SGX Nifty Update

SGX Nifty is trading at 3,690.0 (198 Down)

Markets likely to continue wobble

The stock markets may well remain wobbly as they head into a new week, carrying over last week's confusion surrounding the proposed curbs on participatory notes (P-note). A a video conference between the Securities and Exchange Board of India and leading foreign investors after close of trade on Monday may, however, provide much-needed clarity and, hopefully, bring stability back to the markets, dealers said.

P-notes, an offshore derivative instrument which has Indian stocks as underlying, are issued by FIIs to anonymous overseas investors. More than 30% of the capital inflows into the country’s capital markets are through the P-note route.

Dealers said they anticipate further slide in stock prices judging by the recent frenzied rise in prices that made several stocks "excessive". Cues from the US, where the Dow lost 367 points on Friday, are also negative.

Proposals to curb rising inflows into stock markets through P-notes triggered a sell-off in the stock markets last week. Sensex, which had gained 36% since the lows of mid-August, corrected nearly 8% after hitting a record 19051.

Also, if the dollar continues to fall, one could see more inflows as foreign investors buy shares in India as a hedge against the US currency. The rupee closed at 39.74 against the dollar on Friday, down 0.06%. The currency has appreciated 10% since late 2006.

Second quarter results announced by many companies this week have not been very stunning, though they are in line with market expectations. Reliance Industries, India's most valuable company, posted 28% increase in net profit. However, software companies bore the brunt of the strong rupee as Infosys results failed to keep up with expectations'of analysts. The upcoming week will see other IT majors such as HCL and Satyam along with heavyweights Tata Steel and ITC announcing their results.

Sebi, at its board meeting on Thursday, will decide how to curb the $88 billion P-note investments. Foreign investors unwound Rs 14,000 crore worth exposures into stocks and derivative positions in the last three days. With the markets already absorbing the pain, some commentators expect Sebi to go ahead with the P-note move.

Deepak Parekh, chairman, HDFC, welcomed the P-note curb proposals, saying the huge inflows through the instrument were a cause of concern. "The BPO industry is operating at margins of 10-15%, which are pretty thin. Further, rupee appreciation will render several people jobless," he told reporters on the sidelines of a seminar on Friday.

Sashi Bhushan, head of equities at IL&FS Investsmart said: "There is some more pain left for the market. We will see stability at 16000-16500 levels. We could see some buying coming at those levels.”

Market participants also fear that margin calls may get triggered on Monday, if there is further unwinding of positions by FIIs. Margins calls are triggered when brokerage houses (and stock exchanges, in extreme situations) unwind their clients leveraged exposures in the market to meet margin requirements when prices fall sharply.

Investors can expect a bumpy ride this week

Don’t say a day was bad as the next could be worse, says a famous Chinese proverb. And investors in Indian equities may well pay heed to this maxim as the coming week may see stocks at their volatile best with intermittent bouts of buying and selling. Global cues could also act as a spoilsport.

Volatility is expected to remain high ahead of expiry of October 2007 derivatives contracts on October 25, 2007. The P-Notes issue continues to hang like the sword of Damocles over the market and all eyes are now on the SEBI board meet scheduled on Thursday to discuss suggestions put forth by market players to its proposal.

If the proposals are implemented, equity analysts warn of a sharp downside. However, many choose to believe that SEBI may adopt a milder stance while converting the proposals to norms. The market will also look for signals from the video conference to be convened by SEBI chairman, M Damodaran with overseas investors to discuss issues arising from the draft proposal on participatory notes (PNs).

It had been a tumultuous week and benchmark indice lost almost 4.66% or 859 points in that period. The Sensex and the Nifty which had also touched historic highs in the last week, snapped an eight-week rally post the SEBI proposal on P-notes.

Including the provisional figures issued by exchanges for Friday, foreign funds sold shares more than worth $450 million on the last three days of the week. Although, market experts are divided on how the market will behave in the near future, stay invested is what they all advice.

A Merrill Lynch report issued last week said that given sub prime concerns across the developed markets, more money will now come to Asia. The Wall Street firm has upgraded India to market weight saying within Asia, India has the second-strongest growth, and the second-largest economy, after China.

“With the MSCI Asia ex-Japan index’s total twelve month return now in excess of 60%, there must be some itchy trigger fingers in the fund management community,” Merrill’s Hong Kong based strategist Mark Matthews says in his report. It also points out that on the past three occasions when Asian stock markets rose by this much in such a short period of time, subsequent returns were mediocre.

The near term trigger for the market is RBI’s mid term review of annual policy due on 30 October 2007. It remains to be seen whether the central bank does away with a hawkish stance in the policy. However, a near term rate cut by RBI looks unlikely with consumer price based inflation and liquidity remaining high.

Then there is panel meeting-set up by the government to look into Left front’s concerns over the Indo-US nuclear deal-on Monday, 22 October 2007. An action packed week and definitely no place for the faint hearted any more.

Confined market rally

An internal study by the finance ministry has found that there were no surveillance or regulatory problems when the Bombay Stock Exchange (BSE) benchmark index touched new highs recently.

The rally was confined to select scrips and there was no real overall spurt in stock prices. Mid-caps and small-caps continued to remain laggards. These are some of the findings of a study undertaken by the North Block on the Sensex’s journey from 12,000 to 18,000.

The Sensex crossed the 12,000-mark for the first time on April 20, 2006. It crossed the 18,000, mark on October 09, 2007.
However, Sebi proposals to restrict investments through participatory notes triggered a more than 1,700- point crash in the market on Wednesday, prompting suspension of trade for an hour.

While the market recovered after statements by finance minister P Chidambaram and Sebi chief M Damodaran, the volatility continued on Thursday. The Sensex closed with a loss of over 700 points.

Interestingly, more than a quarter, or 25%, of the listed stocks declined during this period, with the rally remaining confined to the top 30 scrips. In fact, the BSE-30 stocks were far ahead of the NSE-50 in terms of the quantum of increase, an official said.

The rise in mid and small-cap stocks was around 5% of the overall movement. The study, which analysed the movement of the index and the investment pattern, as it crossed each 1,000-point milestone, has revealed that the investment pattern remained the same during the rise. But, many promoters were found to be partly selling their stakes, taking advantage of the bull run.

Market may rally

The Dalal Street is expected to witness a positive bout in the week ahead amidst the volatile environment on the bourses driven by global cues even as the 18,000 milestone remains just within the reach, analysts have said.
“Bulls have had a fantastic time so far on Dalal street in the wake of the Fed’s better than expected rate cuts and unabated FII inflows into the Indian equity markets,” domestic brokerage India Infoline said in its weekly wrap.
However, choppiness and sharp swings around these levels are expected ahead of the quarterly results, it added.
The BSE benchmark index Sensex closed at 17,773 points, adding over 400 points in the previous week while remaining within the kissing distance of the 18,000 milestone. It had also touched an intra-day new peak of 17,979.18 points on 5 October.
Analysts also believe that an upswing may be witnessed this week as the US Labour Department data has showed hike in the number of jobs. The US stock markets had shot up in opening trades on Friday after the Labour Department said the economy added 110,000 jobs.
The experts also believe that the stock markets may see an upside in the coming sessions, with stock-specific action based on corporate results, although certain amount of profit booking cannot be ruled out.
“Quarterly results will start coming in this week and they can be a reason to be exuberant or disappointed,” Arun Kejriwal of Kejriwal Securities said.
Factors that would predict market trend in the coming weeks include quarterly results from Infosys and the board meeting of DLF on October 11 to consider overseas acquisitions and raising funds offshore. This would be followed by quarterly results from HDFC Bank and Reliance Industries annual shareholder meeting on 12 October.
“The domestic trigger for the market could be the political standoff regarding the nuclear deal....it would be healthy if the markets would consolidate in the range between 17,000 to 18,000,” Asika Stock Brokers’ Paras Bodhra said.
Foreign institutional investors are favouring the Asian markets, especially China and India, he added. FIIs have made net investments in equities worth Rs9,425.80 crore in just five days till 5 October, while they have bought Rs60,592 crore in 2007 so far.
Besides, domestic mutual funds have sold off equities worth about Rs 532.50 crore in the first week of the month. An increase in annual inflation, based on the wholesale price index (WPI), which moved up 3.42% in the week ended 22 September from 3.23% in the week ended 15 September, doesn’t appear to be a welcome sign, experts said.
The rise in inflation is due to increase in prices of manufactured products, with a 63.75% weight in WPI. Food products like salt and oil became dearer in the week.

Gains pared

The market pared gains in late afternoon trade after the BSE 30-share Sensex hit an all-time high. The market breadth remained negative. The mid-cap and small-cap indices declined. Banking stocks were weak. IT stocks slipped further.Asian markets ended mixed, while European markets were trading up.

The market galloped in mid-afternoon trade, propelling the Sensex to its all-time high. Reliance Industries extended gains.

Remaining range bound in mid-afternoon trade, the market surfed in the positive and negative zones. Extending gains, the market had hit a new intra-day high in mid-morning trade.

At 15:57 IST, the Sensex was up 7 points, or 0.01%, to 17,954.15 in mid-afternoon trade. It opened with a gap of 54.54 points at 17,779.22 . The Sensex touched an all-time high of 17979.18 in mid-morning trade and a low of 17,731.14 in early afternoon trade.

The S&P CNX Nifty was down 21.8 points, or 0.42%, to 5,186.85. It had hit a high of 5,248.55 in mid-afternoon trade, and a low of 5,173.75 in early afternoon trade.

Of the 30 shares of the Sensex, seven had moved up, while the remaining were trading down. The market breadth was weak on BSE: 955 scrips had advanced, 1,760 declined, while 367 remained unchanged.

The BSE Mid-Cap index was down 85.13 points, or 1.12%, to 7,494.14 underperforming the Sensex,. The BSE Small-Cap index down 30.03 points, or 0.33%, to 9,111.89, underperforming the Sensex.

India's wholesale price index (WPI) rose 3.42 % in the 12 months to 22 September 2007, higher than previous week's 3.23 %, due to a rise in manufactured product prices, data released today, 5 October 2007, showed. Banking stocks declined as WPI was more than expected. SBI (down 1.86% to Rs 1,865), ICICI Bank (down 1.35% to Rs 1,047) and HDFC Bank (down 0.44% to Rs 1,398) edged lower. HDFC declined 1.71% to Rs 2,452.10.

Reliance Communications (up 2.13% to Rs 648) and Bharti Airtel (up 3.42% to Rs 994) were among the major gainers in the Sensex pack.

NTPC (down 4.37% to Rs 216.50 and the top loser from the Sensex pack), Hindalco Industries (down 2.55% to Rs 171.40), Tata Steel (down 2.77% to Rs 840.80) and ITC (down 3% to Rs 179.25) and ACC (down 2.58% to Rs 1,183) were the major losers from the Sensex pack.

IT bigwigs declined as the rupee gained further. Infosys (down 0.41% to Rs 1,988) ,TCS (down 0.8% to Rs 1,070), Wipro (down 0.55% to Rs 458.75) and Satyam Computer Services (down 0.94% to Rs 446.50) were weak.

The BSE Capital Goods index was the major gainer from the sectoral indices. L&T (up 6.62% to Rs 3,087.95, hitting an all-time high of Rs 3,197.50 today and the top gainer from Sensex pack), Bhel (up 3.03% to Rs 2,155 , hitting an all-time high of Rs 2,229 today) and Suzlon Energy (up 0.66% to Rs 1,650) advanced.

The largest private sector company and oil refiner Reliance Industries rose 2.79% to Rs 2,490.05. It touched an all-time high of Rs 2,539 today on reports it may join state-run firms to set up a Rs 6000-crore petrochemicals complex in Visakapatnam i n Andhra Pradesh.

Power transmission firm Power Grid Corporation of India was trading at Rs 101.40 on BSE on its debut, a premium of 94.71% over the IPO price of Rs 52.

Among the side counters, Phoenix International (up 19.83% to Rs 20.85) Tata Sponge Iron (up 20% to Rs 234.95), Artson Engineering (up 20% to Rs 57.35), and OCL India (up 20% to Rs 192.40) had advanced and were the major gainers.

Solectrun Centum (down 20.68% to Rs 221.10) and Ras Resorts (down 14.45% to Rs 37) were the major losers.

Asian markets, which opened before the Indian markets, were trading mixed today. Taiwan's Taiwan Weighted (down 0.11% to 9,617.26) and Japan's Nikkei (down 0.16% at 17,065.04) were in red. Hong Kong’s Hang Seng (up 3.18% to 27,831.52) and Singapore's Straits Times (up 1.03% to 3,822.62) were in positive territory.

Most of the European markets were trading in green. These included France’s CAC (down 0.03% to 5,802.88) edged lower. Germany’s DAX (up 0.14% to 7,956.30) and UK’s FTSE 100 (up 0.21% to 6,561.70).

American markets rose marginally on Thursday, 4 October 2007. The Dow Jones Industrial Average index ended up 6.26 points to 13,974.31 points and Nasdaq up 4.14 points to 2,733.57. US stocks barely rose on Thursday as investors shied away from making big bets before the release of the jobs data on Friday, 5 October 2007, to shed light on the economy and the outlook for interest rates. The American earnings season goes in full force in another one week.

Provisionally, as per NSE data, foreign institutional investors (FIIs) were net buyers of Rs 457.28-crore equities, while domestic institutional investors (DII) were net sellers of Rs 663.9-crore equities on Thursday, 4 October 2007.

The market snapped its 10-day winning streak on 4 October 2007 as the Sensex ended down 69.90 points, or 0.39%, to 17,777.14 points. The S&P CNX Nifty closed lower 2.15 points, or 0.04%, to 5,208.65. It had touched a low of 5,126.05 in mid-afternoon trade.

Till then, the market had been on a roll, with the Sensex hitting a record high in the trading sessions from 19 September 2007 to 3 October 2007. Heavy FII buying and hopes of a further cut in interest rates by the US Federal Reserve at its next policy meeting on 30-31 October 2007 had boosted the bourses.

From a low of 13,989.11 on 21 August 2007, the Sensex has galloped a whopping 3,857.93 points, or 27.57%, to 17,847.04 on Wednesday, 3 October 2007.

International Markets - 3 October 2007

International Markets - 3 October 2007

Penny stocks run

In a bull market speculators tend to turn penny wise and this is evident in the sudden interest in stocks of relatively unknown companies.

In the past one month, at least 20 stocks with ‘not-so’ inspiring background have climbed from below-par levels to achieve a ‘double-digit’ status. Analysts fear the movement may have been triggered by operator-driven activity and thus advise caution. In their view, investors, particularly retail, should carefully study company background and trading patterns before dealing in such shares.

ET tracked the movement of BSE-listed stocks across groups and found that many low-priced stocks have shot up to new highs, piggybacking on an euphoric Sensex. Brokers warn of getting carried away by the frenzy, especially when the gains are not supported by good fundamentals or any kind of development that would bring about a change in business prospects of companies.

Major gainers among the low-priced stocks include IEC Softwares, where the share price jumped 156% in over a month. The scrip, in fact, hit the 5% upper circuit on Wednesday when it closed at Rs 17.2.

The volumes, however, remained low with 300 to 27,645 shares changing hands during the period.

Yet the financials of IEC Softwares do not support the spurt in stock price. It posted a small net profit of Rs 8 lakh on sales of Rs 1.2 crore in the quarter ended June 30, 2007. The company, in fact, made a loss of Rs 30 lakh on a turnover of Rs 4.3 crore for the year ended March 31, 2007.

Media Matrix Worldwide (MMW) is another example where the share price has zoomed 155% over the past month to Rs 13.4. While the company has posted some profit in the past quarter and also in 2006-07, there has been no significant development for the share price to drive up. MMW posted a net profit of Rs 33 lakh on sales of Rs 8.1 crore in the past quarter.

The figures stood at Rs 20 lakh and Rs 22 crore, respectively, in 2006-07. The company board is meeting on October 10 to consider raising funds through a preferential allotment or any other route.

The share price of LN Polyesters has risen 113% to Rs 26.3 from Rs 12.3 a month ago. The rally is not backed by sound fundamentals as the company posted a loss of Rs 48 lakh on sales of Rs 6.8 crore for the April-June quarter. In 2006-07, it recorded a sharp fall in net profit at Rs 3 lakh from Rs 1.5 crore in the previous year.

Bulls have fun for 10 days

Bulls returned home triumphant for the 10th session in a row on Monday, with benchmark indices touching new highs. As the quarterly earnings season gets underway in a few days, the burden of expectations will be weighing heavily on companies that have seen a spectacular run-up in their stock prices. Market observers feel that current valuations are already factoring in the best possible performance.

In a volatile session, the Sensex slumped to an intra-day low of 17,144.58 and then went on to hit a record of 17,425.34. It finally closed at 17,328.62, a gain of 37.52 points. The 50-share Nifty hit a new peak of 5089.30 before closing at 5,068.95, up 47.60 points.

“Though the advance tax numbers are good, the market has already discounted them. We are advising our clients to remain invested, however, buying should be avoided at these levels,” says Arihant Capital Markets head-institutional business Anita Gandhi. She said European funds were heavy buyers in index stocks.

Dealers attributed the intra-day volatility mainly to fresh rumblings on the political front, which seem to indicate that a mid-term poll may not be too far off. While domestic funds continue to adopt a cautious stance and book profits at every opportunity, foreign funds remained aggressive buyers.

As per provisional data, overseas investors net bought Rs 1,721 crore worth of shares, while local mutual funds net sold Rs 930 crore worth of shares. While talk of expensive valuations are getting louder, some players feel it is inevitable given the strong liquidity in the system.

In its latest India strategy note, brokerage house Lehman Brothers has said: ”The declining global interest rate environment coupled with strong flows could mean that the market remains expensive. We believe that the important trends are slower global growth, a strengthening rupee, correction in interest rates on the downside and political uncertainty in the run-up to the elections.

We think capex spending by corporates and spending on infrastructure are likely to remain strong, at least for the next 2-3 years.” The immediate trigger for the market will be the third-quarter performance by key companies.

“Any upside from these levels will be contingent on the companies outperforming market expectations by a wide margin,” Sharekhan senior VP and head of research Sandeep Nanda said. He is expecting an average growth of 20% in companies that are part of the Sensex. He is of the view that sustained foreign fund flows and a cut in interest rates could deflect the attention from corporate performance in case they are below expectations.

India Market

India Market

Market to witness volatility

Investors on Dalal Street may see volatility in the week ahead and will wait for cues from the US markets, which might get a booster doze in the form of interest rate cut from the Federal Reserve, analysts said.

The benchmark BSE Sensex lost 168 points in the past week at 15,590.42 points on Friday. Meanwhile, US benchmark index Dow Jones Industrial Average (DJIA) fell nearly 250 points to end at 13,113.38 points, while Nasdaq-100 also closed down 49 points at 2,565.70 points.

The US markets had declined after the jobs data came in far worse than expected, threating to throw the economy into a recession. American employers dismissed 4,000 workers last month, marking a sharp change of direction from the 68,000 jobs that had been created in July.

In a research note, global financial services major Citigroup expects US Federal Reserve to lower interest rates by 75 basis points before the end of the year, with the first cut coming on or even before the scheduled meeting of Federal Open Market Committee on September 18.

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"Our global strategists have concluded that Fed cuts should be supportive for equities performance, with non-US markets outperforming... Instances of Fed rate cuts have been meaningfully positive for Indian equities as well, especially on 12-24 month time horizons," Citigroup analyst Ratnesh Kumar said in the India Equity Strategy report.

Even in an extremely pessimistic scenario of a recession in the US, massive rupee appreciation and sharp slowdown in domestic growth, Citigroup does not see an earning collapse in India, "due to strong and broad-based growth momentum in the Indian economy".

Besides, Foreign Institutional Investors again embarked on a buying spree in the equities market in September after a month of net sale in August. In the first week of September, FIIs purchased equities worth Rs 2,869 crore and Rs 752 crore in the debt markets.

"The trend taken by the FIIs in the coming week could be crucial for the direction market takes," an analyst said.

Domestic mutual funds were also net buyers worth Rs 353.80 crore in equity market during four trading sessions from September 3 to September 6.

The markets would also be watching the outcome of the negotiations between the UPA government and its Left allies on the Indo-US nuclear deal.

Market Update

US markets were POSITIVE & Asian markets are trading MIXED.
Levels for NIFTY - support at 4500-4480-4460 & resistance at 4540-4565-4585.

Bias for markets is Positive for the day… possible support at 4500 & resistance at 4538.

Stocks with +ve bias: IDFC , India Cement, Steel Stocks (TISCO & Sail), Wipro & IT stocks

Stocks for Short-term delivery: TTML, NIIT Tech

Stocks for Investments: Bajaj Auto, JP Associates

Reliance Energy, ONGC, Technicals, Market Update

Reliance Energy, ONGC, Technicals, Market Update

Market Update

Market Update

Political Stability key to rally

Political instability saw the market turn nervous this week with the CPM raising hackles over the Indo-US nuclear deal.

The issue grew menacing with the CPM threatening to pull out of the UPA government and the Congress standing firm.

When all seemed lost and mid-term polls seemed almost certain, with the opposition BJP also readying itself, the CPM took a step back by saying that there was no intention of destabilising the present government.

The last day of the week saw Bombay Stock Exchange's Sensex finish 260 points or 1.84 per cent higher at 14,424.87. The 30-share index swayed 810 points during the week from 13870 to 14680.

National Stock Exchange's Nifty closed 75 points or 1.83 per cent higher at 4190.15. The 50-share benchmark swung 222 points during the week from 4040 to 4262.

Week over week, the Sensex gained 217 points and Nifty 82 points.

The rebound Friday, though due to short covering, has raised expectations of a move higher. “The market is looking exciting and volatility seems to have subsided,” said Sumeet Rohra, technical analyst, Tricolor India.

Drawing comparisons, he said Asian markets have recovered 10-18 per cent from lows whereas the Indian market just 2 per cent.

“If nothing deteriorates on the political front, our market will rally next week. Once we manage to cross 4262 on the Nifty, we will enter a strong bull run.”

Inflation for the week ended Aug 11 inched up to 4.10 per cent from 4.05 per cent in the earlier week. Analysts had expected the number to remain unchanged.

The scene on the global front was peaceful for the first four days of the week after the US Federal Reserve cut its discount rate to infuse liquidity into its system.

However, with Countrywide Financial Corp, the biggest US mortgage company, warning that the housing downturn could create a recession sent panic signals to investors.

Asian stocks too fell for the first time in five days Friday after Bank of China said it had almost $9.7 billion invested in US sub prime loans.

“Two major issues surrounding the Indian market are the sub-prime woes and political uncertainty. Though things look settled a bit, we are still not out of the woods. It will be a trading market next week in the range of 14000-14700 levels,” said Manish Sonthalia, vice president-equity strategy, Motilal Oswal Financial Securities.

It needs to be seen whether the Indian market will be able to sidestep these uncertainties. The outlook for next week is that of guarded

F&O expiry to keep market volatile

The market is expected to remain volatile ahead of the derivative contracts expiry for the August 2007 series on Thursday, 30 August 2007

Market nudged higher for the week ended Friday, 24 August 2007, tracking recovery in Asian markets on speculation that the US Federal Reserve will cut benchmark rates sooner rather than later. Also the Bank of Japan (BOJ) decision to keep interest rates unchanged at 0.50% boosted the market further

The market ended its four week losing streak to post gains for the week ended Friday, 24 August 2007. The 30-share BSE Sensex rose 283.35 points or 2% to settle at 14,424.87. The S&P CNX Nifty rose 82.10 points or 1.99% to settle at 4,190.15 in the week.

But the domestic bourses underperformed its Asian peers due to fluid political situation in New Delhi, with prospects of mid-term polls looming large. World stock markets had fallen sharply in recent weeks as problems in the risky US subprime mortgage sector spread to other markets.

Also FIIs, who were the key drivers of the recent rally have resorted to selling. As per the latest data they sold shares worth Rs 8,895.80 crore in the month of August, till 23 August 2007. FII inflow in the month of July 2007, totaled Rs 23,872.40 crore.

Inflation has been under control. India's wholesale price index rose 4.10% in the 12 months to 11 August 2007, slightly up from the previous week's 4.05%, due to higher food and manufactured product prices, government data showed on Friday, 24 August 2007.

Market to remain sideways

The Sensex took just 17 working days to test an intra-day low of 13779.88 points on August 17, 2007 from around 15868 points. The weakness in the world markets started on July 13, 2007, but remained sideways till July 23, and the markets came off their highs the next day. The global weakness was expected because of overbought situations, but what was not expected was the high intensity which we had seen in the past two weeks.

Indices like Dow and Sensex even fell below its 200 daily-moving averages and fortunately closed above on Friday, giving investors signs of consolidation. Technical analysts are giving high priority to 200-day moving averages of stocks and indices. Once stocks or indices fall and trade below their 200 DMA, they may remain weak, and higher levels of selling can be expected.

At present, the Sensex and Nifty are trading in oversold territories, which is helpful for the markets to recover from their lows. The weekly Relative Strength Index (RSI) of major indices, including Dow, Hang Seng, Nikkei, CAC 40, and Nasdaq is in the oversold territory, which may further help the markets recover in the short run.

On the other hand, monthly Indices’ Charts are still showing weakness. There is an indication that after consolidation, a weak or more of selling can be expected. This is further supported by the weekly moving averages of the world’s indices. Monthly indicators are suggesting sideways movement for one more month.

For the Sensex and Nifty, 13971 points and 4062 points are the 200 DMA levels, respectively. As long as the Indian markets are above their respective indices, we may see renewed buying interest, and the Sensex may move towards 14864 points and Nifty towards 4358 points, respectively.

But one has to keep in mind that monthly indicators can once again destroy market equilibrium at any point of time. Apart from the monthly indicators, some of the heavyweights are also trading below their key supports, and it is always a threat to the upward journey.

Majority of the index stocks are oversold, but some sectors are technically weak. Automobiles, pharma and oil are some of these sectors. On Monday and Tuesday, we may see a recovery, but counters like Tata motors, Mahindra and Mahindra, Cipla, Dr Reddy’s, BPCL, HPCL and IOC may attract major selloff.

ACC, Grasim, Gujarat Ambuja are heavily-oversold and recovery is expected, but the selloff again can bring these stocks down to further lows because these counters are absolutely weak. On the buying side, one expects upward movements in reality stocks like DLF, Unitech and GMR. Reliance Communication, Reliance Energy, IFCI and IDBI may witness sustained buying interest.

Recovery on the way...

Having lost close to USD 100 bn in last 15 sessions on sub prime mortgage concerns, Dalal Street may hope for happier times ahead with improving global cues after US Federal Reserve cut the rate at which it lends to banks, even as some feel more steps were needed to tackle the crisis.

Indian bourses lost close to Rs 4,00,000 crore -- nearly 10 per cent in overall market capitalisation -- in just a fortnight of trading since July 27 after the credit crunch in the us economy spread across the globe.

While the Fed's decision to cut the primary credit rate by 50 basis points to 5.75 per cent came as a reprieve for us and European markets on Friday, domestic bourses, which were declared closed before the rate-cut was announced, will react only tomorrow.

Multiple crashes since July 27 have wiped off nearly all gains made by BSE in the past six months, while taking the benchmark Sensex back to January-February level. Analysts at global brokerage giant Merrill Lynch said the rate cut would not necessarily bring a sustained stability in the markets.

"Prior two asset and credit bubbles that unwound from 1990-92 and again from 2001-03 show that Fed cut interest rates 100 basis points, the central bank believed that it acted in time to prevent a recession or bear market," Merrill Lynch's North American Economist David A Rosenberg wrote in a research note after Friday's rate cut.

"But, recessions did follow the initial Fed rate cuts back then, and so did a cyclical bear market in equities. Not even the Fed could stand in the way of nature taking its course and expunging the bad credits out of the system," Rosenberg said.

Time for bottom fishing...

Is it safe to invest money in equities? — would seem to be the all-important question at the moment. Though benchmark indices have shed about 950 points over the past month, the prevailing market sentiment is that there is no need to reduce risk over the long term.

A quick sectoral analysis over the past one month shows that sectors like capital goods, FMCG and shipping have managed to stay put where others have failed to stand their ground. Sectors like consumer durables and textile (ET index) have even managed to gain 1.95% and 2.57%, respectively, during the said period. Key stocks in these sectors have managed to log returns in the range 6% and 85% over the past one month.

Sectors like sugar (down 16%), oil & gas and NBFC (both down 9%), logistics, capital goods and construction (all down 10%) have been the worst-hit sectors over the past one month. So, do investors need to run for cover during a broad market fall? A cautious approach to investing would be to invest in ‘healthy’ sectors, which have the strength to bounce back once the market recovers from the corrective trend, said experts.

Sectors like banking, realty, consumer goods and IT continue to remain favourites with market participants. Though most broking houses have sounded an alert to clients, their advice is to indulge in ‘bottom-fishing’ for bluechips while the market is on a downtrend. Should investors need the protection of slow-moving defensive sectors in current market conditions?

Fundamentally, defensive slow-moving sectors are a group of stocks that continue to perform irrespective of where the economy is heading. Traditionally, sectors like pharma, FMCG and utilities have been spot-on defensive sectors. “From the trend evident over the past one month, sectors like capital goods, textiles, consumer durables and shipping have been doing moderately well,” said Religare Securities head-institutional business Sangeeta Purushottam.

“Current market conditions make it difficult to spot defensive sectors using historical data. Investors should forget the idea of investing in slow-moving sectors; they should continue to invest in sectors that have a growth horizon of 2-3 years,” Ms Purushottam added.

Given the fact that there are many ongoing infrastructure projects in the country, capital goods sector is expected to do well over the next four years. As regards the textiles sector, many manufacturing companies are moving towards expansion and modernisation. The import-dependent consumer durables industry would do really well if the rupee gains strength, analysts said. Performance of FMCG and shipping stocks are cyclical in nature. FMCG has not done well over the past one year. Investments in shipping should give moderate returns as there has been a sudden spurt in cargo activity.

Domestic mutual funds buy!

FIIs' India sales offset; sub-prime fears continue to hit markets abroad.

Domestic institutions such as insurance companies and mutual funds are playing the role of market saviours at a time when foreign institutional investors (FIIs) are selling heavily.

Secondary market operations data (for the Bombay Stock Exchange and the National Stock Exchange combined) show net sales by FIIs since July 26, when the markets started falling, stood at Rs 7,733.82 crore.

Domestic institutions, on the other hand, bought shares worth Rs 4,542.95 crore, which means they absorbed 60 per cent of FII sales.

In the last three months, domestic institutions have been placing big orders in the secondary market while FIIs continued to sell to cover for losses as a result of exposures in the US sub-prime mortgage market. It was only in July that FIIs bought around Rs 10,000 crore worth of stocks before starting to offload from July 27

n June this year, domestic institutional purchases were the highest this financial year at Rs 4,560 crore. But they neared that figure in just 13 trading sessions since July 26.

“In recent times, domestic institutions have been absorbing FII sales,” said Deven Choksey, MD, KRC Shares and Securities.

The head for institutional selling with a large domestic brokerage house reckons that Life Insurance Corporation (LIC) alone must have bought shares worth Rs 2,000 crore in the last three weeks and domestic mutual funds, over Rs 1,000 crore.

The rest was bought by other insurance companies and banks. Market sources said insurance companies were making big purchases for unit linked insurance policy equity schemes as well.

“We are buying from the markets but cannot divulge how much we bought,” said an LIC executive. A dealer with a fund house said domestic companies were buying fundamentally good shares at reasonable prices in a falling market.

Choksey believes “the short-term hot money” will go out of the market. The participatory notes crowd exit and that will cause the Indian market to suffer.

“We enjoyed the ride for the past four years, now we will feel a bit of pain. In the medium term, however, India will benefit and more stable money will come in.”

While FIIs may continue to sell, domestic mutual funds are sitting on a huge amount of cash. They had collected Rs 9,000-10,000 crore in the last two months, an investment banker said.