Strategy, Cairn India, Economy

Strategy, Cairn India, Economy

Anand Rathi - Nifty Strategy

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Indiainfoline - STRATEGY INPUTS FOR THE DAY

Can bulls handle the bounce?

“A hard fall means a high bounce... if you're made of the right material.”

The Indian cricket team may be finding it hard to handle the bounce in South Africa. In stark contrast, the bulls on the street so far have been unperturbed by the talk of expensive valuations and possibility of a correction. As we have been reminding you, make sure your stock is made of stuff, which can bounce back in case of any eventuality. Bulls are presently like the Australian team; more like the kangaroos just hopping ahead. The good innings could extend for a while as there is no dearth of FII powered strokes.

There may be some more volatility ahead of Thursday's F&O expiry. We are beginning the expiry week with record Open Interest in the derivative segment. The short-term direction of the market will hinge on whether the bulls rollover F&O contracts into the next month series or decide to play safe. Fresh buying at this juncture is best avoidable though the positive bias will continue as there is not much of bad news on the horizon. One should not get carried away and build up a lot of long positions as December could see some slowdown in foreign capital inflows. As for today, we expect a cautious opening, on the back of mixed global cues.

FIIs have been quite gung-ho in the past few months, especially in November. They pumped in Rs11.79bn in the cash segment on Thursday. This may include inflows towards recent big-ticket IPOs like Parsvnath and Lanco Infratech and some major bulk as well. They have poured in $1.75bn this month so far after investing over $1bn each in the past three months. In Friday's trade, foreign funds were net buyers to the tune of Rs2.99bn (provisional) in the cash segment. In the F&O segment, they were net sellers of Rs3.46bn. Mutual Funds on the other hand have been more cautious. They pulled out Rs2.76bn on Thursday.

GE Shipping shares will re-list on the exchanges today after the demerger of its offshore business. Investors will get 1 share of Great Offshore for every five shares of GE Shipping. Great Offshore will list after a month. The shares are likely to list between Rs225-250.

Shares of Lanco Infratech Ltd. will also get listed today. The issue was oversubscribed 11.88 times. The offer price was fixed at Rs 240 per share.

Hindalco could be under some pressure as it has temporarily halted operations at a copper smelter at Dahej in Gujarat after declining global copper ore supplies reduced processing and refining charges

Sun TV's Board will meet today to consider the proposed merger of Satellite Television Broadcasting Companies with itself. Bharti Airtel will be in focus amid reports that the Bharti Group is likely to announce a partnership with Wal-Mart for its retail venture.

M&M might also attract some attention as it has entered into an agreement to acquire 66% stake in DGP Hinoday Industries Ltd. UTV Software could advance as the company has entered into a term sheet with Astro Multimedia International (BVI) Ltd. for establishing a television channel joint venture business in India, South Asia and South East Asia.

US stocks slipped on Friday in a shortened post-Thanksgiving session, as investors focused on rising oil prices and reports from the nation's retailers about the start of the crucial holiday shopping season.

The Nasdaq was down 5.72 to 2,460.26, after ending Wednesday's session at its highest point since February 2001. The Dow Jones fell 46.78 to 12,280.17, and the broader S&P 500 dropped 5.14 to 1,400.95. The S&P ended last Wednesday's session at a six-year high.

For the week, the Nasdaq gained 0.6%, the Dow lost 0.5% and the S&P was barely changed.

US light crude oil for January delivery rose 26 cents to $59.50 a barrel in after-hours electronic trading in Asia. Treasury bond prices rose, lowering the yield on the 10-year note to 4.55% from 4.56% late on Wednesday. In currency trading, the dollar slipped versus the euro and yen.

European stocks dropped on Friday, ending lower for the third straight session after the dollar reached its lowest level against the euro since April 2005. The pan-European Dow Jones Stoxx 600 index lost 0.8% at 355.98. The German DAX Xetra 30 dropped 1% to 6,411.96, the French CAC 40 shed 0.7% to 5,389.46 and the UK's FTSE 100 slipped 0.3% to 6,122.10.

Asian stocks were mixed Monday morning. The Nikkei was up 69 points at 15,803 while the Hang Seng was down 51 points at 19,209.

Taiwan's Taiex gained for a 10th day, heading for its highest in more than six years. Singapore's Straits Times climbed as much as 0.9% to a record. Markets rose around the region, except in China, New Zealand and the Philippines. South Korea's Kospi and the Hang Seng in Hong Kong swung between gains and losses.

The Morgan Stanley Capital International Asia-Pacific Index added 0.4% to 133.06 as of 11:35 a.m. in Tokyo.

In the emerging markets, the Bovespa in Brazil lost 0.7% to 41,757 while the IPC index in Mexico gained 0.25% to 24,792 and the RTS index in Russia put on 0.6% to 1722.

Major Bulk Deals:
UBS has bought Bank of Baroda and sold JHS Svenguard; Prudential ICICI MF has picked up Prithvi Info; ABN Amro and Merrill Lynch have sold Rohit Ferro; T. Rowe Price has sold SREI Infrastructure; Templeton MF has bought TVS Motor.

Insider Trades:
Rajshree Sugars & Chemicals Ltd: Raja M J Abdeen, Director has purchased from open market 300000 equity shares of Rajshree Sugars & Chemicals Ltd on 24th November 2006.

IL&FS Investsmart Limited: Vibhav Kapoor, Director has sold in open market 69000 equity shares of IL&FS Investsmart Limited on 22November & 23 November 2006.

Market Volumes:
The turnover on NSE was down by 7.7% to Rs81.95bn. BSE Metal index was the major gainer and gained 1.36%. BSE PSU index (up 1.40%), BSE Consumer Durable index (up 0.86%) and BSE Pharma index (up 0.65%) were the other major gainers. However BSE Capital Good index lost 1.31%.

Volume Toppers:
SAIL, NTPC, DCB, Siemens, IVRCL Infrastructure, Yes Bank, Hindustan Construction, Zee Telefilms, Tata Steel, India Cements, HLL, Ashok Leyland, ITC, MTNL, Dabur, Hanung Toys, Sterling Biotech.

Delivery Delight:
Aftek Infosys, Arvind Mills, BEML, BRFL, Cipla, Dabur India, Dr Reddys Laboratories, Era Constructions, Gammon, Gujarat Heavy Chemicals Ltd, Hero Honda, HLL, HDFC, India Infoline, Indiabulls, IPCL, Jyoti Structures, ONGC, Pidilite Industries, PNB, Titan Industries and Zee Telefilms.

Brokers Recommendations:
Infosys – Outperform from CLSA

Long Term Investment:
Hanung Toys

Major News Headlines:

Essar Oil to spend $2.4bn to build new refinery
Usha Martin acquires Agra based company
Hindustan Zinc denies Congo mines acquisition news
Jupiter Bioscience to raise funds up to Rs950mn
Subex Azure wins contract from Middle East company
Ranbaxy to increase sales by increasing business, acquisitions
Emco gets order worth Rs380mn from Power Grid Corp
HDFC Bank gets RBI approval to open new branches

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Discipline while Investing is the Key to Success

The bull run before the market meltdown during the Q1FY07 was the longest and most sustained rally in the history of Indian equity market. The market seems to have come a full circle and the bulls have brushed-off the beers once again and emerged victorious. To everyone's delight it has taken just three months for the markets to regain the level of highs of 12500 from the low of 9000 in the month of June. The benchmark BSE Sensex and S&P Nifty are now nearing their record levels. Does this imply that stocks are again too expensive?

Although the emerging markets have witnessed a lot of volatility, it has been repeatedly said that India growth story is still growing strong and has the potential to sustain the momentum of the current pull back. The Indian economy is experiencing a paradigm shift, as it is moving away from being an agricultural driven economy to an IT-driven, service economy and such rapid economic growth has boosted the prospects of Indian corporate sector and consequently improved the confidence of global and domestic investors. With the Indian economy looking good in long term and GDP growth rate projected at 8% plus, markets have recognized the potential growth by escalating the stock prices.

Though some feel that the valuation are justified in view of the long-term opportunities that India offers, rest are cautious in their stance. This raises the obvious question, would the current rally be sustainable when considerable amount of buying from the institutional side has already pulled the market up quickly to all time high levels again.

Investors are already wary of their experiences in May and June, when the markets tanked. Unexpected gains could disappear just as quickly as they appear unless there is a workable strategy to help their money grow. There are some dos and don't of investing which if followed religiously could do wonders. Investing is not tricky; it is a simple process that requires planning.

* Instead of looking at the levels of the markets, investors should look to book profits whenever the portfolio has achieved the targeted appreciation levels, or when the investment objectives have been met and not be too greedy and adopt a disciplined approach towards investing.

* There are many investors who often lose sight of their long-term financial objectives in order to fulfill their short-term needs. While at times it may become absolutely necessary to do so, investors need to remain focused on longer-term goals. This can be made possible by analyzing various options rather than rushing to look for easier ways to make money.

* The key for successful investing is of "getting in" & "moving out" at the right time, which is easier said than done. The smart investor is one who enters the market at its bottom or at average levels and leaves the market when it gives the first sign of sinking, and since it is not possible for a common investor to correctly time the market; it is advisable to invest regularly in small amounts irrespective of the market movement.

*The effect of "moving in" at a wrong time i.e. at market peak can be negated to some extent if portfolio is built with longer-term perspective. This is because the market cycles will take care of the intermediate volatility. While portfolio rebalancing and booking profits periodically would negate the effect of moving out at wrong time.

Though markets are on a cyclical high but still there are sizeable opportunities in the market even at current level. What's required now is the focus not on speculative stocks but on those that offer real potential. Studies after studies have shown that equity provide superior returns in longer term. Ride through the market's swings and stay invested and do not forget to book the profits whenever investment objectives are met. If investments are actually guided by the strong fundamentals then certainly it won't pester the rational investors whether the market goes up or down.