Weekly Close: Highest weekly gains ever !

It was the best week ever for the markets in absolute terms with gains of 6.85% which is a gain of almost 850 points. Such high gains in a week have been registered for the first time ever. Out of the 5 days in the week, market saw gains in the last 4 sessions.

It was a mild start for the week with decent gains but volumes were very muted without conviction. However then a strong bounce in the US had the Indian Markets rallying and that accompanied with some decent volumes.

China Central bank, People's Bank of China (PBOC) raised lending and deposit rates by 0.27 percentage point last week end. The benchmark one-year lending rate was increased to 6.39 % while the deposit rate was set at 2.79 %. Apparently this was to balance growth, stabilise prices and improve the overall structure of the economy. China has been seeing major growth even in a tightening environment. This sets the stage for slower growth. We expected metals / crude to see softness on the back of this. They softened only to make a comeback later.

Inflation last week was 6.46% and this week too the number did not change. We expected the banks to be weak but they rallied. The Banks were the big gainers this week which really remains a surprise. Markets are smart and they realised that this is a temporary phenomenon and probably that brought in the big buying. Inflation remains a bit of a worry in a sense . The rupee was strong this week and touched a low of 43.45 before closing at 43.75. The benefit of that is to an extent due to the inflation and may be thats the reason the RBI has been quite sanguine about it. The software stocks were a bit cautious on this and hence the gains in the large caps softwares were a bit muted.

The gains were across board and the major gainers of the Nifty were Bharti Airtel +8%, BHEL 16%, Cipla 8%, Dabur 9.8%, HDFC 5.4%; HLL 12%; ICICI 10%, Jet 11%, Larsen 12%, Mahindra 7%, Maruti 7%, ONGC 10%, Oriental Bank +16%, PNB + 15%, Rel com +13%, Satyam +6%; SBI 13%; Sail 9%, VSNL 9%. Among the losers were ITC and Tata Power but marginally.

We had a research note on Blue star. The company is into central Airconditioning. We believe that the stock is extremely expensive. The Markets seem to be expecting much stronger growth than they can deliver. At 34 times FY07 we are not convinced on the valuations. Look for lower levels but over the long term things could get better.

It was not a very positive week for cement though hopes were high. The Cement manufacturers met the FM this week but met with little success and the issue of high cement prices still remains hanging. The FM requested the Manufacturers to control the prices and has asked for proposals for the same. We were hoping for a rollback by the FM and thats not happened. However this has brought in some level of discomfort as long as inflation numbers come in high. We believe all this will be forgotten once inflation numbers start coming lower.

ITC was on the receiving end with West Bengal applying 12% Vat on tobacco products and then followed by Maharashtra. This is a hit below the belt for the cigarrette major. Cigarettes account for 60% of revenues and about 80% of profits. ITC will thus diversify less as cashflows are expected to be impacted badly and the plans for expansions in soaps and FMCG products have been put on the backburner. This was seen as a positive for HLL.. ITC lost 1% this week where as HLL gained 12%.

We had a research note on ICRA the second largest Rating agency in India. Moodys is the dominant shareholder here. Sebi norms on IPO grading gave the ICRA IPO a boost in the arm. This brings in another set of grading. So when a company has to raise money either through equity of debt, the rating agencies will get business. ICRA IPO is valued at 18 X FY07 earnings. Important to understand that the business is completely dependent on the macro environment. However its a good service business with annuities. We believe the pricing has been kept low so as to benefit the Employee trust. The big fallout of this IPO would be that the employees could be offered an incentive package. Thats good news. We thing its a good idea to subscribe to the issue. In the current environment where most IPOs have listed below offer price, there is hope of getting what one bids for.



Technically speaking: We maintained that Sensex supports were placed at 12300- 12400 and the resistance was at 13000 and above that around 13300- 13400. Thats where the Sensex has taken resistance. We are near the upper end of the range. Expect Markets to have some level of reversal from here. and supports are around 13000 before the next direction. 13520 is the next resistance level to be crossed with targets of 13804. Clearly the negative trend will be negated above 13520.

Next week is the FNO expiry for March and that should bring in some volatility. Also we are near the year end and some level of NAV propping is a possibility. Volumes are low and the liquiidity will be limited. So its likely to be a lacklustre week.

FII: + Rs 713 cr

Mkt Sources:

FII Gross purchases Rs 2595 Cr, Gross Sellers Rs 1882 Cr, Net Buyers Rs 713 Cr.
MF Gross Purchases Rs 558 Cr, Gross Sellers Rs 471 Cr, Net Buyers Rs 87 Cr.
Our View:

Thats a big number.. Markets had rallied on short covering and value buying as well. This should be encouraging for the markets...

ICRA IPO Subscription Details

QIB - 90 times

HNI/NII - 72 times

RETAIL - 54 times

OVERALL - 75 times

Weekly Stock Ideas

BUY Colgate (326)
SL 318 T 342, 346

BUY HCL (303)
SL 293 T 322, 327

BUY Wockhardt (382)
SL 374 T 398, 404

BUY Punj Lloyd (834)
SL 816 T 867, 875

BUY Tech Mahindra (1476)
SL 1445 T 1540, 1550

DOMESTIC NEWS & GLOBAL NEWS

Direct tax receipts pierce Rs2-lakh crore mark

Spurred by the current economic boom and robust corporate profits, the Government's revenue kitty just keeps getting bigger and bigger, with the direct tax receipts crossing the Rs2 lakh crore mark for the first time ever. Net direct tax collection grew by 36.5% to Rs205,115 crore up to March 20 as against Rs150,269 crore in the same period last fiscal. Advance tax receipts for the same period were up 35.3% at Rs117,114 crore versus Rs86,559 crore in the year-ago period. This figure could have been much higher but for the public holiday in Maharashtra, probably the biggest contributor to the exchequer, on March 19. With the public sector bank unions calling off their three-day strike next week, tax collections can only go one way, that is up. Corporate tax collection climbed 40.7% to Rs128,354 crore up to March 20 compared to Rs91,236 crore during the corresponding period a year earlier. Personal income-tax receipts, including Fringe Benefit Tax (FBT), Banking Cash Transaction Tax (BCTT), Securities Transaction Tax (STT), grew by 30.2% to Rs76,472 crore as against Rs58,748 crore in the same period last year.

Lok Sabha okays bill to phase out CST

The Lok Sabha cleared a bill to phase out and abolish the Central Sales Tax (CST) in the next three years. The Taxation Laws (Amendment) Bill, approved by the lower house of parliament, seeks to amend the CST Act of 1956. It will cut CST by 1% annually beginning in April. The legislation includes changes in the Additional Duties of Excise (goods of special importance) Act 1957, which proposes to exclude tobacco, enabling states to levy Value Added Tax (VAT). States have been demanding the end of the CST ever since VAT was introduced two years ago. The bill now has to be approved by the Rajya Sabha and get the President's consent before it becomes a law. The Government aims to eventually phase out CST and will merge some central and state levies into a single Goods and Services Tax (GST) by 2010 to reduce the tax burden on consumers and businesses. Finance Minister P. Chidambaram said in the Lok Sabha that CST is proposed to be reduced from 4% to 3% from April 1. CST will eventually be abolished from March 31, 2010, he said. The package for compensation to states for revenue loss on this account shall consist of non-monetary as well as monetary measures, the Finance Minister said. Chidambaram said that CST being an origin-based tax was inconsistent with VAT which was destination-based tax. He said that CST results in cascading of tax (tax on tax) since it was not rebatable against VAT. The Taxation Laws (Amendment) Bill proposes to drop tobacco from the list of declared goods to enable the states to levy VAT on tobacco at a rate higher than the 4% rate applicable to declared goods.

FM-Cement Cos talks fail

As expected, the meeting between the cement manufacturers and Finance Minister P. Chidambaram was inconclusive with both the sides sticking to their respective stance. While Chidambaram reiterated the Government's demand for reduction in cement prices, cement producers once again spurned the request. "We have information how much your sales have increased. How much your PBT has increased. How much your PAT has increased. So you should come forward with some proposals on moderating cement prices," Chidambaram said in New Delhi after the meeting. But, the cement makers are believed to have told the Government that nothing can be done on reducing prices. According to reports, cement companies told the Government that they had started doing well only since the latter part of 2005 whereas in the previous 15 years they were struggling. The Government is still clamoring for more cuts in cement prices. It has even proposed a five-year tax holiday to set up more capacity. The Economic Times in its March 20 edition reported that the move was aimed at ending the current demand-supply mismatch and soften prices. "If they find difficulties in adding capacity or accessing coal or raw materials, certainly the Government will help," Chidambaram said in his reply to the debate on Budget 2007-08 in the Rajya Sabha on March 19.

Govt gives green signal to 74% FDI in telecom

The Government finally approved the revised Press Note 5, clearing the decks for 74% Foreign Direct Investment (FDI) in the telecom sector. The decision was taken at a meeting of the Union Cabinet on March 22. At present, the FDI cap in telecom is 49%. The Government has incorporated a series of new security norms, especially on the contentious issue of Remote Access (RA), to allay the concerns raised by intelligence and defence establishment. All telecom operators will have time till the first week of June to comply with the new set of guidelines. Press Note 5 was first notified in November 2005. At its meeting on December 8, 2006, the Cabinet had approved other sticky matters such as allowing foreign nationals to hold key positions of Chairman, MD, CEO and CFO, subject to the approval of the Home Ministry. However, chief officer in charge of network operations and chief security officer have to be resident Indian citizens.

TRAI slashes annual ADC charge

The Telecom Regulatory Authority of India (TRAI) announced that it was cutting the Access Deficit Charge (ADC) from Rs32bn in the current fiscal year (2006-07) to Rs20bn in the coming financial year. ADC is a fee paid by all telecom operators to fund loss-making rural network expansion by public sector Bharat Sanchar Nigam Ltd. (BSNL). The telecom regulator also abolished the ADC on all outgoing international calls from a previous 80 paise per minute. The charge on incoming international calls has been cut from Rs1.6 per minute to Re1 a minute. For national long-distance (NLD), the ADC burden has been slashed by 50%. The new fee structure will be applicable from April 1. However, the Cellular Operators' Association of India (COAI) expressed its disappointment on the revised ADC regime. T. V. Ramachandran, Director General of COAI said that it was unfortunate that despite the overwhelming industry view that domestic consumer should be spared the burden of ADC, the regulator continues to prescribe a levy of 0.75% of Adjusted Gross Revenue (AGR) on domestic telecom services. The existing level is 1.5% of AGR. As a result, all telecom operators are likely to marginally reduce national long-distance rates while international call rates are expected to be cut by up to 20%

Chinese steel firms suspend Indian ore shipments

The tax slapped on iron ore exports in the budget prompted at least 10 Chinese steel companies, including Baosteel, to suspend shipments from India, even as the mineral industry warned that exports of iron ore from India, which has the world's fifth-largest reserves of the mineral, may fall by 32% this month. The new tax makes iron ore from India less attractive and China's mills are likely to look for other alternative sources like Australia and Brazil. The Government on Feb. 28 announced a tax of Rs300 per ton on iron ore exports in a bid to ensure that local supplies are sufficient to meet domestic demand. Indian companies, including Sesa Goa Ltd. exported 4.98mn tons between March 1 and March 20, and may ship a further 2.18mn tons by the end of the month, R.K. Sharma, Secretary General of the Federation of Indian Mineral Industries said. Exports of the steel making ingredient totaled 10.6mn tons in March 2006. India accounted for 23% of China's 326mn tons of iron ore imports last year, making it the second-biggest supplier after Australia.

ITC shares slide on VAT fears

Shares of ITC Ltd. slumped further after West Bengal and Maharashtra governments said they will impose 12.5% Value Added Tax (VAT) on tobacco and tobacco products starting April 1. Also, the Lok Sabha cleared a bill that will allow states to impose 4% VAT on tobacco products. The legislation includes changes in the Additional Duties of Excise (goods of special importance) Act 1957, which proposes to exclude tobacco, enabling states to levy VAT. ITC Chairman Y.C. Deveshwar said that profit margins of the company, India's biggest cigarette maker, will be eroded by the proposed levy of VAT on tobacco by 28 states. About half the company's sales comes from tobacco. ITC will now have to bank on faster growth from its new businesses, such as foods, retail and garments, to mitigate the impact of higher taxes on cigarettes.

Torrent, Teva in race for Merck's generic biz: report

Torrent Pharmaceuticals Ltd. and Israel's Teva are the only two companies left in the race for acquiring the generic business of Germany's Merck KGaA. According to reports, Torrent in tandem with private equity firms Fortress Investment Group and Greater Pacific Capital, are closer to the finish line than Teva. A financial daily says that the other two contenders, Mylan and Actavis have pulled out of the race. Earlier, India's Ranbaxy had withdrawn its bid, citing expensive valuation, estimated by some analysts at around US$6bn. Shares of Ranbaxy rallied on the news. Cipla, who also partnered with private equity players, was not short-listed while Dr. Reddy's didn't submit a bid, saying the price was too high and the timing was not appropriate. If the deal sees the light of day, Torrent will manage Merck's generic business while Fortress and Greater Pacific will be the financial investors. Majority of the funding for the transaction is expected to come from Fortress, which manages US$30bn in assets

Essar Shipping fails in delisting attempt

Shares of Essar Shipping Ltd. declined after its parent Essar Shipping & Logistics Ltd. failed to garner the required number of shares from the public shareholders in order to delist the company from the BSE. The Reverse Book Building Process closed on March 16. "As the aggregate number of shares tendered by the public shareholders was less than the number required to reduce the public shareholding of the target company below the minimum level for delisting, the offer has failed in terms of the guidelines," Essar Shipping said in a statement. Essar Shipping will remain listed on BSE. The shares deposited in the Special Depository Account of the trading members during the reverse book building will be returned to the respective public shareholders in accordance with the guidelines. The Ruias are planning to turn into a privately held group by delisting Essar Steel Ltd., Essar Steel Ltd., Essar Oil Ltd. Earlier, it had delisted its telecom arm, Essar Tele-Holdings Ltd., and its US-based BPO subsidiary, Aegis Communications Group.

Govt to sell Maruti stake in next FY

The Government will sell its remaining stake in Maruti Udyog Ltd. in the next financial year, Finance Minister P. Chidambaram said. "The Government has decided to do it in the next (financial) year," Chidambaram told reporters in New Delhi when asked about media reports that the Centre had put on hold its plan to sell the stake. The Government has put off selling its stake in Maruti following the sharp fall in the company's shares in the last month or so, the Business Standard said on March 17. The Government this month accepted bids for its 10.27% stake in Maruti. Public sector financial institutions, banks and mutual funds have submitted initial offers for the stake. In December, the Union Cabinet approved the sale of the Government's residual stake in Maruti. SBI Capital Markets Ltd. and Kotak Mahindra Capital Company Ltd. are the advisers for the stake sale. It may be recalled that the Government raised Rs15.67bn in January last year selling an 8% stake in Maruti to nationalised banks, insurance and financial companies.

RIL seeks EOU status for Jamnagar refinery: report

Reliance Industries Ltd. (RIL) reportedly sought government approval to turn its existing Jamnagar refinery into an export oriented unit (EOU), to enable it to import crude oil without paying any duties. RIL applied to the Commerce & Industry Ministry for grant of EOU status for the Jamnagar refinery, according to reports. The company's subsidiary Reliance Petroleum Ltd. (RPL) is also building an export-oriented 29mn tons per year refinery adjacent to the existing RIL refinery. The new refinery is likely to be completed in 2009. RIL plans to convert the existing refinery into an export house as selling petroleum products in the current environment is uneconomical due to the subsidy public sector companies receive from the Government.

Idea inks IT outsourcing deal with IBM

Idea Cellular Ltd. signed a 10-year business transformation agreement with IBM India to integrate, innovate and transform it's business processes and IT infrastructure. The agreement is designed on an innovative risk-reward revenue sharing model, Idea said in a statement. It covers all of the company's existing operations and potential new additions, it added. The 10 year pact, depending upon Idea’s business revenues and circle expansion, would size around US$600mn to US$800mn. The deal will cover billing, call center operations, customers care management and data management for Idea, the newspaper said. Outsourcing of IT infrastructure is likely to minimise technology risk and reduce the operational costs for Idea. According to industry analysts, Idea is likely to save around US$15-20mn from this contract.

Deals, deals and more deals

Britannia Industries Ltd. announced formed a Joint Venture with Khimji Ramdas Group to run two bakery product companies in the fast growing Middle East market. Britannia and its associates acquired 70% beneficial stake in Dubai based Strategic Foods International LLC and Oman based Al Sallan Food Industries Co SAOG. The two companies are significant regional players in biscuit and cookies segment in the GCC markets and export their products to over 70 countries around the world, Britannia said in a statement. The companies have a combined annual turnover in excess of about Rs1.6bn with leading brands such as Nutro, Family Choice and Bakers Pride, it added.

Canara Bank said it was selling a 49% stake in Canbank Investment Management Services Ltd. (CIMS) in favour of Robeco Groep NV for Rs1.15bn. Canara Bank and Robeco signed an agreement to form a joint venture and hope to start joint operations after getting regulatory approvals this year. Robeco is part of Rabobank Group of Netherlands and manages assets worth US$185bn in nine countries. CIMS, the Asset Management Company (AMC) of Canbank Mutual Fund, is a 100% subsidiary of the Canara Bank. CIMS has Rs40bn worth of assets under management. It will be renamed Canara Robeco AMC after the deal is completed. In August 2006, Canbank Mutual Fund announced the buyout of schemes of GIC Mutual Fund. This brought in an additional Rs1.5bn for Canbank MF.

Shoppers Stop Ltd. said that its Board of Directors has decided to exercise the option of acquiring 19% shareholding in HyperCity Retail India Pvt. Ltd., out of the total 51% of the option available to it. HyperCity Retail is a part of K Raheja Corp, (Chandru L Raheja Group). It has at the moment, only one store built over 120,000 square feet in Malad, Mumbai. It sells an array of products - groceries, fresh foods, home needs, garments and consumer durables. Last month, Shoppers’ Stop and HyperCITY Retail signed a MoU with UK’s leading retail chain Home Retail group to develop the Argos retail format stores in India. HyperCity Retail has announced plans to establish a network of 55 hypermarkets across India, by 2015. The stores will be strategically located in middle class areas in tier I and II cities. The retailer plans to open three hypermarkets in Mumbai, Ahmedabad and Pune by the end of 2006.

EPIC Energy Ltd. said that it had acquired Hydragen Infrastructures Pvt Ltd, Bangalore based company operating energy saving devices in the Navi Mumbai Municipal Corporation. With this acquisition, the company has become the largest operator of energy saving devices for the Navi Mumbai Municipal Corporation, with about 3000 KVA of installed capacity, covering all the towns situated in the jurisdiction, EPIC Energy said. EPIC Energy recently acquired manufacturing facilities at Por GIDC in Vadodara. This manufacturing facility, coupled with Hydragen's formidable service infrastructure, will enable the company to enhance its value offerings to its clients, EPIC Energy said.

RSWM Ltd. announced that it will acquire a 48.17% equity stake in Cheslind Textiles Ltd., a 100% EOU manufacturing cotton yarn with its headquarters based in Bangalore. The company will acquire the shares in Cheslind Textiles at Rs25 per share from the promoters for Rs278mn. RSWM proposes to fund this acquisition through internal accruals. In line with the listing and SEBI guidelines, RSWM also made an open offer to the shareholders of Chestind Textiles to acquire an additional 20% stake at the same price. If the open offer is successful, the company will have 68.17% stake in Chestind Textiles for Rs393mn.

Rain Comm, Rain Calcining merger ratio at 2:7

The Boards of Rain Commodities Ltd. and Rain Calcining Ltd. approved the share exchange ratio submitted by Ernst & Young and Grant Thornton for their proposed merger. The two independent advisors proposed a share exchange ratio of 2:7 i.e. two equity shares of Rain Commodities for every seven equity shares of Rain Calcining. The Record Date will be fixed after the approval by the High Court of Andhra Pradesh. The two companies' Board also decided to transfer the cement division from Rain Industries Ltd. (100% subsidiary) to Rain Commodities (holding company) with effect from July 1, 2006, besides the transfer of Calcined Petroleum Coke (CPC) and Power Business from Rain Commodities to Rain Industries with effect from April 1, 2007. The Board of Rain Calcining also approved expansion of calcining capacity by 480,000mn tons per annum by way of a Greenfield facility at Vishakhapatnam at a projected cost of Rs3.34bn. The expansion will include a cogeneration facility to generate 49 MW of electricity. The proposed plant is expected to commence its operations in October 2008. Separately, US-based Oxbow Carbon & Minerals Holdings, Inc. raised its offer for Great Lakes Carbon Income Fund, intensifying the bidding battle with India's Rain Commodities Ltd. The Canada-based Great Lakes, which owns 73.56% in GLC Carbon USA Inc., received a revised proposal from Oxbow Carbon to acquire all assets of Great Lakes at C$14 per Unit in cash. Rain Commodities (USA) Inc. and Rain Commodities (Canada) Inc, the wholly owned subsidiaries of Rain Commodities have time till March 27, to match the Oxbow proposal.

Indiabulls' realty arm tumbles on listing

Indiabulls Real Estate Ltd. (IREL), the demerged realty arm of Indiabulls Financial Services Ltd. (IFSL), listed at Rs380.05 on the Bombay Stock Exchange (BSE) on March 23. The stock hit a high of Rs414.8 and a low of Rs328.1. The stock closed at Rs325 with 12.45mn shares changing hands on the BSE. The face value of the stock is Rs2 each. IREL, which recently demerged from IFSL, has a networth of Rs22bn. Currently, the company's projects, at various stages of execution, are valued at nearly US$5bn and they cover a land area in excess of 8000 acres. IREL has committed over Rs18bn on two urban redevelopment projects in central Mumbai. The total value of IREL's effective ownership (as on Dec. 21, 2006) in the project companies undertaking developments was pegged at Rs151.25bn, according to Knight Frank, a leading international real estate consultancy firm.

ICRA IPO subscribed 38 times

The Initial Public Offering (IPO) of credit rating agency ICRA Ltd. has been subscribed 38 times as on 15:00 hrs on March 23, the last day for submitting the bids. The company received bids for 98.29mn shares as against the issue size of 2.58mn shares. The price band for the issue was Rs275 to Rs330 per share. The issue size at the higher price band is at Rs851.7mn. ICRA is an associate of Moody's Investors Services. Moody's has a 29% stake in ICRA. The balance stake is held by leading financial institutions and banks like SBI, LIC, IFCI etc. About 26% of ICRA is being sold by current shareholders, and significant portion of it would be from IFCI. The state-run term lender is selling around 1.86mn shares. Current shareholders, including SBI are set to sell about 2.58mn shares in total. Moody's is likely to hold a stake of about 28% in ICRA after the IPO.

Advanta fixes price band at Rs600-650

Advanta India Ltd., a subsidiary of United Phosphorus Ltd., set a price band of Rs600-650 per share for its Initial Public Offering (IPO). The issue is set to open on March 26 and close on March 30. Advanta, an international agronomic seed company with principal operations in India, Australia, Thailand and Argentina, is entering the Indian capital market with a public issue of 3,380,000 equity shares of Rs10 for cash at a premium to be decided through the 100% Book-Building Process. The issue will constitute 20.08% of the post-issue paid-up capital of the company. The shares will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange Ltd. (BSE). The company has allotted 1,677,000 equity shares to a group of investors at a price of Rs625 per share under the Pre-IPO placement. Headquartered in Bangalore, Advanta is a wholly-owned subsidiary of United Phosphorus, one of the leading generic agrochemical companies in the world with operations in the United States, Australia, China, Latin America and Europe.

Fed leaves rates steady; alters language

As expected, the US Federal Reserve kept the benchmark short-term interest rate unchanged, citing elevated inflation pressure and mixed economic growth prospects. What's more, the American central bank made a subtle change in its accompanying remarks, switching from a hawkish stance to a more neutral one. The change signaled that Fed policy makers were moving closer to cutting rates if the problems in the housing market spread further. The Federal Open Market Committee (FOMC) kept the target for the federal funds rate, an overnight bank lending rate, at 5.25%. It was the sixth consecutive meeting where the Fed policy makers did not change rates after raising rates seventeen straight times between June 2004 and June 2006 in order to fight inflation. US stocks and bonds rallied after the Fed unexpectedly abandoned its tilt toward higher borrowing costs. That could mean that the Fed was not likely to raise rates in the near term and might even start cutting them if the situation demands later this year. "Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth," the FOMC said in Washington. While inflation is the predominant concern, the statement dropped a reference to additional firming, giving central bankers more flexibility on the direction of interest rates

BOJ keeps rates on hold

Bank of Japan (BOJ) decided to keep its key interest rate unchanged after lifting it a quarter point last month, amid continuing deflation worries in the world's second-largest economy. Central bank Governor Toshihiko Fukui and his policy board voted unanimously to keep the key overnight lending rate at 0.5%, the lowest among the G7 economies, the BOJ said in a statement. The bank doubled the rate last month. Government data released earlier this month showed that consumer prices were flat for the first time in eight months in January, fueling speculation that the central bank will leave rates on hold for a while before resuming the tightening. According to some economists, recent market volatility could also have had some bearing on the BOJ's latest decision. While others speculated that the Japanese central bank will wait until midyear parliamentary elections in Japan before deciding to raise rates again. Analysts and financial market players believe that BOJ may face opposition from the Government if it tries to raise rates again before nationwide parliamentary Upper House elections in July. The BOJ's next policy setting meeting is scheduled for April 9-10, after the bank's closely watched "tankan" quarterly survey on corporate sentiment set for release April 2.

China ups rates again

In its continuing attempt to cool down its overheated economy, China raised its key interest rate by 0.27% on March 17. The third rate increase by People's Bank of China in 11 months sent the yuan to its strongest since a fixed exchange rate was scrapped in 2005. Bonds fell after the surprising announcement. The People's Bank of China said in an announcement late that the benchmark one-year lending rate would be increased to 6.39% while the deposit rate would be set at 2.79%. The Chinese central bank said in a statement that the move was necessary to balance growth, stabilise prices and improve the overall structure of the economy. Separately, China's mainland's stock watchdog issued rules to ban listed firms from using share-sale proceeds to invest in securities as the Government moves to curb potential bubbles in the market. Public companies can't use the funds they collect from stock issuance to subscribe to new share sales, the China Securities Regulatory Commission said in a statement. Mainland-listed companies also can't use the proceeds to trade existing stocks, convertible bonds and proposed financial derivatives, according to the statement

Barclays eyes ABN Amro
Barclays Plc confirmed media reports that it was in talks with ABN Amro Holding NV about a possible purchase of the largest Dutch bank in what would be Europe's biggest financial-services merger. Shares of Barclays and ABN Amro advanced as analysts weighed in favorably on a possible deal. Meanwhile, reports also said that ING was also eyeing rivals after the Barclays and ABN Amro deal. Some executives within Citigroup are pushing for the US banking giant to make a bid for ABN Amro, the Wall Street Journal reported. Citigroup is studying whether to make a bid for ABN Amro, and could make a hostile bid for ABN Amro, the Netherlands' biggest bank, the newspaper said, citing unnamed people familiar with the matter. Officials from both banks were not immediately available for comment. Barclays has sealed an exclusive agreement with ABN Amro and has drawn up a broad merger outline for a combined bank worth more than US $166bn that would be listed in London, headquartered in Amsterdam and have its two top jobs split.

Blackstone files for IPO
Blackstone Group LP, the private equity giant that has spent US$160bn taking companies private in the past two decades, plans to raise as much as US$4bn by going public. The company, founded in 1985 by bankers Stephen Schwarzman and Pete Peterson, will sell a minority stake in what will be the largest Initial Public Offering (IPO) by a US buyout manager. The IPO will give New York-based Blackstone cash to expand into new businesses and to buy out partners as they leave, according to a filing with the U.S. Securities and Exchange Commission (SEC). Blackstone's revenue more than doubled to US$1.12bn last year. Investment income, its largest source of profits, was US$7.59bn, a 48% increase from a year earlier. The firm didn't disclose the number of units it plans to sell or the expected price range.

EU clears Open Skies accord with US

In a move that will drive down passenger fares and open aviation markets to more competition, European transport ministers unanimously approved a landmark open skies aviation deal with the US. Douglas Alexander, UK's transport secretary, said the deal to allow European and US airlines to fly to any destination in Europe and the US would bring British consumers benefits of £250mn per year. British Airways denied that a price war will break out, even as rival BMI said it was planning to launch rival US flights from Heathrow. EU governments and the European commission claimed that transatlantic air travel will increase by 50% and passengers will save €15bn (£7.7bn) on fares by 2013. Meanwhile, Airbus's A380 made inaugural flights to the US in order to test the runway upgrades of airports that are trying to accommodate the world's biggest passenger jet, which has faced a series of embarrassing production delays and losses. The aircraft touched down in New York and Los Angeles ahead of schedule.

Motorola slashes forecasts, reshuffles top deck

Motorola shares sank to a two-year low on March 22 as analysts said that there was no immediate end in sight for the cell phone maker's financial woes. Analysts rushed to downgrade the company's stock one day after Motorola shuffled its top deck and announced its first-quarter sales would fall more than US$1bn short of earlier projections. The world's No. 2 cell phone maker said slumping sales in its cell-phone unit, which accounts for more than two-thirds of its sales, are largely to blame for is shortfall. Motorola said on March 21 it also would report a first-quarter loss in mid-April. The company said it now expects sales for the January-to-March quarter of US$9.2bn to US$9.3bn, and a net loss of 7 cents to 9 cents per share. It also expects sales, profitability and operating cash flow for the full year to be substantially below its prior guidance. Still, Chief Executive Ed Zander said he was confident a gradual recovery in the second half would help Motorola eek out a full-year profit.

INVESTMENT STRATEGY

Short-n-sweet week!

Is the worst over for the bulls? Are we out of the woods? These and many similar questions must be going through the mind of investors. After weeks of turmoil in global markets, suddenly everything appears calm. Global markets are trading firm again and US Federal Reserve has indicated it is no longer biased toward higher borrowing costs.

If domestically, cement companies reach an amicable solution with the Government on prices, we may see another week of gains. However, inflation still remains a worry. Again, expect inflation to cool in the coming month due to the base effect. For the near term, the revival in inflows from the FIIs might provide some support. The market could see some added volatility ahead of the expiry. Moreover, Tuesday markets are closed. So the shortened session could see bigger swings. Expectations are mutual funds will try and see that the NAVs are propped up for the year end. In short, expect some gains for the coming week. And booking profits at higher levels in your holding stocks should see you comfortably before the results set in.

MARKET MOOD

Bulls snap five-week losing streak

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Even as India prepares to take on Sri Lanka in a ' do- or- die' encounter in the Cricket World Cup, the bulls on Dalal Street managed to rebound from a month's downturn. After being on the receiving end for the past five weeks, the bulls finally got some respite this week. In a broad-based rally, the benchmark BSE Sensex surged by 6.88% or 855 points to record its biggest gain since 21st April, ending the week at 13286. Buying was seen in counters lie Telecom, Oil & Gas, Capital Goods, Banking, FMCG and Auto. Short covering of positions in the F&O segment also contributed towards this week's turnaround. Also, value buying by investors after the 15% fall from the all-time high of February powered the rally. BHEL, HLL, SBI, L&T and Bharti Airtel were the major gainers among the 30 Sensex stocks. The NSE Nifty added 7% or 252 points to close at 3861.

Markets across US and Asia provided good support after Bank of Japan and the Federal Reserve kept interest rates unchanged. The Fed also unexpectedly abandoned its tilt towards higher borrowing costs, indicating that it may well cut rates if the need arises.

Despite the uncertainty over the cement prices, cement stocks bucked the negative trend and closed higher. The Finance Minister met cement makers this week over the sticky issue of prices, but the talks didn't make much headway. Meanwhile, reports said that the Government was mulling a five-year tax holiday for cement companies putting up fresh capacity. ACC surged by over 3% to Rs745, Grasim rose 3.3% to Rs2071, Gujarat Ambuja was up by 1.4% to Rs105 and Mangalam Cement added 3.1% to Rs148.

Telecom stocks climbed after telecom regulator TRAI cut ADC on international calls. Also, the Cabinet approved revised norms for allowing 74% FDI in telecom. RCOM and Bharti Airtel were among the major gainers. Bharti surged 9.2% to Rs783, R Com rose over 11% to Rs425 and MTNL was up by 2% to Rs145. Spurred by reports of land sale, VSNL rose by over 8.5% to Rs406. However, the company denied such developments.

Banking stocks outperformed the key indices after the money market situation eased and public sector banks called of next week's big strike. Outcome of the BOJ meet and Fed's remarks on interest rates also brought the banking stocks back in action. Heavy weights led from the front. SBI was the top gainer among the Banking stocks. The scrip jumped by over 12% to Rs1027, HDFC Bank rose by over 11% to Rs1011 and ICICI Bank added 10% to Rs894. Among the mid-cap banks, UTI Bank, PNB and Kotak Bank were the major winners.

Value buying was seen in Capital Goods stocks after the recent massacre. Also, industrial production, which grew more than expected in January to 10.9%, contributed towards the gains. BHEL was the top gainer among the 50 stocks in the Nifty amid market grapevine of a big order from ONGC. The scrip rose by over 16% to Rs2279. L&T followed suit. The scrip rallied by over 12% to Rs1632, Punj Lloyd was up by 8% to Rs832 and Siemens added 6.3% to Rs1080.

Auto stocks were in top gear. Maruti paced ahead by over 7.5% to Rs839. The company hiked prices of the Swift diesel and the Government said it would sell its residual stake next year. Tata Motors was up by 5.3% to Rs789, Hero Honda surged 4.1% to Rs679 and Bajaj Auto added 1.7% to Rs2533.

ITC was the sole loser among the index heavyweights over the week after West Bengal and Maharashtra decided to levy 12.5% VAT on tobacco products. Concerns on VAT along with the excise duty increase in the budget would have a negative impact on the profit margins of the company, analysts said. The scrip lost 0.5% to close at Rs144.

Reliance Industries zoomed over 6% to Rs1380 after hitting a high of Rs1420 and a low of Rs1297. Reliance said it had tied up with Rohm & Haas Co. to build a plant in Jamnagar to make chemicals used in paints and plastics. Also, there were reports that Reliance may spend US $12bn to buy a majority stake in a venture with Dow Chemical.

BHEL was a power performer. The stock gained by over 16% to close at Rs2279. The scrip hit a week's high of Rs2315 and a low of Rs1957. The stock witnessed sustained rise in its delivery volume over the week, indicating heavy buying interest. There were reports that the company may win an order from ONGC to supply equipment for oil rigs.

Ranbaxy attracted a lot of attention over the week after the company pulled out of the bidding for the generic unit of Germany's Merck citing expensive valuation. The scrip rose over 4% to Rs330 hitting the week's high of Rs350 and a low of Rs315.

TOP STORIES

SEBI allows short selling by institutions

Capital market regulator SEBI formally declared that Foreign Institutional Investors (FIIs), Mutual Funds and other institutions will be allowed to short-sell in the spot market. The decision comes less than a month after Finance Minister P. Chidambaram's announcement in the Budget for FY08 in this respect. This is a big move that the market, especially the institutions, have been waiting for, and is likely to lend more depth and liquidity to the usually volatile spot market. However, for the move to take its full effect, a comprehensive stock lending and borrowing mechanism has to be in place. Till now, institutions were allowed to go short only in the Futures and Options (F&O) segment of the market, even as retail investors were free to sell short in the spot market, that too without adhering to a proper lending and borrowing process. Short-selling allows one to make a profit by selling a stock in anticipation of a fall in the price of the particular scrip. In case, one doesn't have the stock one has to borrow from others at a cost. Meanwhile, at its Board meeting on March 22, SEBI also tightened the norms for Initial Public Offerings (IPOs) by real estate companies, by asking real estate developers to declare the ownership of the land bank to claim a high premium. Among the other measures announced by SEBI Chairman M. Damodaran in Mumbai included making PAN mandatory for preferential allotment, facilitating easier listing by PSUs and compulsory IPO grading. SEBI has also amended the listing agreement to allow companies to send abridged annual reports besides capping ad valorem fees to lower transaction costs on large deals and IPOs.

Cash crunch hits money market

Call money rates shot up to 10-year high of 60-70% range as desperate banks rushed to garner funds to meet a shortfall triggered by outflows of Rs300bn towards advance tax payments. In addition, the market was worried about an impending strike called by the workers of public sector banks between March 28 and March 30. Most banks, including those who are usually on the lending side, resorted to heavy borrowing in the overnight call money market in order to provide for funds for next week. However, the bank unions were persuaded to call off the strike, which could have affected banking operations across the country for as many as seven days due to public holidays. Also, the Reserve Bank of India (RBI) came to the rescue saying that funds borrowed via repurchase auctions (repo auctions) can be used for inter-bank lending. The central bank also pumped money through the daily repo auctions to help banks tide over the temporary crisis and avoid defaulting on the SLR and CRR requirements. As a result, call rates eased off to 10% levels by the end of Thursday. In currency markets, the rupee had its biggest weekly gain in more than 15 months after call rates zoomed to 70% amid severe cash strain. However, with liquidity easing the partially-convertible Indian currency too lost steam and declined to around 43.70 levels by Friday. Increased RBI intervention, coupled with short-covering of dollars and month-end demand from oil companies also played a part in softening the rupee. The currency reached the highest in 19 months this week as the cash shortage forced banks to buy rupees for their lending and spending needs. The rupee rose 1.2% this week to 43.58 against the dollar. That's the best weekly gain since the five-day period through Dec. 16, 2005.

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Derivatives expiry may keep market volatile

The market will enter a highly volatile week on account of expiry of the March 2007 derivative contracts. Rollover from the March 2007 contracts to the April 2007 contracts has already started. With the market scheduled to remain closed next Tuesday (27 March) for a public holiday, only three trading sessions are left before the expiry of the March 2007 contracts.

Technical analysts feel the support for the Sensex exists at 13,145 levels and the resistance at 13,520. For the S&P CNX Nifty, the support exists at 3,800 and resistance at 3,915.

Inflation has been a cause of concern in the past few months. Inspite of taking several measures to curb it, so far the government has not been able to bring it down. India's wholesale price index rose 6.46% in the 12 months to 10 March 2007, matching the previous week's annual increase, latest data showed on Friday (23 March).

A lot will depend on how the global markets pan out. Over a past few months, local bourses have been tracking global cues in the similar direction. Any sharp correction will lead to a fall here as well.

Crude oil rose to a near two-week high in New York on speculation that stronger demand may push US gasoline consumption to a record this summer. Prices rose as high as $ 61.99 a barrel on Friday (23 March). Any sharp surge on this side may dampen the sentiment further.

The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Analysts expect Q4 results to be strong. Market men will closely watch what company managements have to say about the outlook for FY 2008.

Market gains a handsome 855 points

The domestic bourses were back to their winning ways after posting losses for five consecutive weeks. The market managed to post gains, taking cues from a firm trend on bourses around the globe. In the past, domestic bourses have tracked global markets. Short covering in the derivatives segment also supported the rally.

Prior to this, local bourses had suffered a sharp setback from their all-time highs struck in February, as a host of factors including lack of inflows at higher levels, a surprise CRR-hike, high valuations, rising inflation as well as interest rates kept investors nervous. Fears of an earnings slowdown in the coming quarters, weak global markets led by severe yen-carry-trade unwinding, the defeat of the Congress party in Uttarakhand and Punjab, weak global markets and profit-taking at the higher levels had also plagued the market lately.

The BSE Sensex surged 855 points (6.88%) for the week ended Friday (23 March 2007), to settle at 13,285.93, while the NSE Nifty rose 255 points (7%), to finish at 3,861.05.

Trading for the week started on upbeat with the Sensex surging 214.59 points, to 12,644.99, as buying continued unabated during the session. Strong markets across the globe also boosted sentiment.

The BSE Sensex gained 60.95 points the following day, to settle at 12,705.94, amid high volatility. IT, banking and telecom shares were in demand helped by heavyweight Reliance Industries (RIL).

On 21 March 2007, the barometer index advanced 239.94 points triggered by heavy buying for shares from the banking, FMCG, IT and the metals segment.

The 30-share BSE Sensex jumped 362.15 points, to settle at 13,308.03, as global markets rallied after the US Federal Reserve's policy-setting meeting on 21 March 2007, left interest rates unchanged at 5.25%.

On 23 March 2007, the Sensex settled 22.10 points lower, at 13,285.93, amid extreme volatility, as investors booked profits after four days of a fantastic rally.

Reliance Industries (RIL) gained 5.81% to Rs 1379.20, after it said it was exploring joint construction of an acrylic-monomer plant in India with Rohm and Haas Co, US. The proposed plant in Jamnagar will be able to produce 2 lakh tonnes of acrylic acid and its esters, annually. Products from the new firm will be used to make paints, packaging adhesives, detergents, textile and construction materials.

State-run Bharat Heavy Electricals (Bhel) surged 16.41% to Rs 2279.50, on reports that the company was in talks with two overseas firms for nuclear technology deals. Bhel also informed BSE that the tentative performance for FY 2007 will be announced on 3 April 2007, at a press conference to be addressed by the chairman & managing director.

Tata Motors edged up 4.74%, to Rs 788. Its Managing Director, Ravi Kant, said that its small car project coming up at Singur, Kolkata, was on track, and will be completed by the middle of next year.

Car maker Maruti Udyog (MUL) rose 7.26%, to Rs 837. MUL increased prices of cars across all models in the Rs 258 - Rs 1017 range across all cities effective 15 March 2007. The hike is in response to an increased cess announced in the Union Budget 2007-08.

Ranbaxy surged 4.53% to Rs 330, on a report that the company had pulled out of the bidding war for Merck's generic-medicines unit, citing high valuations. The company exited the race on concerns that the acquisition would not add to earnings, a television report said.

Cigarette maker ITC moved 0.79% higher to Rs 144. The Lok Sabha on 19 March 2007, passed the bill allowing more than 4% VAT on tobacco. Analysts reckon that any levy of 12.5% VAT by state governments on cigarettes will impact cigarette volumes. In the Union Budget 2007-08, the total excise duty on cigarettes was raised by 6%, which also includes 1% educational cess. ITC derives more than half its revenue from cigarettes.

Reliance Energy advanced 6.21% to Rs 485, on reports that the company was pursuing tie-ups with US companies. The firm plans to get into the nuclear energy market. Apart from nuclear energy, the company had also chalked out aggressive growth plans for wind energy. Besides, REL has reportedly bagged a contract for developing the Trichy–Dindigul National Highway four-laning project to be undertaken on a build-operate-transfer (BOT) basis worth Rs 576 crore.

Hero Honda rose 3.91% to Rs 675.10. Honda Motorcycle & Scooters India, a wholly-owned subsidiary of Japan’s Honda, proposes to foray into the entry-level 100-cc motorcycle segment. Hero Honda currently generates over 75% of its sales volume from the entry-level segment.

Oil exploration major ONGC surged 10.6% to Rs 843.25. US crude oil held firm near $60 a barrel after a big drop in US gasoline supplies raised worries of a crunch leading into the US summer driving season.

Term lending institution IFCI surged 26% to Rs 31. It appointed Ernst & Young as an advisor for the induction of a strategic investor in the company.

Five IPOs were listed during this week. On 20 March 2007, Astral Poly Technik, a manufacturer and provider of CPVC (Chlorinated Poly Vinyl Chloride) piping and plumbing systems, settled at Rs 104.55 on BSE, a discount of 9% over the IPO price of Rs 115.

On 19 March 2007, shares of three companies got listed on the bourses. Abhishek Mills settled at Rs 91.15, a discount of 8.85% over the IPO price of Rs 100, while Jagjanani Textiles settled at Rs 23.15, a discount of 7.4% over the IPO price of Rs 25.

Lawreshwar Polymers settled at Rs 14, a discount of 12.5% over the IPO price of Rs 16. AMD Metplast, however, settled at Rs 78.30, a slight premium of 4.4% over the IPO price of Rs 75.

Indiabulls Real Estate settled at Rs 325.65, after touching a low of Rs 325.65 and a high of Rs 414.80 on BSE, after it was listed on the bourses on 23 March 2007. Indiabulls Real Estate (IBREL) was formed following the de-merger of the real estate business of Indiabulls Financial Services (IBFSL). The total equity capital of IBREL is Rs 35.93 crore, consisting of 17.96 crore shares of Rs 2 each.

The Bank of Japan (BOJ) decided to keep interest rates unchanged at 0.5%. BoJ Governor Toshihiko Fukui stuck to previous comments by saying the bank would adjust rates gradually on 20 March 2007.

On 21 March 2007, the US Federal Reserve’s policy-setting meeting dropped an explicit reference to the possibility of taking rates higher in its statement, sparking talk abut the next move of a cut. The Fed left interest rates unchanged at 5.25%. US interest-rate futures indicated a 48% chance of a rate-cut by end - June 2007, compared to 24% before the Fed's announcement.

India's wholesale price index rose 6.46% in the 12 months to 10 March 2007, matching the previous week's annual increase, latest data showed on Friday (23 March 2007). The figure was slightly lower than a forecast of 6.51% in a poll of analysts. The annual inflation rate was 3.80% during the corresponding week of the previous year.

Meanwhile, the Securities & Exchange Board of India (Sebi) authorised all institutional investors, domestic and foreign, to sell short in the cash segment of the capital market. “The time frame for this will be decided fairly quickly,” Sebi Chairman M Damodaran said after the market regulator’s board meeting on Thursday. Sebi held preliminary discussions with stock exchanges who also have agreed, he added.

Though naked short selling will not be allowed, investors will have to fulfill their delivery obligation by borrowing shares through the securities lending and borrowing (SLB) mechanism. The SLB mechanism can be implemented through a clearing corporation or the custodian route, where investors can lend their shares to those who sold short. Of course, the lending investors could earn a fee for the shares lent.

In yet another major development, the Union Cabinet on Thursday decided to raise the foreign direct investment (FDI) ceiling in the telecom sector up to 74%, from the prevailing 49%. The Cabinet clearance came after the Department of Telecom (DoT) and security agencies reached a consensus on allowing remote access with certain safeguards.

In December 2006, the Cabinet had extended the deadline for telecom operators to comply with the norms for an increased foreign direct investment limit of 74%. The deadline expires on 2 April 2007.

Sensex slips after a four-session rally

The Sensex paused after a strong four-day rally. The Securities and Exchange Board of India allowing foreign institutional investors and mutual funds to short sell in the spot market had little or no impact on the market sentiment. The market opened with a positive gap of 36 points but soon slipped into negative territory on profit booking in banking and fast moving consumer goods counters that saw the Sensex touch an intra-day low of 13197. The Sensex witnessed some momentum in the afternoon on value buying at lower levels and touched the day's high of 13387. The index faltered towards the close on a fresh bout of selling and closed with losses of 22 points at 13286. The Nifty closed at 3861, down 15 points.

The breadth of the market was negative. Of the 2,641 stocks traded on the BSE, 1,512 stocks declined, 1,037 stocks advanced and 92 stocks ended unchanged. Most of the sectoral indices ended in the red. The BSE FMCG Index was the biggest loser and slipped by 1.20% at 1689 followed by the BSE IT Index (down 0.54% at 5068) and the BSE Teck Index (down 0.46% at 3625). However, the BSE CG Index rallied sharply and gained 1.75% at 9129 followed by the BSE Metal Index (up 0.27% at 8454).

Among the laggards ITC was down 3.42% at Rs144, Gujarat Ambuja declined 2.27% at Rs105, Tata Motors shed 1.99% at Rs789, Bajaj Auto dropped 1.32% at Rs2,534 and Reliance Energy lost 1.19% at Rs486. TCS at Rs1,289 and HDFC Bank at Rs1,012 fell around 1.11% each. However, select heavyweights attracted decent buying support. L&T surged 3.79% at Rs1,632, Cipla rose 2.79% at Rs242, BHEL jumped 2.22% at Rs2,280, HDFC added 1.37% at Rs1,594 and Maruti Udyog gained 1.04% at Rs840.

Capital Goods stocks, however, were in the limelight. Crompton Greaves surged 5.35% at Rs201, Gammon India jumped 3.69% at Rs310, Bharat Electrical soared 2.22% at Rs1,547 and Carborundum Universal gained 1.81% at Rs143.

Over 48.50 lakh Reliance Petroleum shares changed hands on the BSE followed by IDBI (33.40 lakh shares), SAIL (26.71 lakh shares), Idea Cellular (26.29 lakh shares) and Century Textiles (24.27 lakh shares).

Century Textiles topped the value list with a turnover of Rs133 crore on the BSE followed by Reliance Industries (Rs85 crore), L&T (Rs78 crore), Reliance Communications (Rs68 crore) and Tata Motors (Rs68 crore).

Four-day rally halts abruptly

The market snapped its four-day long dream run, to settle with modest losses due to profit-booking. The Sensex had surged a sharp 878 odd points in the past four trading sessions, on value-buying with short-covering lending support.

The 30-share BSE Sensex settled 22.10 points lower, at 13,285.93. Short-covering in the derivatives market kept the losses under check. The benchmark index was extremely volatile in the first few minutes of the opening session. It had opened slightly higher, at 13,386.95, also the day’s high, but had immediately begun declining. It then dipped to a low of 13,196.90, from where it again started recovering.

The Sensex moved 190.05 points in that range.

The S&P CNX Nifty settled 14.85 points (0.38%) lower, at 3,861.05.

Rollover from the March 2007 contracts to the April 2007 contracts has already started. With the market scheduled to remain closed next Tuesday (27 March) for a public holiday, only four trading sessions are left before the expiry of the March 2007 contracts.

The important inflation data that analysts awaited today was released. India's wholesale price index rose 6.46% in the 12 months to 10 March 2007, matching the previous week's annual increase, data showed on Friday. The figure was slightly lower than a forecast of 6.51% in a poll of analysts. The annual inflation rate was 3.80% during the corresponding week of the previous year.

The market-breadth was weak, as selling started for small-cap and mid-cap stocks. On BSE, against 1,545 scrips declining, 1,055 advanced. A total of 76 scrips also remained unchanged. There were close to 1.5 losers for every gainer on BSE. In the 'A' group, 89 shares had advanced and 120 shares had declined, while 5 scrips remained unchanged. In the 'B1' Group, 277 shares had advanced and 419 shares had declined, while 13 shares remained unchanged. The 'B2' group had 339 advancers, 505 decliners, and 34 unchanged shares.

While only 47 shares advanced, 52 shares had declined, and a single scrip remained unchanged from the BSE 100 Index.

In the BSE 200 Index, against 96 stocks that advanced, 102 declined. Only two scrips remained unchanged from this pack.

The BSE 500 Index showed 220 advancers and 271 decliners. A total of nine scrips also remained unchanged in this pack.

The total turnover on BSE cash market was Rs 3988.85 crore. The total market wide turnover was at Rs 45804.21 crore, lower than Rs 51,363.4 crore on the previous day.

Among the 30-Sensex pack, 18 declined while the rest had advanced.

Cigarette maker ITC was the top loser, down 3.44% to Rs 144, on a volume of 17.77 lakh shares after Maharashtra proposed a hike in tax on cigarettes in its annual Budget. ITC had dipped to a low of Rs 143.60.

Tata Motors was down 2.20% to Rs 788, on reports that sales of cars across the board, which showed good growth in February, may not retain the tempo in March. With car loan rates moving north steadily, manufacturers as well as dealers are a worried lot. Over the last two months, car loan rates have seen a rise of 250 basis points (2.5%), and are now in the 14.5 - 16% range. No upside in sales in the immediate future is expected. A dealer for Tata Motors put the decline at 15% this month. In Mumbai, too, dealers are worried about the sales slump.

Gujarat Ambuja Cements (down 1.95% to Rs 105.80), TCS (down 1.57% to Rs 1283.45) and ONGC (down 1.50% to Rs 839.50) were the other losers.

Engineering and construction major L&T surged 3.88% to Rs 1634, on a volume of 4.85 lakh shares, and was the top gainer. It had touched a high of Rs 1641.10, in intra-day trade.

Cipla (up 2.66% to Rs 241.20), Bhel (up 2.37% to Rs 2280.25), and Dr Reddy’s (up 1.25% to Rs 1588) were the other gainers.

Index heavyweight Reliance Industries (RIL) was up 0.28% to Rs 1378, on a volume of 6.20 lakh shares. It had advanced to a high of Rs 1384, in the late afternoon session.

Ratings agency CRISIL rose by its maximum daily limit of 5%, to Rs 2,490.30, after market regulator, Securities & Exchange Board of India (Sebi), on 22 March 2007 approved a proposal making IPO grading mandatory. Companies coming out with IPOs will have to get their issue graded by one of the three rating agencies CRISIL, ICRA or CARE. The Sebi decision of mandatory grading of IPOs will help boost revenue of ratings agencies, given the prevailing strong primary market conditions.

Cement stocks, which were strong in the opening session, settled in red. ACC (down 1.21% to Rs 744), Grasim (down 0.04% to Rs 2080), Gujarat Ambuja Cements (down 1.95% to Rs 105.80) and India Cement (down 0.88% to Rs 164.15) declined.

The government’s tight vigil on cement prices has already taken its toll on cement scrips, which have tumbled in the last two month. From Rs 1115.80 on 22 January 2007, ACC tumbled to Rs 721.90 by 16 March 2007. It did come off that low later.

A confrontation is on between the government and cement industries due to rising prices. The government is trying to combat inflation and wants cement companies, who it believes have been profiteering, to moderate prices.

Later, on 9 March 2007, cement makers promised the government that they will not further raise prices for one year. But they also did not cut prices.

For the March 2007 quarter, cement firms are likely to show strong growth in profits as cement prices remain firm on a year-on-year basis.

Most sectoral indices on BSE ended in the red today as consolidation was under way on the bourses after a solid recent surge. The BSE FMCG Index was the major loser. It lost 20.52 points (1.2%), to settle at 1,689.47, as ITC declined sharply. ITC has a huge 46.89% weightage in the BSE FMCG Index.

The BSE Capital Goods Index ended with strong gains. It rose 156.72 points (1.75%), at 9,129.78. It was the top-gainer among sectoral indices of BSE.

Debutant Indiabulls Real Estate topped the turnover chart, clocking Rs 437.15 crore, on BSE. The stock settled at Rs 325.65, on total volumes of 1.24 crore shares, after touching a low of Rs 325.65 and a high of Rs 414.80, on BSE. Exchanges had set Rs 407 as the base price for the scrip with a 20% price band. Indiabulls Real Estate (IBREL) was formed following the de-merger of the real estate business of Indiabulls Financial Services (IBFSL). The company was listed on the bourses today. The total equity capital of IBREL is Rs 35.93 crore, consisting of 17.96 crore shares of Rs 2 each.

Nahar Exports and Nahar Spinning Mills tumbled 20% each as trading in both counters resumed after a two-month suspension for restructuring. Nahar Exports (NEL) plunged to Rs 60.75 and Nahar Spinning Mills (NSML) to Rs 149.05.

A day before resumption of trading, the stock exchanges had fixed Rs 75.90 as a base price with 20% daily price band for NEL. The base price of NSML was set at Rs 186.30 with 20% daily circuit band. The restructuring involved the transfer of the textiles business of NEL to NSML. In consideration of that, NSML issued 55 equity shares of Rs 5 each for every 100 equity shares of Rs 10 each held in NEL on the record date. The investment business of NSML was demerged into another group firm Nahar Capital and Financial Services (NCFSL). In consideration, NCFSL issued an equity share of Rs 5 each against every equity share of Rs 10 each held in NSML on the record date. NCFSL will be listed on the bourses in due course.

In a nutshell, NEL issued 70 equity shares of Rs 5 each for every 100 fully paid up equity shares of Rs 10, held prior to reorganisation of the equity share capital of the company.

Term lending institution IFCI surged 6.74% to Rs 30.90, on huge volumes of 4.58 crore shares, after appointing Ernst & Young as an advisor for the induction of a strategic investor in the company. The board of IFCI on Thursday approved the appointment of an advisor for induction of a strategic partner in the firm. The stock had risen 8.2% on Thursday (22 March 2007) to Rs 28.95 ahead of the announcement, which hit the market after trading hours. Meanwhile, the National Stock Exchange (NSE) today barred market participants from taking fresh position in the futures & options segment of IFCI, as open interest in the stock had reached the permissible limit.

India’s fourth-largest FMCG player Dabur India surged 3.10% to Rs 93, on reports that it was said to be in advanced talks with Singapore-based personal products compnay, UNZA Holdings, for an equity stake. Industry sources said that the deal could be announced in the first quarter of the next fiscal. UNZA sells personal care products in South East Asia under brands such as Safi, Enchanteur, Eversoft and Romano, and household products under the brand name Vigor and Maxkleen.

KSB Pumps rose 2.39% to Rs 512, in a weak market, despite reporting strong Q4 December 2006 results. KSB Pumps had registered a net profit of Rs 12.10 crore for the December 2006 quarter compared to a net profit of Rs 8.50 crore in the December 2005 quarter. Net sales for the December 2006 quarter went up to Rs 108.30 crore from Rs 86.70 crore in the year ago quarter.

Most Asian and European markets were trading with losses. The Nikkei 225 Index was up 0.35%, while the Hang Seng Index was up marginally 0.01%. The Nikkei average rose 0.35% on Friday, as investors picked up laggards like Mitsubishi UFJ Financial Group and other bank shares, while a softer yen boosted auto shares such as Honda Motor Co Ltd. On the week, the Nikkei added 4.4%, the biggest weekly climb since January 2006.

The Securities & Exchange Board of India (Sebi) authorised all institutional investors, domestic and foreign, to short sell in the cash segment of the capital market. “The time frame for this will be decided fairly quickly,” Sebi Chairman M Damodaran said after the market regulator’s board meeting on Thursday. Sebi held preliminary discussions with stock exchanges who also have agreed, he added.

Though naked short selling will not be allowed, investors will have to fulfill their delivery obligation by borrowing shares through the securities lending and borrowing (SLB) mechanism. The SLB mechanism can be implemented through a clearing corporation or the custodian route, where investors can lend their shares to those who sold short. Of course, the lending investors could earn a fee for the shares lent.

In yet another major development, the Union Cabinet on Thursday decided to raise the foreign direct investment (FDI) ceiling in the telecom sector up to 74%, from the prevailing 49%. The Cabinet clearance came after the Department of Telecom (DoT) and security agencies reached a consensus on allowing remote access with certain safeguards.

In December 2006, the Cabinet had extended the deadline for telecom operators to comply with the norms for an increased foreign direct investment limit of 74%. The deadline expires on 2 April 2007.

FIIs have stepped up buying, as they pumped Rs 713 crore on 22 March in Indian equity market. Gross purchases were Rs 2594.60 crore while gross sales amounted to Rs 1881.50 crore. As per provisional figures, FIIs were net buyers to the tune of Rs 127 crore today

The US Federal Reserve's policy-setting meeting on Wednesday dropped an explicit reference to the possibility of taking rates higher in its statement, sparking talk abut the next move of a cut. But a day later, investors soon started to consider that the US central bank may not be in a hurry to cut rates and that the dollar may be oversold, as the Fed also reiterated that inflation was still its main concern.

The Fed left interest rates unchanged at 5.25% on Wednesday. Rate hikes in the United States tend to drain cash from the emerging markets, but rate-cuts tend to hike dollar flows into developing economies such as India.

The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Analysts expect Q4 results to be strong. Market men will closely watch what company managements have to say about the outlook for FY 2008.

US stock indices ended Thursday's session little changed after a profit warning from Motorola knocked tech shares lower, stalling a global equities rally sparked by the Federal Reserve's signal that it was less inclined to raise interest rates. The Dow Jones industrial average gained 13.62 points, or 0.11%, to end at 12,461.14. But the Standard & Poor's 500 Index dipped 0.50 of a point, or 0.03%, to finish at 1,434.54. The Nasdaq Composite Index slipped 4.18 points, or 0.17%, to 2,451.74.

US oil continued to climb, after surging on Thursday when a fall in gasoline stocks fuelled concerns of tight supplies ahead of the driving season in the world's top consumer. NYMEX crude for May delivery rose 21 cents to $61.90 a barrel.

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Edelweiss - Daily Market Outlook 23rd March, 07

Market Snapshot

Yesterday, the Sensex opened with a significant positive gap of 126 points at 13,072, and did not bother to look back. The markets got another booster dose as the US Federal Reserve kept the benchmark interest rates unchanged. Unabated buying saw the index rally to a high of 13,326. The index thus gained 1,010 points from the low of 12,316 hit last Friday. The Sensex finally closed today with a hefty gain of 362 points (2.8%) at 13,308. The index is now up 878 points (7%) in the last four trading days. Nifty Settled with a gain of 111 points to close at 3876.

 

The NSE and BSE cash volumes were higher compared to the previous day at INR 78 bn and INR 35 bn respectively. The F&O volumes were also higher at INR 402 bn.

 

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has decreased to 26-30% levels. The WPCR of Nifty Options decreased to 0.98 compared to the previous day while the 5 day average is 1.07.

 

Outlook

The markets are expected to open flattish in line with global cues and no major news flow coming in today. The Nifty might consolidate after gains from previous trading sessions. However, we could see some profit booking to come in above Nifty levels of 3900. SEBI's announcement to allow short selling by institutions is seen as a positive as it will add liquidity to the capital markets. 

 

Banking sector might continue to see strength as fresh buying will come in and shorts are covering their positions. Bajaj Auto is our top buy candidate in the Auto segment as we expect the Automobile stocks to gain further from current levels.

 

As expected, the roll levels have contracted to -7 and we advise the short rollers to be aggressive at Nifty levels of -5.  

 

The Nifty staged a strong recovery and showing straight 7.5 % gains in the last 4 days the technical charts indicate that its time for Nifty to settle down. The next resistance for the Nifty index is at 3886 followed by 3900 which will be a strong resistance for the Nifty. On the lower side, the Nifty has a support at 3848 followed by 3818.

 

The Nifty staged a strong recovery and showing straight 7.5 % gains in the last 4 days the technical charts indicate that its time for Nifty to settle down. The next resistance for the Nifty index is at 3886 followed by 3900 which will be a strong resistance for the Nifty. On the lower side, the Nifty has a support at 3848 followed by 3818.

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Intra-day Stock Ideas

NIFTY (3875.9) SUP 3823 RES 3934

BUY GAMMONIND (299.3)
Sl 294 T 309, 311

BUY ESCORTS (117.7)
Sl 114 T 125, 127

BUY IVRCLINFRA (301)
SL 296 T 311, 314

SELL HCLTECH (296.55)
@ 299 SL 304 T 288, 285

SELL RAJTV (199)
@ 202 SL 206 T 192, 190

STRATEGY INPUTS FOR THE DAY

STRATEGY INPUTS FOR THE DAY

Bulls say Bought'em out

Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.

We mentioned about sunshine after sun outage at the beginning of the week. You had plenty of time to pick up heavyweights which no one seemed interested to buy for the last couple of weeks . We've had a fairly successful week as far as the bulls are concerned. Yesterday, was particularly satisfying with the key indices shooting up with a sharp jump in volumes and a positive breadth. Along with a buoyant global mood, some amount of short covering also helped. FIIs too seem to have pumped up the volume yesterday. Provisional figures on the NSE show that the overseas investors poured in Rs7.13bn in the cash segment. In the F&O segment, they were net buyers of Rs21.76bn. All of a sudden, things are looking up once again, as if we never had a fall last month.

Has something drastically changed. Except the sentiment? It always pays to be a little bit cautious as some of the concerns that brought about last month's downfall are still there. Today, we expect a higher opening given the mixed set of cues from US and Asian markets. Also, some selling pressure could set in at higher levels ahead of the weekend. The market could remain choppy as we will have the F&O expiry next week.

IFCI is likely to gain after the state-run term lender said it has appointed Ernst & Young, for advising the company on the induction of a strategic investor. Dabur India will be in focus amid reports that it is to acquire Singapore's Unza Holdings. TCS is also expected to attract attention amid reports of a big bang acquisition. HCL Tech and Cambridge Solutions are also going to be in the limelight as a deal could be brewing between the two companies. Torrent Pharma might also be in spotlight as reports suggest the Ahmedabad-based company along with Israel's Teva are the only ones left in the race for the generic business of Germany's Merck. Telecom stocks could be in the thick of things as well after the Cabinet formally approved 75% FDI yesterday.

ITC and other cigarette makers could be in for some more pressure as Maharashtra has also decided to impose a 12.5% VAT on all tobacco products except bidis. Indiabulls Real Estate Ltd., the real estate arm of stock broking firm Indiabulls Financial will make its debut today. F&O trading in Hinduja TMT will be suspended from March 30 due to the spin-off of its IT business into a separate company. The existing contracts for April and May will expire on March 29 and fresh month contracts will not be introduced.

US markets closed mixed. While the Dow managed slim gains the Nasdaq ended in the red and the S&P 500 finished flat. The S&P 500 ended flat at 1434.54. The Dow added 13.62, or 0.1%, to 12,461.14. The Nasdaq lost 4.18, or 0.2%, to 2451.74.

US light crude oil for May delivery jumped $2.08 to $61.69 a barrel, a gain of more than 3%, on the New York Mercantile Exchange. The front-month contract was 16 cents higher at $61.85 a barrel.

Treasury prices slumped, raising the yield on the 10-year note to about 4.58% from 4.54% late on Wednesday. In currency trading, the dollar fell versus the euro and rose modestly versus the yen. COMEX gold for April delivery added $4.20 to $664.20 an ounce.

Blackstone Group LP, the leveraged buyout firm that has spent $160bn taking companies private in the past two decades, plans to raise as much as $4bn by going public.

Motorola shares slid more than 6%. The mobile handset maker warned on Wednesday that it will post a first-quarter loss and that full-year sales will miss forecasts, owing to weak sales of mobile devices. The company also said its chief financial officer would retire effective April 1.

European indexes rose. The pan-European Dow Jones Stoxx 600 index added 1.5% to 374.36. The index is now up about 2% from its Dec. 29 close of 365.26, having recovered from last month's sell-off. The German DAX Xetra 30 closed up 2.2 % at 6,856.96, the French CAC-40 rose 1.8% to 5,598.37 and the UK's FTSE 100 added 1% to 6,318.00, with the latter's gains capped by some weakness in the pharmaceutical sector.

In Asia, stock benchmarks in Singapore, China and Korea are down. The Hang Seng is nearly flat while the Nikkei has gained marginally. The Morgan Stanley Capital International Asia-Pacific Index gained 0.1% to 145.72 at 11:02 a.m. in Tokyo, set to close at the highest since Feb. 27. For the week, the gauge is heading for a 3.1% rise, the most since the five days to Aug. 18. Markets open for trading elsewhere in the region fell, except in Australia, Taiwan and Malaysia.

HOW MARKET FARED

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Fantastic Friday on cards

This week as of now is turning out to be an impressive for the bulls as the benchmark Sensex has recovered by nearly 1000 points from weeks low of 12427 on Monday to 13300 mark making a strong come back in last four trading sessions. Strong Global cues and the decision of the Federal Reserve to keep interest rates unchanged boosted the key indices at open. Today's rally yet again belonged to the large cap stocks again, however the Mid-Cap and the small cap stocks were unable to follow today yet both the indexes managed to close up nearly by 1%. Aggressive buying was again witnessed in the scrip's across the bourses lifting the benchmark Sensex over 350 points.

Finally, the 30-share benchmark Sensex surged 362 points to close at 12308. NSE Nifty jumped 111 points to close at 3875. VSNL, Tata Chemical and PNB were the major gainer, however Britannia, Zee Tele and Glaxo were the major losers among the 50-scrip's of NSE Nifty.

Suzlon Energy slipped sharply after reports stated that the company would increase its bid for Repower. The scrip fell from a high of Rs1025 to hit an intra-day low of Rs975 finally closing 1.3% up to Rs1008. The scrip touched an intra-day high of Rs1025 and a low of Rs975 and recorded volumes of over 5,00,000 shares on NSE.

IDFC surged by over 2% to Rs87 after the company bought a stake in the toll-road unit of Abhijeet Group for Rs656mn. The scrip touched an intra-day high of Rs89 and a low of Rs85 and recorded volumes of over 37,00,000 shares on NSE.

VSNL rallied by over 10% to Rs423 following reports that the company may be asked by the government to sell land to raise as much as Rs100bn. The scrip touched an intra-day high of Rs426 and a low of Rs389 and recorded volumes of over 21,00,000 shares on NSE.

BHEL surged nearly by 6% to Rs2230 after reports stated that the company may win an order from ONGC to supply equipment for oil rigs. The scrip touched an intra-day high of Rs2256 and a low of Rs2103 and recorded volumes of over 9,00,000 shares on NSE.

The index heavy weight Reliance Industries rose 2.6% to Rs1375 after the company entered into a Memorandum of Understanding with Rohm and Haas Company to explore the joint construction of a world-scale acrylic-monomer complex in Jamnagar, India. The scrip touched an intra-day high of Rs1379 and a low of Rs1347 and recorded volumes of over 24,00,000 shares on NSE.

Banking sector once again out performed the benchmark indexes as the Bank index rose over 4% for second consecutive trading session after Finance Minister said money supply with Banks will ease in coming days as Government will start spending funds from the budget marked for the fiscal year. The Mid-Cap stocks yet again led from front, Bank of India surged by over 12% to Rs176, Canara Bank rose 7.8% to Rs208 and PNB advanced 7% to Rs482. HDFC Bank, SBI and ICICI Bank were the major gainers among the heavy weights with each gaining over 3.5%.

Oil & Gas exploration stocks also were in the limelight today. ONGC was up by a whopping 5% to Rs852 and Reliance Industries surged by over 2.5% to Rs1375. Oil & Gas stocks refinery stocks also extend their gains marginally. BPCL gained 0.7% to Rs313, HPCL marginally gained by 0.9% to Rs267 and IOC edged higher 0.6% to Rs420.

Auto stocks slowly shifted to top gear today. Hero Honda led the race the scrip rose 5.2% to Rs685, Maruti paced ahead by 5% to Rs831, Tata Motors surged by over 3.5% to Rs805 and M&M advanced 3.7% to Rs781.