Weekly Close: A nano rally.. ! Can it be a big one ?

Great optimistic start for the week with upcoming IPO of Reliance Power and touched 21k on second day of the week. Global markets are falling prey to financial crises and economic slowdown. But, India was a different story. India had great start led with optimism amongst investors. Result season is on and Infosys came with big bang. The numbers posted were better than expected. However, the last two sessions saw huge profit booking and mid caps and small caps were major losers. Overall sessions were choppy and volatile.

The conditions in US have been worsening and it continued despite Feds efforts to smoothen the economic landing. Now, the final solution which prevails is to cut rate. Fed Chairmen Ben Barnanke has indicated rate cut and market is expecting 50 bps cut. Let see how rate cut helps the economy stuck between slowdown and inflationary pressure at same time. Indian markets have been ignoring these cues..but we don't think that it may ignore these signals for long !

Inflation was 3.5%. This has been under control but more because of a base effect. Inflation remains a concern and it is a supply side issue. Food articles have seen a major upsurge and this is on the back of poor agriculture growth. Agriculture thus would be an area of focus. Crude is at an all time high and it would be really difficult for Govt. to cope up with this. If the Govt. doesn't hike petrol and diesel prices.. it would only postpone the problem. If it does hike then the Govt would face the irk of the Left and certainly it cannot afford this when elections staring it. This would be a big issue going ahead and certainly there are no easy answers. The easy way out is not the best one Economicaly for the country.

Sensex Gained 0.7% for the week. Sensex was dragged by ACC (-10.6%), Hindalco (-7.25%), Maruti (-7.1%), Infosys ( -6.66%), Ranbaxy(- 6.92%), Grasim (-5.86%), M&M ( -5.24%) Ambuja Cem (-4.31%), CIPLA (-3.64%), BHEL (-3.56%) and ONGC (-3.07%) While Sensex was supported by ICICI (+12.5%), DLF (+7.6%), RIL(+ 5%) RCOM( +5.12%), HDFC Bank (+4.39%), ITC ( +2.53%) and Bharti (+2.27%)..Infosys numbers were good on the face and market reacted to it positively. However, macro worries like US slowdown, high salary cost and appreciating rupee are certainly a concern for Infosys.

Tata Motors finally unveiled the much awaited 1 lakh car. Its named as Tata "Nano" which will come into commercial basis in H2 FY08. Tata motos was in news across but stock failed to rally as market weakness pulled it down.

Shree Cement reported impressive results for the Q3 FY08, the top line grew by 44% and the bottom dip due to change in depreciation policy. Outlook is good but the worry is Govt. regulations. Tamil Nadu Govt. has forced the cement manufactures to reduce the prices. It has also asked the companies to give cement on subsidised rates for Govt projects and to economy weaker class people. This certainly put pressure on the companies located in TN like India Cement, Madras Cement, Dalmia and other players. The coal prices and fright rates are going up which puts margins under pressure.

We had our Sayaji Hotel this week. The company has two businesses; Hotels and Restaurants. Sayaji Hotel operates two hotels, one at Indore and another at Baroda. FOOD and Beverage is an area of expertise and Sayaji is well versed here. The new businesses have large investments. The company has already tied up the funding. Macro factors seem to be in favor of the company. Since our coverage last month the stock is up over 30%. We believe that post the current run up the risks have increased. Of course being a small company the risks are higher and the restaurant business is fast catching up as well the Pune hotel..Do read to know our view on this one.

ABG Shipyard Ltd (ABG) reported impressive results. The top line grew by 55% to Rs 275 cr and bottom line was up 61% to Rs 47 cr. The EBITDA profit grew by 55% to Rs 82 cr from Rs 53 cr on yoy basis. Subsidy factor was Rs 17 cr for the quarter. ABG is the first private company to get the subsidy disbursement. A big issue is the form of 30% (Valid till Aug 2007) subsidy from the Govt which remains an event risk. The Finance Ministry is not in favour where as shipping ministry is keen on at least 20% subsidy. The argument is that without the subsidy, the Indian ship manufactures wont able to compete in the global scenario against the Chinese and Koreans who are being subsidised. We believe that the case for the subsidy to continue at 20% for 5 years is strong. The macro scenario is extremely positive but then valuations down leave much upside. Do have a look at our results update.

Greenply showed some strength in weak market. The company has performed really well and given amazing returns. It is pure play on Indian infrastructure where Greenply focus on interior infrastructure.

KEI is into manufacture of high and low tension cables (HT and LT)..a play on power sector. The company is growing aggressively by expanding capacity to meet domestic and international demand. The macro scenario is extremely good for power cable manufactures; we feel their wont be any such major risks in near term. Our recent note would give more idea on this one.

Technically Speaking: Sensex traded volatily for the week. After a healthy corection the markets are ready to take on 22k. Sensex Support seen at 20500 , 20250 and Resistance at 20970 and 21220.