Weekly Close: Party continues.. !

Huge activity were seen during F&O expiry weak...Mid caps were also active.

Its clearly a party on the markets and there was activity in the mid caps as well. There was huge activity given that it was the FNO expiry. Markets were volatile after falling a big way on Tuesday on Global cues. But it was global cues which helped really. Japan had a booming economy against expectations that it was slipping. US economic data was mixed but the earlier GDP growth data was revised upwards and that had the US stocks rallying. The US housing prices and demand seems to be slipping. The worry also was the US Dollar which hit a 14 year low against the pound and was again created records in terms of weakness against the yen.

Leading the charge this week for the Sensex which closed up 1.12% was State bank. The Banking regulation act is to be presented and that had the interest flowing in. There was news of the petrol and Diesel price cut which fueled the Cement stocks and ACC and Ambuja were the Sensex gainers really. Maharashtra had more benefits with Sales tax being cut on diesel and also the surcharge being removed. We believe that reduction in taxes is positive but this cut in fuel prices is only robbing Peter to pay Pan with no real benefits. The Auto stocks fired up at the end of the week helped by strong sales numbers for November which were announced. Metal stocks were typically weak and also weak were the refinery stocks who will be really hit badly because of this fuel price cut. The software stocks were strong this week though they recovered from the initial lows not to end up gaining much. The dollar is weak and rupee was strong at Rs 44.5 against the dollar. However these software companies are resorting to innovative ways of increasing productivity. HCL T has increased the working hours. TCS has cut the number of holidays. Thats some way of beating the need for higher manpower in a crunch environment.

The leaders in the Nifty this week were, State Bank + 10%, ABB + 4%. ACC + 5%. Bajaj Auto + 4%. Gujarat Ambuja + 4%, Hero Honda + 7%, ITC +5%, Maruti + 4%, Rel com + 5%. Sun Pharma + 6%, Tata Power + 4%,

The losers this week were Bharat Petroleum -9%, HPCL -8%., Cipla -4%, Hindalco - 7%, Jet -4%. Sail -4%, Tisco -3%

India GDP galloping with agriculture a lagard; Honda Siel, Tyres, RSystems were some action stocks this week.!

The Indian economy grew by 9.2% in the July-September quarter (Q2) and 9.1% for the first half of the current fiscal. This is the highest such growth rate registered by the economy since the CSO started compiling quarterly GDP data 1996-97 onwards. The share of agriculture, forestry and fishing in the economy has come down to 17.2% in the first half, less than half the share of the primary sector in 1990-91, agriculture has grown by only a meagre 1.7%. Manufacturing registered a growth of 11.9% in the second quarter as against 8.1% in the corresponding period last year. The sector contributes to 16% of the GDP. The services sector, which now accounts for aboutt 66% of India's GDP, saw growth of 10.9% from a year earlier, accelerating from annual growth of 10.6% in the previous period. Within services, Trade, hotels and transport services expanded 13.9 percent, while financial services business grew 9.5 percent. Construction at 9.8% and financing, and real estate at 9.2 % and 9.5% were the drivers.

RBI statistics released upto 10th November indicate that credit growth is placed at 28.4% YoY. There has been a slowdown in % YoY terms largely on the back of a high base effect. Total deposit growth uptill the same period has increased to 20.7% YoY from 19.8% YoY on 27th Oct, 06. We seem to be headed towards a crunch period.

Mr Chidambaram said inflation was the only worrying factor in the overall macro-economic story and that we agree with. We believe that India's central bank will hike interest rates by at least 25 basis points in December or January. To add to the above.. Lower agriculture growth is a negative sign for the FMCG companies dependent on higher rural offtake.

We had a wow call on Honda Siel and that delivered wonders. The company is into engines gensets and pumpsets. The stock delivered a fantastic 15% gains and more expected in due course. The company has introduced LPG run products in the 1.5 KVA segment and that is a big positive. Going ahead they are trying to get the 5 KVA genset and that really will be the killer. We have a research note here do read

We had a Quickies call on R Systems which delivered a super 15% returns in a matter of days. The company is into offshore product development. It had fallen out of interest and with interest in offshore product development expected to increase the stock delivered. The stock remains inexpensive at around 14 times FY 08 even at current levels.

We had a research note on Apollo Tyres but the stocks we had calls on were Ceat and Premier Tyres. Both were fantastic super gains in a matter of days. Tyres benefit because of lower rubber prices and also because of lower costs of crude related raw materials. This sector has not performed and we caught it bang on. Do read the research note on Apollo tyres.


Mid caps have started performing and party may go on.. but be careful as always: Performance unbelievable this week too !

The mid caps have started joining the party and more is possible next week. However the worry is from the global markets where the US cues are not too encouraging. A weak dollar is certainly bad for the US markets we believe. However the US GDP growth has been the saviour and hopefully these negatives should pass. However, as investors its best to play safe. Get some cash off the table. Put stoplosses and all fresh entries should be with stoplosses.

Bulls have a blast!

Markets continued to defy gravity this week and moved into higher territory for the fifth week in a row. While the BSE benchmark ‘Sensex’ edged higher by 2%, gains in Nifty were a tad higher at 2.5% for the week ended November 24, 2006.

The week’s proceedings started on a rather dispirited note on Monday, as markets seemed to take a leaf out of the previous week’s close. The Sensex tumbled by as much as 200 points within the first couple of hours. While it continued to stay rangebound throughout the day, it recovered miraculously in the final hour to shed all its losses and close at breakeven levels. However, there were no such worries over the next two days as led by gains in heavyweights, bulls literally went on a rampage and the Sensex edged higher by a mind numbing 275 points. Considering the levels the indices are at, the gain of such a magnitude is indeed staggering. After a mild profit booking on Thursday, indices resumed their northbound journey on Friday and recouped most of the gains it had pared the day before.

As far as the institutional activity on the bourses was concerned, FIIs were net buyers this week to the tune of nearly Rs 31.6 bn. Domestic mutual funds, on the other hand, turned out to be net sellers to the tune of Rs 3.4 bn.

As far as sectoral indices are concerned, this week it was the turn of the BSE IT index to emerge as the frontrunner as it closed higher by 4%, comfortably above the rest of the pack. Sector majors like Wipro and Satyam played pivotal rules in propping up the IT index as they ended higher 8% and 7% respectively for the week. With valuations among other heavyweights looking rather stretched, relatively safer havens like software stocks seem to be once again propping up on the radar of investors.

Among other indices, the midcap and small cap indices gained 2.8% and 2.6% respectively. As large caps are looking rather expensive, investors seem to be moving towards mid cap and small cap stocks in a view to further improve upon their investment results. However, one need to keep in mind that the high returns on these stocks are directly proportional to the higher risks involved. Hence, caution needs to be exercised to that extent.

As per a leading business daily, the dispute between Reliance Industries (RIL) and power generation major NTPC, over the supply of natural gas to the Kawas and Gandhar power projects may be resolved, as the two companies are working out a limited liability formula to cover the eventuality of non-supply of gas or NTPC not buying the gas it contracted for. RIL was to supply 132 trillion British thermal units (BTU) of gas to NTPC's 2,600 MW expansion plans for the Kawas and Gandhar power plants at a price of US$ 2.97 per MMBTU for 17 years. Reliance is proposing a fresh price discovery after every 2 to 3 years, reflecting market trends. The new price of gas would then be US$ 4.3 per MMBTU. However, it needs to be noted that power companies cannot afford to pay energy cost above US$ 4 per MMBTU, which is likely to make the power generation cost uneconomical. NTPC stock emerged as the highest gainer on the Sensex for the week by notching up gains of 8%.

In what could be termed as another landmark event in the Indian stock market history. dotcom major, Info Edge made its debut on the bourses during the week, and what an opening it was! The stock opened with 41% gains over its offer price of Rs 320 and went on to make the opening day's high of Rs 624. It finally closed the week at Rs 583, a rise on nearly 82% over the offer price. As a matter of fact, Info Edge is a leading provider of online recruitment and matrimonial classifieds and related services in India, and owns brands like 'Naukri.com' and Jeevansathi.com'.

Engineering major Siemens earlier this week gained a huge 11% in just one trading day as it won a huge Rs 36 bn order from a Qatar based company. However, the stock closed 1% lower for the week as its FY06 results although buoyant, fell short on expectations, thus sparking a sell off. Consolidated revenues and net profits grew by 64% YoY and 27% YoY respectively. This strong performance was specifically aided by traction in the company's power and telecom divisions. The company board has recommended a dividend of Rs 3.8 per share for the fiscal (dividend yield of 0.3%).

Despite the satisfactory performance of India Inc. and positive news emanating with respect to organic and inorganic growth across sectors, there is no yardstick that seems to justify the current level of valuations. At the current levels, markets have more than factored in the growth prospects of India Inc. from a medium term perspective. Nevertheless, a bottom up approach, longer investment tenure and selective stock picking with cognizance of one’s risk profile will stand investors in good stead. Happy investing!