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Inflation continues to haunt Govt
The pressure is telling on the Government owing to the rising public unrest over the spiraling prices of essential products. As a last ditch attempt to salvage the UPA regime's pro-common man image, Prime Minister Dr. Manmohan Singh on Feb. 22 urged all states to take necessary steps for containing inflation. The Prime Minister advised the State Governments to put in place an appropriate mechanism for regular intensive monitoring of commodity prices in order to take prompt and necessary action to curb price rise. Separately, Finance Minister P. Chidambaram said the rise in the Wholesale Price Inflation (WPI) was temporary and that the rate was likely to fall once a major supply constraint eases with the arrival of the new wheat crop from March. He said the Government had moderated inflation in the past and would take further measures if needed.

"The Government will take all necessary steps to ensure that the poor are not adversely affected by inflation," President APJ Abdul Kalam said in his inaugural address at the budget session of parliament. The President called for more supplies of factory and farm goods to meet demand and curb inflation. The price rise must be contained to reap the benefits of growth, which makes India among the world's two fastest- expanding major economies, Kalam said. Meanwhile, inflation, based on the WPI, declined to 6.63% in the week ended Feb. 10 from 6.73% in the previous week. The WPI was unchanged at 209.2. The Government revised the inflation rate for the week ended Dec. 16 to 5.73% from the preliminary estimate of 5.43%.

The Finance Ministry has taken a slew of measures to lower inflation to less than the government's comfort level of 4%, including cutting import duties on items ranging from cement, metals, chemicals and edible oils to corn. It has also halted the export of wheat until the end of this year. It has also banned the export of milk powder until Sept. 30. On the monetary side, the RBI has raised the repo rate by 150 basis points since October 2004 and the CRR twice since December to drain money from the banking system. Continuing its ongoing campaign against inflation, the Government decided to release 365,000 tons of wheat to states for sale in open markets in February and March to curb prices. The Government may lift the ban of wheat exports as rains improved the prospects for a bigger-than-expected harvest, Agriculture Minister Sharad Pawar told reporters in New Delhi on Feb. 21.

HLL unveils results and a new name

Hindustan Lever Ltd. (HLL) announced its fourth-quarter and full-year results for the period ended December 2006. For Q4 CY06, the company posted a net profit (excluding exceptional items) of Rs4.83bn versus Rs4.39bn in the same quarter last year. Net sales for Q4 CY06 stood at Rs31.56bn compared to Rs29.74bn in the year-ago quarter. Basic and Diluted EPS for the reporting quarter are Rs2.32 versus Rs2.37 in the same quarter of last year. The results for the quarter are not comparable to those of Q4 CY06 due to the merger of Vashisti Detergents Ltd. with the company and the demerger and subsequent disposal of Doom Dooma and TEI plantation divisions.

Exceptional items (net of tax) for the October- December quarter of 2006 comprised: profit arising from disposal of 51% share in a subsidiary (Rs367.4mn); reduction in liability for retirement benefits arising from impact of revised interest rates and lower annuity costs (Rs218.9mn) and restructuring costs in the foods business (Rs308.8mn). Adjusting for the above, PAT is Rs4.82bn ( Rs4.39bn) and net profit is Rs5.1bn (Rs5.21bn). Net sales for Q4 CY06 is Rs31.56bn ( Rs29.74bn) and Profit Before Interest and Tax is Rs5.41bn (Rs4.88bn).

For the year ended December 2006, the company has recorded a net profit of Rs18.55bn as against Rs14.08bn in the year ended December 2005. Net sales for CY06 are Rs124.11bn as against Rs115.66bn in the year ended December 31, 2005. At Rs3.93bn, other income is up from Rs3.13bn in the previous year. Annualised Basic and Diluted EPS for the year stood at Rs8.57 versus Rs6.16 in the year ended December 2005. Adjusting for the exceptional items, PAT is Rs15.37bn (Rs13.61bn) and net profit is Rs18.53bn (Rs14.15bn). Net sales for CY06 is Rs121.03bn (Rs110.42bn) while Profit Before Interest and Tax is Rs17.06bn ( Rs14.8bn).

The Board of Directors has proposed a Final Dividend of Rs3 per share of Re1 each, subject to the approval of shareholders at the AGM. This along with the interim dividend of Rs3 per share amounts to a total dividend of Rs6 per share for 2006. Hindustan Lever Ltd. (HLL) said on Tuesday that its Board of Directors has considered a proposal for the transfer of the marine products business. The Board of Directors of Hindustan Lever Ltd. (HLL) on Tuesday approved the change of the company's name from "Hindustan Lever Ltd" to "Hindustan Unilever Ltd." The proposal for the name change will be taken up at the next Annual General Meeting (AGM) to be held on May 18, for their approval.

Edelweiss - Auto Fact Sheet, Suzlon Energy

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Black Friday at Dalal Street

Ahead of the budget next week, for the fourth straight day in running, the markets slid without support from any major quarter. It was a free fall in most counters on the back of sustained selling pressure.

Sensex nosedived below 13,600 and Nifty slipped to 3950 mark in intra-day trade. All the BSE sector indices closed in the red. Cement, pharma and banking stocks were the worst hit.

Most market analysts attributed this fall to pre-budget jitters, inflation concerns, stretched valuations, rising interest rates and profit booking across the bourses and equities. UPA Government’s assurance that more steps would be taken to tackle inflation and price rise had no positive impact on the markets.

President’s address to both houses of parliament has hinted at Finance Minister P.Chidambaram announcing these measures in the union budget later next week.

Sensex finally closed 388.78 points below at 13,632.53. It had opened firm, at 14,071.27 but began its southward journey immediately thereafter. The benchmark index kept on touching one low after another, 13, 568.08 being the last one.

The S&P CNX Nifty lost 101.05 points to 3,938.95. The total turnover on BSE amounted to Rs 4039 crore.

The market-breadth, which reflects the overall health of the broader market, was very weak. There were 5.4 losers for every gainer on BSE. A host of stocks from the small-cap and mid-cap space were being heavily sold. Against 2,207 shares declining on BSE, just 411 advanced. Only 36 scrips remained unchanged.

Among the 30-Sensex pack, only 1 advanced while the rest declined. In NSE, there were 102 advances and 944 declines.

Among the sectoral indices, banking stocks plunged 3.42 per cent, FMCG stocks plunged 3.35 per cent, telecom stocks fell 3.22 per cent and pharma stocks were down 2.65 per cent.

The major market movers on NSE were Gail which gained 1.80 per cent to Rs 277; Tata Steel rose 0.95 per cent to Rs 459, Suzlon Energy advanced 0.75 per cent to Rs 1,048, Reliance rose 0.53 per cent to Rs 1,419.50 and GSK Pharma rose 0.53 per cent to Rs 1,165.

The major NSE losers were Oriental Bank which declined 7.10 per cent to Rs 199; Jet Airways fell 6.38 per cent to Rs 639; Bharti Airtel was down 6.34 per cent to Rs 750; Grasim fell 5.99 per cent to Rs 2,276 and ITC fell 4.96 per cent to Rs 165.80.

Atlanta Ltd plunged 10 per cent to Rs 972.70 after Sebi barred the founders and some other investors from trading in shares of the company on charges of unfair trade practices.

Bombay Rayon Fashions Ltd fell 5 per cent to Rs 192.50 after its board approved acquiring 70 per cent stake in UK-based DPJ Clothing Ltd for 1.54 million pound sterling.

Sterlite Optical Technologies declined 6.1 per cent to Rs 177.90 after receiving contracts for INR 1.5 billion from Power Grid Corporation of India.

Power Finance Corporation moved higher and was trading at Rs 113.10 on BSE, a premium over the IPO price of Rs 85. The stock debuted at Rs 104; hit a low of Rs 103.50, and a high of Rs 117. Volumes in the stock were huge, at 2.67 crore shares.

The wholesale price index rose 6.63 per cent in the 12 months to 10 February, lower than the previous week's annual increase of 6.73 per cent due to a fall in some food and textile prices, data showed on Friday (23 February).

As per provisional data, FIIs were net sellers to the tune of Rs 435 crore on Thursday (22 February 2007), the day when the Sensex lost 167 points. FIIs were net sellers to the tune of Rs 348 crore in index-based futures on the same day. They were net sellers to the tune of Rs 104 crore in individual stock futures. Nifty March futures settled at 4066.65 on Thursday, a premium of 26.65 points over the spot Nifty closing of 4,040.

Revised market lots in NSE's derivatives segment become applicable today. The lot size of the Nifty contract has been cut to 50 from 100. This may boost volumes in the derivatives segment.

US blue-chip stocks declined on Thursday, as a jump in oil prices added to worries about inflation, but a rally in chipmakers' stocks helped the Nasdaq advance late in the session to end at a six-year high.

The Dow Jones industrial average fell 52.39 points or 0.41 per cent, to end at 12,686.02, with only eight of the 30 stocks in the Dow finishing higher. The Standard & Poor's 500 Index dipped 1.25 points or 0.09 per cent, to finish at 1,456.38. The Nasdaq Composite Index rose 6.52 points or 0.26 per cent, to 2,524.94, its highest close since 15 February 2001. Earlier, the Nasdaq hit a six-year intraday high at 2, 531.42.

US crude shed 9 cents to 60.86 a barrel after jumping 88 cents overnight to its highest level since 2 January 2007.

Market battered

The correction continued for the fourth consecutive session on inflation worries and rising interest rates. The dwindling foreign fund inflows into the domestic markets in the past few sessions also adversely affected the sentiment. After shedding around 200 points by mid-morning, the market remained in negative territory but came close to erasing its losses in the afternoon. However, the mood turned extremely bearish as widespread selling in banking, technology, fast moving consumer goods and auto stocks dragged the index below the 13600 mark to an intra-day low of 13568. The Sensex finally managed to pare some of its losses and close at 13633, down 389 points. The broad-based Nifty closed at 3939, down 101 points or 2.50%.

The breadth of the market was extremely negative with the losers outpacing the gainers in the ratio of nearly 5:1 on the BSE. Of the 2,653 stocks traded on the BSE, 2,211 stocks declined, 404 stocks advanced and 38 stocks remained unchanged. All the sectoral indices on the BSE were hammered. The BSE Bankex was the worst hit and tanked 3.42% at 6760 followed by the BSE FMCG index (down 3.35% at 1786), the BSE Teck index (down 3.22% at 3704) and the BSE HC index (down 2.65% at 3611).

Barring Tata Steel, the rest of the Sensex stocks bore the brunt of heavy selling. Grasim led the slump and crashed 5.99% at Rs2,271. Among the other major laggards Bharti Airtel tumbled 5.72% at Rs756, ACC dropped 4.97% at Rs916, Wipro slumped 4.63% at Rs623, ITC fell 4.57% at Rs166, ICICI Bank declined 4.28% at Rs908, Dr Reddy's lost 4.08% at Rs682 and Reliance Communications shed 4.04% at Rs432. The other major front-line stocks shed 2-3% each. However, Tata Steel rose marginally at Rs459.

Banking stocks lost significantly on relentless selling. Oriental Bank of Commerce dropped 6.59% at Rs200, UTI Bank shed 5.33% at Rs491, Bank of India tumbled 4.97% at Rs158 and HDFC Bank declined 3.15% at Rs957. Punjab National Bank, Union Bank, Kotak Bank and Federal Bank shed 2% each.

Value-wise Power Finance Corporation registered a turnover of Rs450 crore on the BSE followed by Reliance Industries (Rs180 crore) and Tata Steel (Rs114 crore).

Budget fears knock Indian shares down 2.8 pct

Indian shares dropped 2.77 percent on Friday, a fourth straight fall that saw the main index slice through key support levels as investors sold on concerns about inflation and fears of nasty surprises in next week's budget.

Selling was broad-based, with ICICI Bank, telecom Bharti Airtel, software exporter Infosys Technologies Ltd. and tobacco maker ITC leading the losses.

The main 30-issue BSE index closed 388.78 points lower at 13,632.53 points, falling through support at 14,000 and the Feb. 14 low of 13,805.36 on its way to its lowest close since Jan. 11. It lost 5.04 percent on the week.

"There is a complete lack of conviction in the market before the budget," Sejal Doshi, chief executive of Finquest Securities, said.

The Union budget will be released on Wednesday.

Twenty-nine of the index's 30 stocks fell. The index ended 7.4 percent below a record high of 14,723.88 hit on Feb. 9.

"There were some rumours in the ring that the budget may have some negative news for some of the industrial sectors. That came as a dampner," said Avinash Gorakshakar, head of research at Emkay Share & Stock Brokers Ltd.

"Inflation is also one of the biggest concerns now."

Data showed inflation for the 12 months to Feb. 10 running at 6.63 percent, only slightly lower than the previous week's rate of 6.73 percent, which was the highest in more than two years.

Bank stocks were big losers on fears inflation could see the Reserve Bank of India (RBI) extend its run of policy tightening measures.

Top lender State Bank of India fell 2.0 percent to a 4-month closing low and leading private bank ICICI Bank dropped 4.3 percent.

Cement maker ACC Ltd. fell 5.0 percent and Gujarat Ambuja Cement Ltd. ended down 3.1 percent on concerns of changes in excise duty in the budget, traders said.

Infosys fell 2.2 percent, the fourth straight fall for the index's second-most heavily weighted stock, while ITC dropped 4.6 percent on fears of an increase in duty on cigarettes.

Technical analysts said the outlook was bearish because the BSE index had fallen below last week's low and also pierced a key trend-line support.

"The crucial level of 13,800 has been broken. It is very clearly bearish. I expect it to touch 13,250-13,350 and then some buying should emerge," said Sandeep Wagle, chief technical analyst at Angel Broking.

"The momentum is very clearly visible that 13,300 is very likely, so why buy before that? And if 13,250 is broken then 12,800 is very likely."

The mood was strongly negative in the broader market, where 2,209 losers easily defeated 385 gainers on volume of 238 million shares.

The 50-issue NSE index fell 2.50 percent at 3,938.95, it lowest close since Jan 10.

Elsewhere in the region, the Colombo All-Share index fell 0.10 percent to 2,986.74 points, while the Karachi 100 index gained 0.56 percent to 11,607.84.

Sensex cascades 389 points

The BSE Sensex, which had slipped below the psychological 14,000 level in the opening session, fell like nine pins as selling continued unabated throughout the session.

The 30-shares BSE Sensex plunged 388.78 points (2.77%), to settle at 13,659.53. It had opened firm, at 14,071.27, but began declining immediately after. The benchmark index kept on touching one low after another, 13,568.08 being the last one.

The S&P CNX Nifty lost 101.10 points (2.50%), to 3,938.90.

The benchmark Sensex had sharply fallen close to 167 points on Thursday (22 February), in the last 45 minutes of trade, due to heavy unwinding of derivative contracts on account of their expiry. The February series, which expired on Thursday (22 February), was interestingly the first monthly series, since the devastating May plunge, when the Nifty settled in the red.

Market men are unwinding their long positions, choosing to watch from the sidelines, cautious ahead of the Union Budget for 2007-08.

The total turnover on BSE amounted to Rs 4039 crore.

The market-breadth, which reflects the overall health of the broader market, was very weak. There were 5.4 losers for every gainer on BSE. A host of stocks from the smallcap and midcap space were being heavily sold. Against 2,207 shares declining on BSE, just 411 advanced. Only 36 scrips remained unchanged.

Among the 30-Sensex pack, 28 declined while only 2 had advanced.

Telecom services provider Bharti Airtel was the top loser, down 6.48% to Rs 749.95, on a volume of 4.59 lakh shares.

Private sector ICICI Bank slumped 4.45% to Rs 906.25, on a volume of 3.46 lakh shares. The scrip had also slipped to a low of Rs 899.15. A surprise hike in CRR announced recently continues to weigh on the stock.

Grasim (down 6.05% to Rs 2270), ITC (down 5.10% to Rs 165.15) and Reliance Communications (down 4.78% to Rs 429) were the other prominent losers.

Maruti Udyog (MUL) was down 1.50% to Rs 866. Moving ahead with its plan to exit the car maker, the Central Government on Thursday invited expressions of interest (EoIs) from public sector financial institutions, banks and mutual funds for selling its remaining 10.27% stake in the company.

The process is likely to fetch the government at least Rs 2,600 crore, based on Thursday's closing of Rs 880 on the BSE. The government had said last year it will completely exit MUL, in which Japan's Suzuki owns a controlling 54.2% stake, by selling its residual 2.96 crore shares (Rs 5 face value). The money raised from the sale will go to the government, and not the National Investment Fund (NIF), as MUL is no longer a public sector.

Private sector Tata Steel was a top gainer, up 0.39% to Rs 457.90, on a volume of 24.71 lakh shares. The stock had struck a high of Rs 466.85, and was looking strong throughout the day. Reports say that Corus had hiked hot/cold rolled prices for European markets by 5 - 7% for the second quarter 2007 deliveries. The decision to increase the prices is a reflection of favourable market conditions. The Anglo-Dutch steel company was last month acquired by Tata Steel.

"Demand is improving and the stocks are at normal levels. The current strong demand for steel in Europe - particularly in construction and end-user sectors - supports this price increase," a spokesperson for Corus said.

Index heavyweight Reliance Industries (RIL) was up 0.30%, to Rs 1418, on a volume of 12.60 lakh shares. It had, however, slipped from a high of Rs 1442.75. The company’s board meets on 24 February 2007 to review plans for raising $2 billion.

Power Finance Corporation moved higher, and settled on BSE at Rs 111.55, a premium over the IPO price of Rs 85. The stock debuted at Rs 104, hit a low of Rs 103.50, and a high of Rs 117. Volumes in the stock were huge, at 4.04 crore shares, on account of multiple block deals.

The IPO had received a strong investor response. It was subscribed 77.24 times, amidst heavy bidding by FIIs, and was priced at the upper end of the Rs 73 - Rs 85 price band. NSE has also included the stock in the futures & options segment. The lot size of PFC in the derivative segment is 2,400.

Power Finance Corporation has a large equity base of Rs 1148 crore and the face value per share is Rs 10.

India's wholesale price index (WPI) rose 6.63% in the 12 months to 10 February, lower than previous week's annual increase of 6.73% due to a fall in some food and textile prices, data showed on Friday (23 February 2007). Analysts forecast the figure at 6.70%. The annual inflation rate was 3.81% during the corresponding week of the previous year.

Global markets were trading mixed. The Nikkei average rose 0.44% to a seven-year closing high on Friday, led by gains in exporters and property shares such as Mitsubishi Estate Co., but Sanyo Electric Co. tumbled following reports of accounting problems. Shares in Sanyo fell as much as 29% on news that Japan's securities watchdog was investigating the company over its past earnings reports, the latest blow to the embattled consumer electronics giant.

The Nikkei rose 79.63 points to 18,188.42, its highest close since May 2000. For the week, the index has added 1.75%.

Hang Seng index shed 97.58 points (0.47%), to 20,711.65.

Meanwhile, the Union Cabinet approved necessary changes in the law in the forthcoming Budget session to phase out central sales tax (CST) on Thursday. CST is collected by the Central Government and is distributed among the states.

The CST rate will be cut from 4% to 3% from 1 April. The phase-out is expected to be completed by 2010-11. This reduction in CST is likely to result in a loss of Rs 6,250 crore to the states’ exchequer in 2007-08. The Centre will introduce a legislation to allow states to tax certain identified services and impose additional duties on excise goods like tobacco to compensate states for the loss of revenue due to the phase-out.

Besides, the Union Government is understood to have assured states of budgetary support to cover any shortfalls.

Earlier this year, the Centre had agreed to the states’ proposal for allowing them to tax 77 services and keep the entire proceeds of it. Of the 77 services, 33 are currently taxed by the Centre, while another 44 are new items to be brought under the service tax net.

For the first year, the Centre will collect the tax and pass on the entire proceeds to the states. The 44 new services to be brought under the service tax net include barbers, legal, education, health, sports and performances of Bollywood actors.

The market is expected to remain subdued in the run up to the Union Budget 2007-08 to be presented in Parliament next Wednesday (28 February 2007). The Budget session of Parliament begins today.

Caution on the bourses is evident in that the market-breadth has turned weak, whenever the key indices have corrected over the past few days. Concerns that the government may raise short-term capital gains tax on sale of shares from the current 10% have gained currency. The securities transaction tax (STT) may also go up further. The STT was raised in the previous budget. The removal of 10% corporate surcharge may be offset by removal of certain open-ended exemptions.

Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget.

FIIs turned net sellers on Wednesday (21 February 2007). FIIs were net sellers to the tune of Rs 40.20 crore on Wednesday. Their inflow has been strong this month. Their cumulative inflow in February 2007 has reached Rs 4175 crore. The strong inflow has been triggered by an upgrade in India's sovereign rating to investment grade by global rating agency, Standard & Poor's, on 30 January 2007.

As per provisional data, FIIs were net sellers to the tune of Rs 435 crore on Thursday (22 February 2007), the day when the Sensex lost 167 points. FIIs were net sellers to the tune of Rs 348 crore in index-based futures on the same day. They were net sellers to the tune of Rs 104 crore in individual stock futures. Nifty March futures settled at 4066.65 on Thursday, a premium of 26.65 points over the spot Nifty closing of 4,040.

Revised market lots in NSE’s derivatives segment become applicable today. The lot size of the Nifty contract has been cut to 50 from 100. This may boost volumes in the derivatives segment.

US blue-chip stocks declined on Thursday, as a jump in oil prices added to worries about inflation, but a rally in chipmakers' stocks helped the Nasdaq advance late in the session to end at a six-year high.

The Dow Jones industrial average fell 52.39 points, or 0.41%, to end at 12,686.02, with only eight of the 30 stocks in the Dow finishing higher. The Standard & Poor's 500 Index dipped 1.25 points, or 0.09%, to finish at 1,456.38. The Nasdaq Composite Index rose 6.52 points, or 0.26%, to 2,524.94, its highest close since 15 February 2001. Earlier, the Nasdaq hit a six-year intraday high at 2,531.42.

US crude shed 9 cents to 60.86 a barrel after jumping 88 cents overnight to its highest level since 2 January 2007, after US data showed a surprisingly big fall in distillate stocks. The fall was compounded by a rash of refinery problems in the world's top consumer. Worries over another escalation in the dispute over Iran's nuclear programme added to concerns over global supply.

Kotak - GATI

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Sharekhan Highnoon dated February 23, 2007

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Daily Fundamental Snippets (23/02/07)

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Poweryourtrade.com Trading Calls

Ashwani Gujral

Sell Punjab National Bank with stop loss of Rs 474 for target of Rs 400
Sell Bombay Dyeing with stop loss of Rs 612 for target of Rs 450.

Deepak Mohoni

Buy Rolta below Rs 353 with stop loss of Rs 347. This is a day-trading recommendation

Short sell India Cement above Rs 189 with stop loss of Rs 192. This is a day-trading recommendation.

Rajat K Bose

Sell Kesoram around the last close with stop loss above Rs 462 for target of Rs 440-429
Buy Moser Baer around the last close with stop loss below Rs 352 for target of Rs 371.

Anand Rathi - Daily Strategist

Nifty futures gained OI to the tune of 5.61% with prices coming down indicating longs liquidating their positions as market couldn't sustain at higher level market at higher levels with nifty futures not ready to move above 4100 levels. If nifty sustains below 4040 levels we may see fresh short positions being formed in nifty futures .The nifty may show real strength once it crosses 4100 marks and fresh buying may come around those levels. The FIIs bought futures to the tune 77 crs. The PCR has come down from 1.25 to 1.18 levels which indicates weakness in the market.

Among the Big guns ONGC saw significant built up in OI to the tune of 1.98 %with prices coming down around 2.07% indicating that bears were aggressive as counter came to its short term support level. RELIANCE saw built up in OI to the tune of 1.37 % with prices up 0.37% indicating short covering in the counter on the last day of the settlement.

On the TECH front, ,TCS, saw loss in OI with prices coming up indicating short positions covered in the counter whereas INFOSYSTCH ,WIPRO,SATYAMCOMP saw a gain in OI with prices coming down in indicating longs liquidating their positions performing in line with the market.

On the Metal front the massacre continued, we saw fall in OI with prices coming down in both the majors HINDALCO and TATASTEEL indicating fresh selling coming in the counters which forced bulls to cover their positions indicating weakness in these counters. SAIL saw built up of significant OI with prices down as well marginally indicating their was selling pressure at higher levels.

In the BANKING arena like the metals there was not respite and they were hammered to pulp. it was across the board be it private or public sector all had their fair share of hammering as both bull liquidation coupled with bear hammering had its effect simultaneously.

However in spite the last day of the settlement we did not see a surprise spring in the market and no recovery came. For today we see a pull back but the view would change either sides if the indices break important levels for either to gain advantage , trade with strict stop losses and caution.

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Sharekhan Daring Derivatives for February 23, 2007

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Edelweiss - Daily Market Outlook 23rd Feb, 07

Market Snapshot

The Sensex opened marginally higher and rallied to a high of 14,287 in early deals. However, sustained selling pressure at higher levels saw the index pare gains. A heavy bout of selling in late noon deals saw the index plunge to a low of 13,978. The Sensex finally settled with a loss of 167 points at 14,021 while Nifty lost 56 points to 4,040.

The NSE & BSE cash volumes were significantly better compared to the previous day at INR 117 bn and INR 42 bn. The F&O volumes were significantly higher compared to the previous day at INR 552 bn.

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has remained unchanged at 26-29% levels. The WPCR of Nifty Options decreased to 1.00 compared to the previous day while the 5 day average is 1.09. The February futures are now trading at 27 points premium. The Nifty Futures OI has decreased by 22%.

Outlook

We expect the market to open with a positive gap for VWAP adjustment and to stay subdued for the rest of the session in the absence of any major triggers. The last half an hour of trading session witnessed Nifty plummeting by about 60 points on the back of unwinding of arbitrage position and VWAP basket selling. Base metals were up on the LME which might lead to some buying interest across metal stocks.

The market wide rollovers were at 83%, which is in-line with previous expiries. Nifty rollovers were very healthy with 77% positions getting rolled into the March contract. However the average market wide roll cost expanded to 85 bps from 62 bps on Wednesday. IT, Pharma and Textile stocks have seen strong rollover while FMCG and Auto were on the weaker side. Buying opportunities can be seen in TVS Motors, GMR, LITL, Siemens and Amtek Auto

After breaking the support level of 4080 the Nifty tumbled down steeply as predicted by the technical charts. The next support for Nifty is at 4009 which is also a 60 DMA and trend line support level followed by next support level of 3965. Resistance for Nifty is at 4091 and 4111.

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Market may move sideways

The market may exhibit cautious trend after taking a strong dip in yesterday's trades. Weakness in the market may continue further amid a mixed Asian indices in early trades and dwindling net FII inflows in the domestic market. Among the domestic indices, the Nifty could test 4000 and below this level may slip to 3950, while on the upside it could edge higher to 4100. The Sensex has a likely support at 13940 and may face resistance at 14100.

US indices ended mixed on Thursday amid rise in crude oil prices, jump in Treasury bond yields and worries of geopolitical unrest in the Middle East. While the Dow Jones dropped by 52 points to close at 12686, the Nasdaq ended seven points up at 2525.

All the Indian ADRs ended in the red on the US bourses. Dr Reddy's lab fell sharply and tumbled around 4% while VSNL, ICICI Bank, Patni Computers, Rediff and Tata Motors declined around 2-3% each.

The Nymex light crude oil for April delivery rose 88 cents to close at $60.95. In the commodity space, the Comex gold for April series declined by a dollar to settle at $683 a troy ounce.

Edelweiss - PCG DAILY MARKET CALL 23-FEB-2007

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