Poor's, on 30 January 2007.

Even mutual funds (MFs) were net buyers of equities worth Rs 152.28 crore in the first four days of the week.

The market is expected to remain subdued in the run up to the Union Budget 2007-08, which will be presented in Parliament next Wednesday (28 February 2007)

Fourth straight day of losses

The market declined for the fourth straight day, as selling refused to die down. Concerns prior to the budget kept the market edgy. Market men unwinded their long positions, choosing to watch from the sidelines, cautious, ahead of the Union Budget for 2007-08.

The BSE Sensex, which had slipped below the psychological 14,000 level in the opening session, fell like nine pins as selling continued unabated.

The 30-shares BSE Sensex plunged 388.78 points (2.77%), to settle at 13,659.53. It had opened firm, at 14,071.27, but began declining immediately after. The benchmark index kept on touching one low after another, 13,568.08 being the last one. Today’s fall is also biggest single day point fall since 12 December 2006. On that day, the barometer index had lost 404.41 points (3%) after data showed a lower-than-expected 6.2% growth in industrial production for October 2006, sparking concerns of an economic slowdown. The 404-point slide came on the back of a 400-point fall a day before (11 December 2007) after the Reserve Bank of India (RBI)’s surprise hike of 50 basis points in the cash reserve ratio (CRR) after trading hours on 8 December 2006.

The S&P CNX Nifty lost 101.10 points (2.50%), to 3,938.90.

The benchmark Sensex had sharply fallen close to 167 points on Thursday (22 February), in the last 45 minutes of trade, due to heavy unwinding of derivative contracts on account of their expiry. The February series, which expired on Thursday (22 February), was interestingly the first monthly series, since the devastating May plunge, when the Nifty settled in the red.

The benchmark Sensex declined sharply from 14,402.90 on 19 February 2007 to 13,659.53.

The total turnover on BSE amounted to Rs 4150.18 crore as compared to Rs 4243 crore on Thursday (22 February).

The market-breadth, which reflects the overall health of the broader market, was very weak. There were 5.4 losers for every gainer on BSE. A host of stocks from the smallcap and midcap space were being heavily sold. Against 2,207 shares declining on BSE, just 411 advanced. Only 36 scrips remained unchanged. The BSE Small-Cap Index closed at 6,904.43 down 268.98 points (3.75%), while the BSE Mid-Cap Index ended at 5,664.89 down 139.59 points (2.4%).

Among the 30-Sensex pack, 28 declined while only 2 ended green.

Telecom services provider Bharti Airtel was the top loser, down 6.48% to Rs 749.95, on a volume of 4.59 lakh shares.

Private sector ICICI Bank slumped 4.45% to Rs 906.25, on a volume of 3.46 lakh shares. The scrip had also slipped to a low of Rs 899.15. A surprise hike in CRR announced recently continues to weigh on the stock. Other banking and financial stocks like SBI (down 2.11% to Rs 1057), HDFC Bank (down 2.10% to Rs 968), UTI Bank (down 5.36% to Rs 491), Union Bank of India (down 3.43% to Rs 98.50) were not spared either. The BSE Bankex lost 3.42%.

Grasim (down 6.05% to Rs 2270), ITC (down 5.10% to Rs 165.15) and Reliance Communications (down 4.78% to Rs 429) were the other prominent losers.

Maruti Udyog (MUL) was down 1.50% to Rs 866. Moving ahead with its plan to exit the car maker, the Central Government on Thursday invited expressions of interest (EoIs) from public sector financial institutions, banks and mutual funds for selling its remaining 10.27% stake in the company.

The process is likely to fetch the government at least Rs 2,600 crore, based on Thursday's closing of Rs 880 on the BSE. The government had said last year it will completely exit MUL, in which Japan's Suzuki owns a controlling 54.2% stake, by selling its residual 2.96 crore shares (Rs 5 face value). The money raised from the sale will go to the government, and not the National Investment Fund (NIF), as MUL is no longer a public sector.

Private sector Tata Steel was a top gainer, up 0.39% to Rs 457.90, on a volume of 24.71 lakh shares. The stock had struck a high of Rs 466.85, and was looking strong throughout the day. Reports say that Corus had hiked hot/cold rolled prices for European markets by 5 - 7% for the second quarter 2007 deliveries. The decision to increase the prices is a reflection of favourable market conditions. The Anglo-Dutch steel company was last month acquired by Tata Steel.

"Demand is improving and the stocks are at normal levels. The current strong demand for steel in Europe - particularly in construction and end-user sectors - supports this price increase," a spokesperson for Corus said.

Index heavyweight Reliance Industries (RIL) was up 0.30%, to Rs 1418, on a volume of 12.60 lakh shares. It had, however, slipped from a high of Rs 1442.75. The company’s board meets on 24 February 2007 to review plans for raising $2 billion.

Power Finance Corporation moved higher, and settled on BSE at Rs 111.55, a premium over the IPO price of Rs 85. The stock debuted at Rs 104, hit a low of Rs 103.50, and a high of Rs 117. Volumes in the stock were huge, at 4.06 crore shares, on account of multiple block deals.

The IPO had received a strong investor response. It was subscribed 77.24 times, amidst heavy bidding by FIIs, and was priced at the upper end of the Rs 73 - Rs 85 price band. NSE has also included the stock in the futures & options segment. The lot size of PFC in the derivative segment is 2,400.

Power Finance Corporation has a large equity base of Rs 1148 crore and the face value per share is Rs 10.

Fears of a slowdown in housing demand due to rising cost of funds has dented real estate scrips, some of which were down between 2 - 5% today. A number of banks have raised lending rates over the past few days following a hike in the cash reserve ratio (CRR) by the Reserve Bank of India on 13 February 2007. After making lending to the real estate sector difficult, the RBI has now placed restrictions on finance companies investing in real estate. The demand for home loans has already slowed at a time, when home loan rates are going up.

Unitech (down 5% to Rs 382.10), Ansal Infrastructure (down 1.85% to Rs 585), Parsvnath Developers (down 4% to Rs 284.85), Sobha Developers (down 1.11% to Rs 790) and Mahindra Gesco Developers (down 1.11% to Rs 593) declined.

Real estate scrips have been at the receiving end over the last few days after a solid rally over the past two years, thanks to the housing sector boom due to easy availability of housing finance and relatively benign interest rates. The surge in real estate stocks was also because of the property boom, which has seen real estate prices increase manifold.

Jaiprakash Associates declined 8.20% to Rs 577, in an overall weak market, after the central bank banned purchases by foreign funds, as they had reached 22%.

Gujarat Mineral Development Corporation (GMDC) rose 4% to Rs 438.15, following a block deal of 1 lakh shares, which was struck at Rs 455 in early trade.

JSW Steel rose 2% to Rs 461.60, on expectations of a rise in domestic steel prices. There are talks that steelmakers will raise prices by Rs 1000 per tonne, post-budget, on the back of firm global steel prices.

Gail India gained 1.7% to Rs 277.90. The stock recovered from the lower level, after having lost 3.3% to Rs 273.15 on Thursday (22 February) even when the company had announced during trading hours that its board will meet on 6 March 2007 to consider payment of a special interim dividend for FY-2007 (year ending 31 March 2007). Gail India has set 12 March 2007 as a record date for interim dividend.

Clariant Chemicals rose 0.80% to Rs 302.05, in a weak market, after posting a net profit growth of 460.60% to Rs 7.40 crore in Q3 December 2006 compared with Rs 1.32 crore in Q3 December 2005. Net sales for the quarter rose 138.20% to Rs 228.20 crore from Rs 95.81 crore in the year ago quarter.

Sterlite Optical Technologies was down 6.62% to Rs 177. It had received contracts worth Rs 150 crore from state-run Power Grid Corp of India. The stock had touched an intraday high of Rs 197.

Wockhardt rose 0.47% to Rs 332.50, after the company posted good Q4 December 2006 results. Wockhardt’s consolidated net profit rose 19.5% in the December 2006 quarter to Rs 87.10 crore from Rs 72.90 crore in the December 2005 quarter. Total income surged to Rs 534.20 crore (Rs 368.90 crore).

Construction firm Atlanta plunged 10% to Rs 972.70, after the Securities & Exchange Board of India (Sebi) asked the promoter group and associated entities/persons, not to deal in the stock for allegedly rigging its price. A total of 3,455 shares changed hands in the counter on BSE. There were outstanding sale orders for 3.08 lakh shares at the 10% lower limit in the stock on BSE.

Sebi has also directed Atlanta not to issue any equity shares, or any other instruments convertible into equity shares, in any manner, or give effect to any alteration in its capital structure till further directions. The depositories have been asked to neither dematerialise the convertible warrants and shares issued upon conversion, nor give effect to the stock-split, till further directions.

India's wholesale price index (WPI) rose 6.63% in the 12 months to 10 February, lower than previous week's annual increase of 6.73% due to a fall in some food and textile prices, data showed on Friday (23 February 2007). Analysts had forecast it at 6.70%. The annual inflation rate was 3.81% during the corresponding week of the previous year.

Global markets were trading mixed. The Nikkei average rose 0.44% to a seven-year closing high on Friday, led by gains in exporters and property shares such as Mitsubishi Estate Co., but Sanyo Electric Co. tumbled following reports of accounting problems. Shares in Sanyo fell as much as 29% on news that Japan's securities watchdog was investigating the company over its past earnings reports, the latest blow to the embattled consumer electronics giant.

The Nikkei rose 79.63 points to 18,188.42, its highest close since May 2000. For the week, the index has added 1.75%.

Hang Seng index shed 97.58 points (0.47%), to 20,711.65.

Meanwhile, the Union Cabinet approved necessary changes in the law in the forthcoming Budget session to phase out central sales tax (CST) on Thursday. CST is collected by the Central Government and is distributed among the states.

The CST rate will be cut from 4% to 3% from 1 April. The phase-out is expected to be completed by 2010-11. This reduction in CST is likely to result in a loss of Rs 6,250 crore to the states’ exchequer in 2007-08. The Centre will introduce a legislation to allow states to tax certain identified services and impose additional duties on excise goods like tobacco to compensate states for the loss of revenue due to the phase-out.

Besides, the Union Government is understood to have assured states of budgetary support to cover any shortfalls.

Earlier this year, the Centre had agreed to the states’ proposal for allowing them to tax 77 services and keep the entire proceeds of it. Of the 77 services, 33 are currently taxed by the Centre, while another 44 are new items to be brought under the service tax net.

For the first year, the Centre will collect the tax and pass on the entire proceeds to the states. The 44 new services to be brought under the service tax net include barbers, legal, education, health, sports and performances of Bollywood actors.

The market is expected to remain subdued in the run up to the Union Budget 2007-08 to be presented in Parliament next Wednesday (28 February 2007). The Budget session of Parliament began today.

Caution on the bourses is evident in that the market-breadth has turned weak, whenever the key indices have corrected over the past few days. Concerns that the government may raise short-term capital gains tax on sale of shares from the current 10% have gained currency. The securities transaction tax (STT) may also go up further. The STT was raised in the previous budget. The removal of 10% corporate surcharge may be offset by removal of certain open-ended exemptions.

Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget.

FIIs turned net sellers on Wednesday (21 February 2007). FIIs were net sellers to the tune of Rs 40.20 crore on Wednesday. Their inflow has been strong this month. Their cumulative inflow in February 2007 has reached Rs 4175 crore. The strong inflow has been triggered by an upgrade in India's sovereign rating to investment grade by global rating agency, Standard & Poor's, on 30 January 2007.

As per provisional data, FIIs were net sellers to the tune of Rs 435 crore on Thursday (22 February 2007), the day when the Sensex lost 167 points. FIIs were net sellers to the tune of Rs 348 crore in index-based futures on the same day. They were net sellers to the tune of Rs 104 crore in individual stock futures. Nifty March futures settled at 4066.65 on Thursday, a premium of 26.65 points over the spot Nifty closing of 4,040.

Revised market lots in NSE’s derivatives segment become applicable today. The lot size of the Nifty contract has been cut to 50 from 100. This may boost volumes in the derivatives segment.

US blue-chips declined on Thursday, as a jump in oil prices added to worries about inflation, but a rally in chipmakers' helped the Nasdaq advance late in the session, to end at a six-year high.

The Dow Jones industrial average fell 52.39 points, or 0.41%, to end at 12,686.02, with only eight of the 30 stocks in the Dow finishing higher. The Standard & Poor's 500 Index dipped 1.25 points, or 0.09%, to finish at 1,456.38. The Nasdaq Composite Index rose 6.52 points, or 0.26%, to 2,524.94, its highest close since 15 February 2001. Earlier, the Nasdaq hit a six-year intraday high at 2,531.42.

US crude shed 9 cents to 60.86 a barrel after jumping 88 cents overnight to its highest level since 2 January 2007, after US data showed a surprisingly big fall in distillate stocks. The fall was compounded by a rash of refinery problems in the world's top consumer. Worries over another escalation in the dispute over Iran's nuclear programme added to concerns over global supply.

Weekly Recommendations

Considering the weakness in the market, especially the crash on Friday, we would not like to give any stock recommendations for the coming week. Also, we will have the Railway Budget and the General Budget next week. As there is a big event risk, it would be prudent for investors to stay on the sidelines for a while and wait for some clarity on market direction.

DOMESTIC NEWS & GLOBAL NEWS

Govt announces key policy decisions
The Group of Ministers (GoM) gave its green signal for the merger of Air India and Indian (erstwhile Indian Airlines) to create an airline giant that can take on the private carriers, both local and foreign. "We want to see a big, strong national carrier, this is our intention," Civil Aviation Minister Praful Patel told reporters in New Delhi after the GoM meeting. "We intend to complete the government process by March 31." The proposal will now be sent to Cabinet for approval, he said.

The Government invited bids for selling its remaining stake in Maruti Udyog Ltd. Public sector financial institutions, banks and mutual funds have been asked to submit initial offers for the Government's 10.27% stake in Maruti. The bids must be for a minimum Rs100mn and submitted by March 9. The stake sale is likely to fetch as much as Rs26.7bn (about US$600mn).

In a bid to attract mega investments in the semiconductor sector, the Government announced on Thursday that it will offer financial incentives to chip manufacturers such as Intel Corp. The proposed sops include tax breaks and interest free loans totaling between 20% and 25% of the capital expenditure for chip fabrication plants in the first 10 years, IT Minister Dayanidhi Maran told reporters in New Delhi. A minimum investment of Rs25bn will be required to obtain incentives meant for chip making plants. The limit is Rs10bn for manufacturing other products, including plasma display panels, Maran said after a Cabinet meeting.

Apr-Dec fiscal deficit down 12.4% yoy

Fiscal deficit during April-December 2006-07 was lower by 12.4% over the corresponding period last year while revenue deficit during the first nine months of the current fiscal year was down 16.2% over year-ago period. Data released by the Government shows that fiscal deficit, the excess of Government expenses over receipts after taking into account borrowings, declined from Rs1.08 trillion to Rs948.54bn. Revenue deficit, the excess of revenue expenditure over revenue receipts, fell from Rs796.81bn to Rs667.77bn.

Wal-Mart checks out India

Despite opposition against the company's formal entry into India, a delegation from Wal-Mart Stores Inc. landed in the country to examine the market and hold talks with people in the business. The Wal-Mart team, led by Vice Chairman Michael Duke, looked at existing retail formats in Mumbai. "It is a routine business visit to check out the market and meet people," a spokesperson for the Bentonville, Arkansas-based company said without divulging details. Duke was also expected to meet top Government officials besides executives from joint venture partner Bharti Enterprises. The visit of the Wal-Mart team to India came amid protests by mom-and-pop shopkeepers, who fear that the entry of MNC retail giants like Wal-Mart will have an adverse impact on their business. Separately, Bharti Enterprises announced it would invest up to US$2.5bn by 2015 in the front-end of its retail business. The group's partner Wal-Mart will look after the back-end operations, including logistics, supply chain and cash & carry. Mittal said the group would open multi-format retail outlets in all cities with a population of about one million. "We are looking at 10mn sq.ft. of retail space," he said, adding that the joint venture will employ 60,000 people in the next few years. Bharti expects revenues of Rs200bn (US$4.5bn) by 2015.

JM Financial to part ways with Morgan Stanley

Nimesh Kampani, one of the pioneers in the Indian capital market space is snapping ties with its US partner Morgan Stanley. Kampani's JM Financial is seeking to pat ways with Morgan Stanley, sending the stock sharply up on the bourses. The deal is likely to be completed by the end of Q1 FY08, according to reports. At present, JM Financial has two Joint Ventures (JV) with Morgan Stanley. One is JM Morgan Stanley Pvt Ltd, which has interests in investment banking, retail distribution, private wealth management and fixed income securities. JM Financial holds 51% in JM Morgan Stanley while 49% is being held by Morgan Stanley.
Second is JM Morgan Stanley Securities Pvt Ltd with operations in institutional equity sales and trading. Morgan Stanley owns 51% in JM Morgan Stanley Securities while the balance 49% is with JM Financial. Under the deal, JM Financial is to buy out the JV partner in JM Morgan Stanley at Book Value for a consideration of US$20mn. At the same time, JM Financial will sell its 49% stake in JM Morgan Stanley Securities to Morgan Stanley for US$445mn, valuing the securities business at nearly $900mn. Post the transaction, JM Financial will become a full fledged investment bank, says Kampani. JM Financial will focus on NBFC, Asset Management and Capital Market businesses, adds Kampani. Morgan Stanley will apply for a fresh merchant banking license.

Mittal to buy 49% in HPCL refinery

Lakshmi Niwas Mittal is enhancing his ties with home country. After unveiling mega investments in the steel sector, the steel baron is now training its guns on India's energy sector. As part of this strategy, he picked up a 49% stake in the Guru Gobind Singh Refinery of state-run HPCL. The deal is part of the revival of the Rs160bn refinery-cum-petrochemical project at Bhatinda, Punjab. HPCL had signed an agreement with BP for the Bhatinda project. But, in March 2006 the British oil & gas major later pulled out of the project, citing the non-viability of the project. Earlier, Saudi Aramco of Saudi Arabia exited the project in 1998. Separately, agency reports said that HPCL will offer a stake in the expansion of its Vishakhapatnam refinery to Oil India Ltd. HPCL also hopes to rope in France's Total and Kuwait Petroleum International for the expansion, the report added. HPCL plans to ramp up annual capacity at Vishakhapatnam to 330,000 barrels a day by 2011, from the current 150,000 bpd, after an investment of Rs 100bn.

Nissan to join Renault, M&M for India plant

Nissan Motor Co. will reportedly build a car plant in Chennai in partnership with Renault SA and Mahindra & Mahindra Ltd. (M&M) as the Japanese auto giant seeks to tap the rapidly growing Indian automobile market. According to agency reports, the three companies will jointly own the factory, with initial annual output capacity of up to 350,000 units in 2009. M&M, India's biggest maker of utility vehicles and tractors, will own 50% of the venture. Nissan and Renault will each hold 25%. An official announcement on the Chennai venture is expected to be made on Monday. Chennai has been a hotbed for auto and auto parts makers. Among the leading companies who have set up plants here include Hyundai Motor Co., Ford Motor Co. and BMW AG. Nissan currently sells only the imported X-Trail SUV in India, with sales there totaling just 190 units last year.

RIL finds more gas in KG basin

The boom in India's hydrocarbon story, especially on the east cost of the country, continues unabated. Leading the way is none other than private sector giant Reliance Industries Ltd. (RIL). The Mukesh Ambani owned company has found more gas in the D6 block of the Krishna Godavari basin, the company's minority partner Niko Resources said on Feb. 19. "The deepwater frontier drilling rig has now completed drilling of an exploratory well, AA-1, which has resulted in discovery of a new high potential natural gas zone," Niko, which holds a 10% stake in the block, said in a statement. Separately, the Director General of Hydrocarbon (DGH) rejected ONGC's mega gas discovery in the KG Basin, blaming the method adopted by the company for evaluating the find. The public sector oil giant responded by saying that the method used by them for notifying the discovery was acceptable and the abandonment of wells was a standard industry practice. ONGC said it will not withdraw the notice for potential commerciality. The total reserve size reported by the company is in the range of 5-15 trillion cubic feet (TCF).

Zensar to buy ThoughtDigital LLC

Zensar Technologies Ltd. said its 100% US subsidiary Zensar Technologies Inc. had signed an agreement to acquire ThoughtDigital LLC, a Delaware-based company and its holding company SOA Software Inc. A Special Purpose Vehicle (SPV) called Zensar TD LLC has been set up to acquire, own and operate the whole business of ThoughtDigital LLC. Zensar Technologies Inc. would acquire 100% equity stake in Zensar TD LLC. As a result of the proposed acquisition, Zensar Technologies Ltd. will get an indirect 100% ownership in Zensar TD LLC. ICI India Ltd. announced it had signed a definitive agreement to divest a portion of its Auto Refinish Paints Business, comprising Advanced Refinish (2K), to its technology partner for this segment, PPG Industries Inc., USA, for about Rs520mn, subject to certain agreed adjustments. The company's 2K business will be transferred as a going concern to Asian PPG Industries Ltd., a 50:50 Joint Venture between Asian Paints Ltd. and PPG Industries, over the next few weeks, ICI India said. The 2K business has about 60 employees and had revenues of about Rs500mn in the financial year ended March 31, 2006, ICI said.

Sun TV gets nod to sell 20% in DTH arm

The Government cleared the proposal by Mauritius-based South Asia Entertainment Holdings Ltd. (SAHEL) to pick up a 20% stake in Sun Direct TV, the DTH arm of Sun TV Ltd. The Cabinet Committee on Economic Affairs (CCEA) gave its approval for issuance of equity shares to SAHEL, totaling about US$150mn (approximately Rs6.75bn) from time to time. The approval would be subject to guidelines issued by the Ministry of Information & Broadcasting. In January, Sun Direct TV had sought the permission of the Foreign Investment Promotion Board (FIPB) to offer 20% foreign equity to SAHEL. The company has licence to run a DTH satellite television service in India. SAEHL is a wholly owned subsidiary of ASTRO Overseas Ltd., which in turn is 100% owned by ASTRO All Asia Network Plc (AAAN). AAAN is a company incorporated in England and Wales and is registered as a foreign company in Malaysia.

Jindal Saw, L&T win mega orders

Jindal Saw Ltd. announced it had bagged its single largest order totaling about US$355mn (approximately Rs15.6bn) from a large corporation in the United States. The order involves supply of 42" Submerged Arc Welded pipes (L Saw Pipes). The order is for about 360 miles, including double jointing and coating. The order, which is scheduled to be executed by March 2008, has been received from an existing large client of the company, Jindal Saw said. The order has been bagged through a competitive bidding process and will be executed out of US operations, it added. With this order, the company's present order book exceeds US$1.5bn (approx. Rs66bn). These orders are scheduled to be completed by March / April 2008. Larsen & Toubro Ltd. (L&T) announced it had won a contract worth US$250mn from Maersk Oil Qatar for its Block 5 development in Qatar, consisting of two new offshore platform top-sides, a flare platform and interconnecting bridge. Maersk Oil Qatar is developing the field under a production-sharing agreement with Qatar Petroleum. To be executed in 28 months, the Block 5 Package 14 project consists mainly of two 2300-tonne topsides with facilities for oil production and export.

MindTree, Idea fix issue price

MindTree Consulting, an international IT and R&D Services company that delivers business and technology solutions through global software development, has fixed the issue price at Rs 425 for the IPO of 5,593,300 equity shares of Rs 10 each issued at a pre-IPO price band of Rs 365 to Rs 425 per equity share through the 100% book building process. The issue closed for subscription on Feb. 14 and was subscribed 103.28 times. Meanwhile, Idea Cellular Ltd. priced its IPO at Rs75 per share, the top end of its price band. The company, a part of the diversified Aditya Birla Group, would raise Rs21.25bn through the public issue. The IPO of Idea Cellular has been subscribed nearly 50 times.

Atlanta probe...promoters, 15 others barred from trading

Shares of Atlanta Ltd. plunged on Feb. 23 after the capital market regulator banned 16 entities, including the company's promoters for alleged price manipulation post listing. Rajoo Barot, Managing Director of Atlanta; Sachin Jain, Company Secretary and Manish Marwah, a prominent stock market player, feature in the list of companies/people restrained from buying, selling or dealing in Atlanta shares, till further directions.Shares of Atlanta, which were listed on Sept. 25, 2006, rose from its offer price of Rs150 to Rs1,446 on Jan. 17, a whopping gain of 681% in just 55 trading days. The stock fell by the 10% lower circuit to Rs972.70. It is down 21% in a month and 11% in a week's time. "It appears that the company promoters, their strategic investors and other related entities of Marwah/Nabera group have abused the stock exchange mechanism, the listing agreement and regulations to unfairly maximise their wealth at the cost of lay investors. Prima facie findings show its promoters and entities seem to have violated the Sebi regulations," the order said. SEBI is further investigating the matter. Meanwhile, SEBI also slapped a Rs10mn fine on DLF Commercial Developers and the promoters of Bhoruka Financial Services (BSFL), for violating norms while trading in the shares of BFSL on the Magadh Stock Exchange (MSE). DLF Commercial Developers is a subsidiary of DLF Universal. "The violation of the nature like above, needs to be dealt firmly," SEBI said.

PFC, Firstsource shine on stock market debut

Shares of Firstsource Solutions Ltd. (formerly ICICI OneSource Ltd.) surged on the stock market debut on Feb. 22 as investors expect the Mumbai-based BPO firm to deliver strong growth going forward. The scrip opened its maiden trading day at Rs75.1 on the BSE as against the issue price of Rs64 per share. This translates into a premium of 17.3%. The stock finished the week at Rs80 after touching a peak of Rs88.90 and a low of Rs75.10. Shares of state-run Power Finance Corporation (PFC), which raised nearly Rs10bn from an IPO, jumped on Feb. 23 as investors remained upbeat on the prospect of the power sector going ahead. The stock opened at Rs104 on the Bombay Stock Exchange (BSE) as against the issue price of Rs85 per share. This translates into a premium of 22.3%. The scrip closed at Rs111.50 after being as high as Rs117 and a low of Rs103.50 with 40.67mn shares changing hands on the counter.

BOJ votes in favour of rate hike

The Bank of Japan (BOJ) announced that it had raised its key interest rate by 25 basis points as the world's second-largest economy expands though inflation remains benign. BOJ Governor Toshihiko Fukui and his policy board colleagues voted 8-1 to increase the overnight lending rate to 0.50%, the central bank said in a statement in Tokyo. The benchmark remains the lowest among the G7 economies. Deputy Governor Kazumasa Iwata voted against the increase. The Japanese benchmark rates are now the highest in more than a decade. The BOJ said the Japanese economy was likely to continue growing and that it would make further rate adjustments gradually. The central bank said that prolonging a low-interest-rate policy could hamper economic growth. The rate increase will help stabilize prices and sustain economic growth, the central bank said. The market had been divided over whether the BOJ would go ahead with a rate increase amid growing opposition from the Government. Many politicians had expressed concern about the Japanese economy. The latest rate hike marks the third major policy move by the BOJ in less than a year. Last March, the Japanese central bank ended its so-called quantitative easing policy of pumping excess money into the banking system. In July it raised the benchmark rate to 0.25% from virtually zero, the first such move in six years.

HTIL EGM on March 9 to mull Hutch sale

Hutchison Telecommunications International Ltd. (HTIL) announced that it will seek shareholders' approval on March 9 for the proposed sale of its stake in its Indian joint venture to Vodafone Group Plc. The company, controlled by billionaire Li Ka-shing, is selling its 67% stake in Hutch to Vodafone for US$11.1bn. HTIL also said that it had made a profit in the nine months ended Sept. 30, 2006 compared with a loss a year earlier. HTIL's net profit (excluding minority interest) for the nine months ended Sept. 30 was HK$109mn, compared with a loss of HK$209mn a year earlier, the company said. Sales rose 37% to HK$24bn, it added. Including minority interest, net income in the period was HK$1.13bn, compared with a net loss of HK$128mn a year earlier. Separately, HTIL said it had entered into a three-year non-compete agreement with Vodafone. HTIL Board said the company would not carry on any business in competition to Hutch Essar in India in the next three years. Also, HTIL cannot offer jobs to any key employees of Hutch Essar within six months after completion of the sale. The deal is expected to be completed in early April or the sixth business day after the last conditions have been satisfied for the deal, whichever is later, HTIL said.

Arcelor Mittal profit down in 2006

Arcelor Mittal said its 2006 net profit fell 3.5% because of higher tax. Reporting full-year figures for the first time since Mittal Steel's acquisition of Arcelor last year, the group said net income fell to US$7.97bn, or US$5.76 a share, from US$8.26bn, or US$5.97 a share last year. Sales for the year were up at US$88.6bn versus US$80.2bn in 2005. The Luxembourg-based company posted a core profit of US$15.3bn, slightly below market expectations but in line with its own forecast. Analysts had forecast 2006 EBITDA of US$15.4bn. The steel giant had previously projected core earnings of between US$15.2bn and 15.4bn. Arcelor Mittal also announced plans to hand over US$2.4bn to shareholders. The company will buy back US$590mn of stock and pay a US$1.8bn dividend, it said. Arcelor Mittal announced it had signed various agreements with the State of Senegal in West Africa to develop iron ore mining in the Faleme region. The project is expected to entail an investment of about US$2.2bn. The total estimated reserves are approximately 750mn tons, located in 4 locations in the Faleme region and comprising both haemetite and magnetite deposits.

Microsoft asked to pay US$1.5bn to Alcatel-Lucent

A federal jury said that Microsoft Corp. must pay Alcatel-Lucent US$1.5bn for using digital music technology without permission. Microsoft violated two Alcatel-Lucent patents with its Windows Media Player, including the version in the new Vista operating system, the jury said. Microsoft said it will appeal the verdict. The decision allows Alcatel-Lucent, the world's biggest maker of telecom equipment, to seek an order barring Microsoft from using the patented technology. The verdict could also clear the way for legal actions against hundreds of companies that rely on MP3, the standard for playing music and sound files on a computer, mobile phone or digital-music player. "The damages award seems particularly outrageous when you consider we paid Fraunhofer only US $16mn to license this technology," said Microsoft's deputy general counsel, Tom Burt. The damage award is "not particularly material in our opinion when considered with the amount of cash on Microsoft's balance sheet and substantial free cash flow generation of about US $1bn per month," Goldman Sachs analyst Rick Sherlund wrote in a note to clients. Meanwhile, Google encroached further into Microsoft's territory by offering businesses a new set of web-based word-processing and spreadsheet services. The internet company released a similar package to consumers last year. Google also announced it will start selling e-mail, calendar and personalized home pages to businesses over the Web.

iPhone name...Apple, Cisco kiss and make up

Apple and Cisco Systems agreed to share the iPhone name, putting an end to a dispute that threatened the June launch of Apple's highly anticipated multimedia phone. The deal ends a six-week legal trademark tussle that began Jan. 10, a day after Apple CEO Steve Jobs introduced his company's iPhone. Cisco currently sells a line of Linksys VoIP devices under the iPhone label. Apple and Cisco said they are both "free to use the iPhone trademark on their products throughout the world." All pending legal action will be dismissed. The two companies will also explore opportunities for interoperability in the areas of security and consumer and enterprise communications.

EU slaps heavy fine on Otis, 4 others

European Union (EU) regulators fined Otis Elevator and four other elevator makers US $1.3bn for operating cartels for the installation and maintenance of elevators and escalators. The union’s competition commissioner, Neelie Kroes, said the costs of buildings and hospitals were artificially bloated by these cartels. Jonathan Todd, a union spokesman, said the fines represented the largest ever for price fixing in the EU. The authorities said the cartel operated from at least 1995 until 2004 in Germany, Belgium, Luxembourg and the Netherlands. The companies fined were Otis, a unit of United Technologies of Hartford; the German conglomerate ThyssenKrupp; Kone of Finland; Schindler Holding of Switzerland; and subsidiaries of Mitsubishi Elevator Europe, a unit of Mitsubishi Electric of Japan. George David, CEO of United Technologies, said that company officials were disappointed by the conduct revealed through the commission’s and UTC’s own investigations. He said nine Otis employees were dismissed over the matter. Otis and United Technologies disclosed the investigation in 2004 and have cooperated with the European Commission, David said. Nevertheless, he said, Otis will appeal the decision to a European court. Otis was fined 225mn euros (US$296mn).

TSE, LSE announce tie-up

The Tokyo Stock Exchange (TSE) and the London Stock Exchange (LSE) said they will to develop jointly-traded products and encourage access by member companies to each other's markets. The alliance is similar to a deal TSE signed recently with the New York Stock Exchange. A task force of senior members from both exchanges will begin discussions on areas of cooperation shortly, the TSE said. "Taking into consideration the environment surrounding market operators, it is critical for us to explore the possibility for satisfying the exchange's various stakeholders,'' Taizo Nishimuro, president of TSE said. The pact is part of TSE's strategy to gain a greater presence internationally as it prepares to sell shares to the public by 2009. Both bourses will share information on technology to introduce new systems into their markets. The eventual aim is to provide a round-the-clock trading environment for member firms of both markets, the TSE said in the statement. Meanwhile, Nikkei Sangyo Shimbun business daily reported that Citigroup plans to list on TSE later in the year. The New York-based financial services company has already began preparations for the listing, which will increase the company’s expansion plans in Japan.

INVESTMENT STRATEGY

Don’t budge before the budget!

The budget evolved from a management tool into an obstacle to management.

Going by the markets performance this week, it appears that the budget has evolved from a market mover to a market obstacle. How else can one explain one of the worst weekly falls in the seven months. The bulls who have been hammered for four days in a row will hope for some relief on Monday. Any lack of buying at open will prompt further margin calls and accelerate the slide on Monday. And don’t be surprised if Monday turns out to be another Manic Monday. The big event, which many will later like to term as a non-event is the budget. No bad news would be the good news here. We have been advising to stay light ahead of the budget. With this week’s fall and another fall expected before the budget, you could pick up your favorite stocks, which definitely offer better value compared to the recent weeks. And again, avoid the small packs as the exit options are less. Bulls can hope for some salvation from heavyweights like Reliance. The Reliance board is meeting on Saturday to review the decision taken by the board to raise US$2bn. Granules is another counter where some action is expected. Nirlon could once again come in the limelight as the company will discuss development of an IT park in Goregaon.

MARKET MOOD

Who let the Bears out?

The bulls have been taken by their horns by the bears as they dominated the proceedings for most part of the week. Out of five trading sessions, the market slipped on four days. It was a 'bears' week out' as they stormed the bourses. The last trading session of the week was disastrous for the bulls as the benchmark BSE Sensex plunged by nearly 400 points and the NSE Nifty tumbled nearly 100 points. Selling was seen across the board with Banking, Consumer Durables and Metal indexes leading the fall. This was the second successive down week for the market. Investors have been gradually booking profits amid high uncertainty about the direction of the market ahead of the budget.

Inflation fell to 6.63% in the week ended Feb 10 from 6.73% a week earlier. However, it was still around its two years high. Historically, we have seen markets touching new peaks in February followed by a decline post-budget. However, things have not been the same this year as concerns about inflation and its fallout on interest rates have overshadowed all other positive news. The Sensex had its biggest weekly fall in seven months. The 30-share BSE index tumbled 5% in the week to closed at to 13,632.53, its biggest weekly decline since the week ended July 21. The Nifty too dived 5% to 3938.95.

Cement majors such as Grasim, ACC and Gujarat Ambuja fell on speculation that the government may take steps to curb prices. There are reports that the government may ban cement exports and introduce curbs to check prices. Grasim plunged by over 14% to Rs2270, ACC declined over 10% to Rs915 and Gujarat Ambuja lost 10% to Rs123.

The BSE IT index fell 5.5% during the week. Index heavy weights led the downfall. Wipro declined over 7% to Rs623, Satyam was down 7% to Rs448 and Infosys lost over 5.5% to Rs2237. Financial Technology shed over 9% to Rs1995. HCL Tech and Patni were the other losers.

Mid-cap stocks also came under the bear onslaught. BEL slipped by over 10% top Rs1556 and TVS lost over 10% to Rs65, while Moser Baer fell by over 10% to Rs274.

Metals managed to escape the sell-off as metal prices on London Metal Exchange (LSE) held firm. SAIL slipped by 1.8% to Rs111 and JSW Steel was down 0.7% to Rs462. However, Tata Steel rose over 4% to Rs460. Jindal Steel was up by 1.3% to Rs122 and Bhushan Steel added 1.7% to 396.

HLL fell over 8% to Rs187 in the week after the company announced its results. Its Q4 net profit came in at Rs5.11bn (down 1.7%), while net sales stood at Rs31.56bn (up 6.11%) missing analysts' estimates. The company's sales declined as short winter cut sales of Pond's and other skin creams. The company also announced it would pay Rs3 a share as final dividend. The scrip hit a weekly high of Rs209 and a low of Rs186.

Indiabulls rose over 4% to Rs438. The company's Board approved a plan to separate the broking business. Merrill Lynch increased its stake in the company to 5.13%. The scrip hit a weekly high of Rs467 and a low of Rs418.

Aban Offshore advanced by over 4.7% to Rs1883 after the company announced it had acquired about 97% stake in Sinvest ASA following the mandatory open offer for the Norwegian company ended on Feb 16. The scrip hit a weekly high of Rs2008 and a low of Rs1797.

TOP STORIES

Inflation continues to haunt Govt
The pressure is telling on the Government owing to the rising public unrest over the spiraling prices of essential products. As a last ditch attempt to salvage the UPA regime's pro-common man image, Prime Minister Dr. Manmohan Singh on Feb. 22 urged all states to take necessary steps for containing inflation. The Prime Minister advised the State Governments to put in place an appropriate mechanism for regular intensive monitoring of commodity prices in order to take prompt and necessary action to curb price rise. Separately, Finance Minister P. Chidambaram said the rise in the Wholesale Price Inflation (WPI) was temporary and that the rate was likely to fall once a major supply constraint eases with the arrival of the new wheat crop from March. He said the Government had moderated inflation in the past and would take further measures if needed.

"The Government will take all necessary steps to ensure that the poor are not adversely affected by inflation," President APJ Abdul Kalam said in his inaugural address at the budget session of parliament. The President called for more supplies of factory and farm goods to meet demand and curb inflation. The price rise must be contained to reap the benefits of growth, which makes India among the world's two fastest- expanding major economies, Kalam said. Meanwhile, inflation, based on the WPI, declined to 6.63% in the week ended Feb. 10 from 6.73% in the previous week. The WPI was unchanged at 209.2. The Government revised the inflation rate for the week ended Dec. 16 to 5.73% from the preliminary estimate of 5.43%.

The Finance Ministry has taken a slew of measures to lower inflation to less than the government's comfort level of 4%, including cutting import duties on items ranging from cement, metals, chemicals and edible oils to corn. It has also halted the export of wheat until the end of this year. It has also banned the export of milk powder until Sept. 30. On the monetary side, the RBI has raised the repo rate by 150 basis points since October 2004 and the CRR twice since December to drain money from the banking system. Continuing its ongoing campaign against inflation, the Government decided to release 365,000 tons of wheat to states for sale in open markets in February and March to curb prices. The Government may lift the ban of wheat exports as rains improved the prospects for a bigger-than-expected harvest, Agriculture Minister Sharad Pawar told reporters in New Delhi on Feb. 21.

HLL unveils results and a new name

Hindustan Lever Ltd. (HLL) announced its fourth-quarter and full-year results for the period ended December 2006. For Q4 CY06, the company posted a net profit (excluding exceptional items) of Rs4.83bn versus Rs4.39bn in the same quarter last year. Net sales for Q4 CY06 stood at Rs31.56bn compared to Rs29.74bn in the year-ago quarter. Basic and Diluted EPS for the reporting quarter are Rs2.32 versus Rs2.37 in the same quarter of last year. The results for the quarter are not comparable to those of Q4 CY06 due to the merger of Vashisti Detergents Ltd. with the company and the demerger and subsequent disposal of Doom Dooma and TEI plantation divisions.

Exceptional items (net of tax) for the October- December quarter of 2006 comprised: profit arising from disposal of 51% share in a subsidiary (Rs367.4mn); reduction in liability for retirement benefits arising from impact of revised interest rates and lower annuity costs (Rs218.9mn) and restructuring costs in the foods business (Rs308.8mn). Adjusting for the above, PAT is Rs4.82bn ( Rs4.39bn) and net profit is Rs5.1bn (Rs5.21bn). Net sales for Q4 CY06 is Rs31.56bn ( Rs29.74bn) and Profit Before Interest and Tax is Rs5.41bn (Rs4.88bn).

For the year ended December 2006, the company has recorded a net profit of Rs18.55bn as against Rs14.08bn in the year ended December 2005. Net sales for CY06 are Rs124.11bn as against Rs115.66bn in the year ended December 31, 2005. At Rs3.93bn, other income is up from Rs3.13bn in the previous year. Annualised Basic and Diluted EPS for the year stood at Rs8.57 versus Rs6.16 in the year ended December 2005. Adjusting for the exceptional items, PAT is Rs15.37bn (Rs13.61bn) and net profit is Rs18.53bn (Rs14.15bn). Net sales for CY06 is Rs121.03bn (Rs110.42bn) while Profit Before Interest and Tax is Rs17.06bn ( Rs14.8bn).

The Board of Directors has proposed a Final Dividend of Rs3 per share of Re1 each, subject to the approval of shareholders at the AGM. This along with the interim dividend of Rs3 per share amounts to a total dividend of Rs6 per share for 2006. Hindustan Lever Ltd. (HLL) said on Tuesday that its Board of Directors has considered a proposal for the transfer of the marine products business. The Board of Directors of Hindustan Lever Ltd. (HLL) on Tuesday approved the change of the company's name from "Hindustan Lever Ltd" to "Hindustan Unilever Ltd." The proposal for the name change will be taken up at the next Annual General Meeting (AGM) to be held on May 18, for their approval.

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Black Friday at Dalal Street

Ahead of the budget next week, for the fourth straight day in running, the markets slid without support from any major quarter. It was a free fall in most counters on the back of sustained selling pressure.

Sensex nosedived below 13,600 and Nifty slipped to 3950 mark in intra-day trade. All the BSE sector indices closed in the red. Cement, pharma and banking stocks were the worst hit.

Most market analysts attributed this fall to pre-budget jitters, inflation concerns, stretched valuations, rising interest rates and profit booking across the bourses and equities. UPA Government’s assurance that more steps would be taken to tackle inflation and price rise had no positive impact on the markets.

President’s address to both houses of parliament has hinted at Finance Minister P.Chidambaram announcing these measures in the union budget later next week.

Sensex finally closed 388.78 points below at 13,632.53. It had opened firm, at 14,071.27 but began its southward journey immediately thereafter. The benchmark index kept on touching one low after another, 13, 568.08 being the last one.

The S&P CNX Nifty lost 101.05 points to 3,938.95. The total turnover on BSE amounted to Rs 4039 crore.

The market-breadth, which reflects the overall health of the broader market, was very weak. There were 5.4 losers for every gainer on BSE. A host of stocks from the small-cap and mid-cap space were being heavily sold. Against 2,207 shares declining on BSE, just 411 advanced. Only 36 scrips remained unchanged.

Among the 30-Sensex pack, only 1 advanced while the rest declined. In NSE, there were 102 advances and 944 declines.

Among the sectoral indices, banking stocks plunged 3.42 per cent, FMCG stocks plunged 3.35 per cent, telecom stocks fell 3.22 per cent and pharma stocks were down 2.65 per cent.

The major market movers on NSE were Gail which gained 1.80 per cent to Rs 277; Tata Steel rose 0.95 per cent to Rs 459, Suzlon Energy advanced 0.75 per cent to Rs 1,048, Reliance rose 0.53 per cent to Rs 1,419.50 and GSK Pharma rose 0.53 per cent to Rs 1,165.

The major NSE losers were Oriental Bank which declined 7.10 per cent to Rs 199; Jet Airways fell 6.38 per cent to Rs 639; Bharti Airtel was down 6.34 per cent to Rs 750; Grasim fell 5.99 per cent to Rs 2,276 and ITC fell 4.96 per cent to Rs 165.80.

Atlanta Ltd plunged 10 per cent to Rs 972.70 after Sebi barred the founders and some other investors from trading in shares of the company on charges of unfair trade practices.

Bombay Rayon Fashions Ltd fell 5 per cent to Rs 192.50 after its board approved acquiring 70 per cent stake in UK-based DPJ Clothing Ltd for 1.54 million pound sterling.

Sterlite Optical Technologies declined 6.1 per cent to Rs 177.90 after receiving contracts for INR 1.5 billion from Power Grid Corporation of India.

Power Finance Corporation moved higher and was trading at Rs 113.10 on BSE, a premium over the IPO price of Rs 85. The stock debuted at Rs 104; hit a low of Rs 103.50, and a high of Rs 117. Volumes in the stock were huge, at 2.67 crore shares.

The wholesale price index rose 6.63 per cent in the 12 months to 10 February, lower than the previous week's annual increase of 6.73 per cent due to a fall in some food and textile prices, data showed on Friday (23 February).

As per provisional data, FIIs were net sellers to the tune of Rs 435 crore on Thursday (22 February 2007), the day when the Sensex lost 167 points. FIIs were net sellers to the tune of Rs 348 crore in index-based futures on the same day. They were net sellers to the tune of Rs 104 crore in individual stock futures. Nifty March futures settled at 4066.65 on Thursday, a premium of 26.65 points over the spot Nifty closing of 4,040.

Revised market lots in NSE's derivatives segment become applicable today. The lot size of the Nifty contract has been cut to 50 from 100. This may boost volumes in the derivatives segment.

US blue-chip stocks declined on Thursday, as a jump in oil prices added to worries about inflation, but a rally in chipmakers' stocks helped the Nasdaq advance late in the session to end at a six-year high.

The Dow Jones industrial average fell 52.39 points or 0.41 per cent, to end at 12,686.02, with only eight of the 30 stocks in the Dow finishing higher. The Standard & Poor's 500 Index dipped 1.25 points or 0.09 per cent, to finish at 1,456.38. The Nasdaq Composite Index rose 6.52 points or 0.26 per cent, to 2,524.94, its highest close since 15 February 2001. Earlier, the Nasdaq hit a six-year intraday high at 2, 531.42.

US crude shed 9 cents to 60.86 a barrel after jumping 88 cents overnight to its highest level since 2 January 2007.

Market battered

The correction continued for the fourth consecutive session on inflation worries and rising interest rates. The dwindling foreign fund inflows into the domestic markets in the past few sessions also adversely affected the sentiment. After shedding around 200 points by mid-morning, the market remained in negative territory but came close to erasing its losses in the afternoon. However, the mood turned extremely bearish as widespread selling in banking, technology, fast moving consumer goods and auto stocks dragged the index below the 13600 mark to an intra-day low of 13568. The Sensex finally managed to pare some of its losses and close at 13633, down 389 points. The broad-based Nifty closed at 3939, down 101 points or 2.50%.

The breadth of the market was extremely negative with the losers outpacing the gainers in the ratio of nearly 5:1 on the BSE. Of the 2,653 stocks traded on the BSE, 2,211 stocks declined, 404 stocks advanced and 38 stocks remained unchanged. All the sectoral indices on the BSE were hammered. The BSE Bankex was the worst hit and tanked 3.42% at 6760 followed by the BSE FMCG index (down 3.35% at 1786), the BSE Teck index (down 3.22% at 3704) and the BSE HC index (down 2.65% at 3611).

Barring Tata Steel, the rest of the Sensex stocks bore the brunt of heavy selling. Grasim led the slump and crashed 5.99% at Rs2,271. Among the other major laggards Bharti Airtel tumbled 5.72% at Rs756, ACC dropped 4.97% at Rs916, Wipro slumped 4.63% at Rs623, ITC fell 4.57% at Rs166, ICICI Bank declined 4.28% at Rs908, Dr Reddy's lost 4.08% at Rs682 and Reliance Communications shed 4.04% at Rs432. The other major front-line stocks shed 2-3% each. However, Tata Steel rose marginally at Rs459.

Banking stocks lost significantly on relentless selling. Oriental Bank of Commerce dropped 6.59% at Rs200, UTI Bank shed 5.33% at Rs491, Bank of India tumbled 4.97% at Rs158 and HDFC Bank declined 3.15% at Rs957. Punjab National Bank, Union Bank, Kotak Bank and Federal Bank shed 2% each.

Value-wise Power Finance Corporation registered a turnover of Rs450 crore on the BSE followed by Reliance Industries (Rs180 crore) and Tata Steel (Rs114 crore).

Budget fears knock Indian shares down 2.8 pct

Indian shares dropped 2.77 percent on Friday, a fourth straight fall that saw the main index slice through key support levels as investors sold on concerns about inflation and fears of nasty surprises in next week's budget.

Selling was broad-based, with ICICI Bank, telecom Bharti Airtel, software exporter Infosys Technologies Ltd. and tobacco maker ITC leading the losses.

The main 30-issue BSE index closed 388.78 points lower at 13,632.53 points, falling through support at 14,000 and the Feb. 14 low of 13,805.36 on its way to its lowest close since Jan. 11. It lost 5.04 percent on the week.

"There is a complete lack of conviction in the market before the budget," Sejal Doshi, chief executive of Finquest Securities, said.

The Union budget will be released on Wednesday.

Twenty-nine of the index's 30 stocks fell. The index ended 7.4 percent below a record high of 14,723.88 hit on Feb. 9.

"There were some rumours in the ring that the budget may have some negative news for some of the industrial sectors. That came as a dampner," said Avinash Gorakshakar, head of research at Emkay Share & Stock Brokers Ltd.

"Inflation is also one of the biggest concerns now."

Data showed inflation for the 12 months to Feb. 10 running at 6.63 percent, only slightly lower than the previous week's rate of 6.73 percent, which was the highest in more than two years.

Bank stocks were big losers on fears inflation could see the Reserve Bank of India (RBI) extend its run of policy tightening measures.

Top lender State Bank of India fell 2.0 percent to a 4-month closing low and leading private bank ICICI Bank dropped 4.3 percent.

Cement maker ACC Ltd. fell 5.0 percent and Gujarat Ambuja Cement Ltd. ended down 3.1 percent on concerns of changes in excise duty in the budget, traders said.

Infosys fell 2.2 percent, the fourth straight fall for the index's second-most heavily weighted stock, while ITC dropped 4.6 percent on fears of an increase in duty on cigarettes.

Technical analysts said the outlook was bearish because the BSE index had fallen below last week's low and also pierced a key trend-line support.

"The crucial level of 13,800 has been broken. It is very clearly bearish. I expect it to touch 13,250-13,350 and then some buying should emerge," said Sandeep Wagle, chief technical analyst at Angel Broking.

"The momentum is very clearly visible that 13,300 is very likely, so why buy before that? And if 13,250 is broken then 12,800 is very likely."

The mood was strongly negative in the broader market, where 2,209 losers easily defeated 385 gainers on volume of 238 million shares.

The 50-issue NSE index fell 2.50 percent at 3,938.95, it lowest close since Jan 10.

Elsewhere in the region, the Colombo All-Share index fell 0.10 percent to 2,986.74 points, while the Karachi 100 index gained 0.56 percent to 11,607.84.

Sensex cascades 389 points

The BSE Sensex, which had slipped below the psychological 14,000 level in the opening session, fell like nine pins as selling continued unabated throughout the session.

The 30-shares BSE Sensex plunged 388.78 points (2.77%), to settle at 13,659.53. It had opened firm, at 14,071.27, but began declining immediately after. The benchmark index kept on touching one low after another, 13,568.08 being the last one.

The S&P CNX Nifty lost 101.10 points (2.50%), to 3,938.90.

The benchmark Sensex had sharply fallen close to 167 points on Thursday (22 February), in the last 45 minutes of trade, due to heavy unwinding of derivative contracts on account of their expiry. The February series, which expired on Thursday (22 February), was interestingly the first monthly series, since the devastating May plunge, when the Nifty settled in the red.

Market men are unwinding their long positions, choosing to watch from the sidelines, cautious ahead of the Union Budget for 2007-08.

The total turnover on BSE amounted to Rs 4039 crore.

The market-breadth, which reflects the overall health of the broader market, was very weak. There were 5.4 losers for every gainer on BSE. A host of stocks from the smallcap and midcap space were being heavily sold. Against 2,207 shares declining on BSE, just 411 advanced. Only 36 scrips remained unchanged.

Among the 30-Sensex pack, 28 declined while only 2 had advanced.

Telecom services provider Bharti Airtel was the top loser, down 6.48% to Rs 749.95, on a volume of 4.59 lakh shares.

Private sector ICICI Bank slumped 4.45% to Rs 906.25, on a volume of 3.46 lakh shares. The scrip had also slipped to a low of Rs 899.15. A surprise hike in CRR announced recently continues to weigh on the stock.

Grasim (down 6.05% to Rs 2270), ITC (down 5.10% to Rs 165.15) and Reliance Communications (down 4.78% to Rs 429) were the other prominent losers.

Maruti Udyog (MUL) was down 1.50% to Rs 866. Moving ahead with its plan to exit the car maker, the Central Government on Thursday invited expressions of interest (EoIs) from public sector financial institutions, banks and mutual funds for selling its remaining 10.27% stake in the company.

The process is likely to fetch the government at least Rs 2,600 crore, based on Thursday's closing of Rs 880 on the BSE. The government had said last year it will completely exit MUL, in which Japan's Suzuki owns a controlling 54.2% stake, by selling its residual 2.96 crore shares (Rs 5 face value). The money raised from the sale will go to the government, and not the National Investment Fund (NIF), as MUL is no longer a public sector.

Private sector Tata Steel was a top gainer, up 0.39% to Rs 457.90, on a volume of 24.71 lakh shares. The stock had struck a high of Rs 466.85, and was looking strong throughout the day. Reports say that Corus had hiked hot/cold rolled prices for European markets by 5 - 7% for the second quarter 2007 deliveries. The decision to increase the prices is a reflection of favourable market conditions. The Anglo-Dutch steel company was last month acquired by Tata Steel.

"Demand is improving and the stocks are at normal levels. The current strong demand for steel in Europe - particularly in construction and end-user sectors - supports this price increase," a spokesperson for Corus said.

Index heavyweight Reliance Industries (RIL) was up 0.30%, to Rs 1418, on a volume of 12.60 lakh shares. It had, however, slipped from a high of Rs 1442.75. The company’s board meets on 24 February 2007 to review plans for raising $2 billion.

Power Finance Corporation moved higher, and settled on BSE at Rs 111.55, a premium over the IPO price of Rs 85. The stock debuted at Rs 104, hit a low of Rs 103.50, and a high of Rs 117. Volumes in the stock were huge, at 4.04 crore shares, on account of multiple block deals.

The IPO had received a strong investor response. It was subscribed 77.24 times, amidst heavy bidding by FIIs, and was priced at the upper end of the Rs 73 - Rs 85 price band. NSE has also included the stock in the futures & options segment. The lot size of PFC in the derivative segment is 2,400.

Power Finance Corporation has a large equity base of Rs 1148 crore and the face value per share is Rs 10.

India's wholesale price index (WPI) rose 6.63% in the 12 months to 10 February, lower than previous week's annual increase of 6.73% due to a fall in some food and textile prices, data showed on Friday (23 February 2007). Analysts forecast the figure at 6.70%. The annual inflation rate was 3.81% during the corresponding week of the previous year.

Global markets were trading mixed. The Nikkei average rose 0.44% to a seven-year closing high on Friday, led by gains in exporters and property shares such as Mitsubishi Estate Co., but Sanyo Electric Co. tumbled following reports of accounting problems. Shares in Sanyo fell as much as 29% on news that Japan's securities watchdog was investigating the company over its past earnings reports, the latest blow to the embattled consumer electronics giant.

The Nikkei rose 79.63 points to 18,188.42, its highest close since May 2000. For the week, the index has added 1.75%.

Hang Seng index shed 97.58 points (0.47%), to 20,711.65.

Meanwhile, the Union Cabinet approved necessary changes in the law in the forthcoming Budget session to phase out central sales tax (CST) on Thursday. CST is collected by the Central Government and is distributed among the states.

The CST rate will be cut from 4% to 3% from 1 April. The phase-out is expected to be completed by 2010-11. This reduction in CST is likely to result in a loss of Rs 6,250 crore to the states’ exchequer in 2007-08. The Centre will introduce a legislation to allow states to tax certain identified services and impose additional duties on excise goods like tobacco to compensate states for the loss of revenue due to the phase-out.

Besides, the Union Government is understood to have assured states of budgetary support to cover any shortfalls.

Earlier this year, the Centre had agreed to the states’ proposal for allowing them to tax 77 services and keep the entire proceeds of it. Of the 77 services, 33 are currently taxed by the Centre, while another 44 are new items to be brought under the service tax net.

For the first year, the Centre will collect the tax and pass on the entire proceeds to the states. The 44 new services to be brought under the service tax net include barbers, legal, education, health, sports and performances of Bollywood actors.

The market is expected to remain subdued in the run up to the Union Budget 2007-08 to be presented in Parliament next Wednesday (28 February 2007). The Budget session of Parliament begins today.

Caution on the bourses is evident in that the market-breadth has turned weak, whenever the key indices have corrected over the past few days. Concerns that the government may raise short-term capital gains tax on sale of shares from the current 10% have gained currency. The securities transaction tax (STT) may also go up further. The STT was raised in the previous budget. The removal of 10% corporate surcharge may be offset by removal of certain open-ended exemptions.

Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget.

FIIs turned net sellers on Wednesday (21 February 2007). FIIs were net sellers to the tune of Rs 40.20 crore on Wednesday. Their inflow has been strong this month. Their cumulative inflow in February 2007 has reached Rs 4175 crore. The strong inflow has been triggered by an upgrade in India's sovereign rating to investment grade by global rating agency, Standard & Poor's, on 30 January 2007.

As per provisional data, FIIs were net sellers to the tune of Rs 435 crore on Thursday (22 February 2007), the day when the Sensex lost 167 points. FIIs were net sellers to the tune of Rs 348 crore in index-based futures on the same day. They were net sellers to the tune of Rs 104 crore in individual stock futures. Nifty March futures settled at 4066.65 on Thursday, a premium of 26.65 points over the spot Nifty closing of 4,040.

Revised market lots in NSE’s derivatives segment become applicable today. The lot size of the Nifty contract has been cut to 50 from 100. This may boost volumes in the derivatives segment.

US blue-chip stocks declined on Thursday, as a jump in oil prices added to worries about inflation, but a rally in chipmakers' stocks helped the Nasdaq advance late in the session to end at a six-year high.

The Dow Jones industrial average fell 52.39 points, or 0.41%, to end at 12,686.02, with only eight of the 30 stocks in the Dow finishing higher. The Standard & Poor's 500 Index dipped 1.25 points, or 0.09%, to finish at 1,456.38. The Nasdaq Composite Index rose 6.52 points, or 0.26%, to 2,524.94, its highest close since 15 February 2001. Earlier, the Nasdaq hit a six-year intraday high at 2,531.42.

US crude shed 9 cents to 60.86 a barrel after jumping 88 cents overnight to its highest level since 2 January 2007, after US data showed a surprisingly big fall in distillate stocks. The fall was compounded by a rash of refinery problems in the world's top consumer. Worries over another escalation in the dispute over Iran's nuclear programme added to concerns over global supply.

Kotak - GATI

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Sharekhan Highnoon dated February 23, 2007

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Daily Fundamental Snippets (23/02/07)

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Poweryourtrade.com Trading Calls

Ashwani Gujral

Sell Punjab National Bank with stop loss of Rs 474 for target of Rs 400
Sell Bombay Dyeing with stop loss of Rs 612 for target of Rs 450.

Deepak Mohoni

Buy Rolta below Rs 353 with stop loss of Rs 347. This is a day-trading recommendation

Short sell India Cement above Rs 189 with stop loss of Rs 192. This is a day-trading recommendation.

Rajat K Bose

Sell Kesoram around the last close with stop loss above Rs 462 for target of Rs 440-429
Buy Moser Baer around the last close with stop loss below Rs 352 for target of Rs 371.

Anand Rathi - Daily Strategist

Nifty futures gained OI to the tune of 5.61% with prices coming down indicating longs liquidating their positions as market couldn't sustain at higher level market at higher levels with nifty futures not ready to move above 4100 levels. If nifty sustains below 4040 levels we may see fresh short positions being formed in nifty futures .The nifty may show real strength once it crosses 4100 marks and fresh buying may come around those levels. The FIIs bought futures to the tune 77 crs. The PCR has come down from 1.25 to 1.18 levels which indicates weakness in the market.

Among the Big guns ONGC saw significant built up in OI to the tune of 1.98 %with prices coming down around 2.07% indicating that bears were aggressive as counter came to its short term support level. RELIANCE saw built up in OI to the tune of 1.37 % with prices up 0.37% indicating short covering in the counter on the last day of the settlement.

On the TECH front, ,TCS, saw loss in OI with prices coming up indicating short positions covered in the counter whereas INFOSYSTCH ,WIPRO,SATYAMCOMP saw a gain in OI with prices coming down in indicating longs liquidating their positions performing in line with the market.

On the Metal front the massacre continued, we saw fall in OI with prices coming down in both the majors HINDALCO and TATASTEEL indicating fresh selling coming in the counters which forced bulls to cover their positions indicating weakness in these counters. SAIL saw built up of significant OI with prices down as well marginally indicating their was selling pressure at higher levels.

In the BANKING arena like the metals there was not respite and they were hammered to pulp. it was across the board be it private or public sector all had their fair share of hammering as both bull liquidation coupled with bear hammering had its effect simultaneously.

However in spite the last day of the settlement we did not see a surprise spring in the market and no recovery came. For today we see a pull back but the view would change either sides if the indices break important levels for either to gain advantage , trade with strict stop losses and caution.

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Sharekhan Daring Derivatives for February 23, 2007

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Edelweiss - Daily Market Outlook 23rd Feb, 07

Market Snapshot

The Sensex opened marginally higher and rallied to a high of 14,287 in early deals. However, sustained selling pressure at higher levels saw the index pare gains. A heavy bout of selling in late noon deals saw the index plunge to a low of 13,978. The Sensex finally settled with a loss of 167 points at 14,021 while Nifty lost 56 points to 4,040.

The NSE & BSE cash volumes were significantly better compared to the previous day at INR 117 bn and INR 42 bn. The F&O volumes were significantly higher compared to the previous day at INR 552 bn.

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has remained unchanged at 26-29% levels. The WPCR of Nifty Options decreased to 1.00 compared to the previous day while the 5 day average is 1.09. The February futures are now trading at 27 points premium. The Nifty Futures OI has decreased by 22%.

Outlook

We expect the market to open with a positive gap for VWAP adjustment and to stay subdued for the rest of the session in the absence of any major triggers. The last half an hour of trading session witnessed Nifty plummeting by about 60 points on the back of unwinding of arbitrage position and VWAP basket selling. Base metals were up on the LME which might lead to some buying interest across metal stocks.

The market wide rollovers were at 83%, which is in-line with previous expiries. Nifty rollovers were very healthy with 77% positions getting rolled into the March contract. However the average market wide roll cost expanded to 85 bps from 62 bps on Wednesday. IT, Pharma and Textile stocks have seen strong rollover while FMCG and Auto were on the weaker side. Buying opportunities can be seen in TVS Motors, GMR, LITL, Siemens and Amtek Auto

After breaking the support level of 4080 the Nifty tumbled down steeply as predicted by the technical charts. The next support for Nifty is at 4009 which is also a 60 DMA and trend line support level followed by next support level of 3965. Resistance for Nifty is at 4091 and 4111.

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Market may move sideways

The market may exhibit cautious trend after taking a strong dip in yesterday's trades. Weakness in the market may continue further amid a mixed Asian indices in early trades and dwindling net FII inflows in the domestic market. Among the domestic indices, the Nifty could test 4000 and below this level may slip to 3950, while on the upside it could edge higher to 4100. The Sensex has a likely support at 13940 and may face resistance at 14100.

US indices ended mixed on Thursday amid rise in crude oil prices, jump in Treasury bond yields and worries of geopolitical unrest in the Middle East. While the Dow Jones dropped by 52 points to close at 12686, the Nasdaq ended seven points up at 2525.

All the Indian ADRs ended in the red on the US bourses. Dr Reddy's lab fell sharply and tumbled around 4% while VSNL, ICICI Bank, Patni Computers, Rediff and Tata Motors declined around 2-3% each.

The Nymex light crude oil for April delivery rose 88 cents to close at $60.95. In the commodity space, the Comex gold for April series declined by a dollar to settle at $683 a troy ounce.