Market Close : Subprime crisis Now in India??

It was one more disappointing day for the Indian markets to close on a weak note though it opened in positive terrain. After flat start on back of mixed global cues selling surges into and drives market to trade in deep trade. Selling pressure was seen across the broader markets which led the indices to fall by more than 400 points. The markets remained weak for major parts of the day. Weak global cues and negative cues from banking major have given support to the weak sentiments. Banking stocks have got major hit on the news that ICICI Bank has lost $264 mn till January 31 on subprime crisis but management clarified that they have made loss of $50 mn in this quarter and subsidiaries to take hit of $25 mn. Bank has made provision of $75 mn in total.. Moreover, this news impacted the banking sector as it proved wrong that Indian banks were aloof from the sub prime crisis. Some reasons for caution here prevailed and markets continued to trade weak, though some value buying at the lower levels saw recovery but it didn?t come to rescue. Banking, Power, Realty, Oil & gas and IT took the hit while Metals and Auto gained marginal. Europe is trading in red.

Sensex closed down by 338 points at 16339.89. Weighing on the Sensex were losses in ICICI Bk (971.6,-5 percent), ACC (746,-5 percent), RCVL (514.55,-5 percent), Cipla (201.9,-5 percent) and ITC (184.85,-4 percent). Losses were restricted by gains in Hindalco (199.9,+5 percent), Maruti (905.7,+4 percent), HDFC (2636.6499,+3 percent), Rel Energy (1504.75,+1 percent) and Tata Motors (701.8,+1 percent).

National Aluminium Co. and Hindalco Industries Ltd., India's two biggest aluminum producers raised prices to match the global rates. Earlier Aluminum futures on the London Metal Exchange jumped 29 %t this year after China's worst snowstorms in 50 years caused power outages and forced output cuts at smelters. Indian companies sell products at prices linked to the exchange. On back of this National Aluminium increased its price by 10,000 rupees ($249) a metric ton, or 7.9 percent, to 137,000 rupees from March 1, while Hindalco Industries raised prices by 5,000 rupees a ton. Although, indices were down 2% Hindalco closed 5% up on the bourses.

DLF group is a leading real estate developer in India. DLF traditionally had a strong foothold in the National Capital Region of Delhi but has now increased its presence in other parts of the country. The group has over 224 million sq. ft. of existing development and 748 million sq. ft. of planned projects spread across 32 cities. DLF's core business has three prime divisions: Homes, Offices and Shopping Malls. To these DLF has added three more divisions: Hotels, Infrastructure and SEZs. DLF's land acquisition cost is approximately around Rs 300 per sq.ft. and DLF owns 93% of the land bank as sole owner. This gives DLF a major advantage as it has a robust land bank and that too at a very attractive rate. The value of land has appreciated manifolds in recent times. 80% of DLF's land bank is in Super Metros and Metros. This provides DLF an added advantage as the realization would be on higher side. The company faces a systematic risk but the residual risk is limited. There is a sensitivity to the profit margin of Selling price and development cost and that can have big variation. DLF has other JV partners to cater in development of AMC & Insurance , Power , Hospitals and Airports. Earlier, we had suggested to avoid the stock as the valuations of DLF seemed to be too expensive. DLF closed down by 5%. Do read our note to know more.

Technically Speaking: The technical picture for the market continues to remain weak. Both Sensex and Nifty remained below the 200DMA for the second consequtive day and the markets inability to come above level points to further downside. Reliance the market heavy weight has also closed below its 200DMA for the first time in 3 years. Hence one can expect further downsides for the broad indices. Any bounce back from here is likely to face selling pressure at the former support levels of 5050 on Nifty and 17100 on the Sensex.