Outlook not so rosy

Outlook for the Indian market does not look promising on Friday with US stocks falling for the first time in six days and Asian equities snapping a five-day rally.

Thursday, Standard & Poor's 500 Index lost 1.57, or 0.1 per cent, to 1,462.5, Dow Jones Industrial Average decreased 0.25 to 13,235.88 and Nasdaq Composite Index slipped 11.1, or 0.4 percent, to 2,541.70 after US’s largest mortgage lender Countrywide Financial said the economy is heading for a recession.

Asian stocks followed suit today on fears of a recession in its largest export market and as BHP Billiton and Posco led declines on concern demand for raw materials will cool.

Japan's Nikkei 225 Stock Average dropped 0.3 percent to 16,271.08, while the Kospi index declined 1.1 percent in South Korea.

Back home, the clash between Left parties and Congress has reached a flashpoint with CPM’s general secretary Prakash Karat saying the future of the Manmohan Singh regime is contingent upon the government’s willingness to put the Indo-US nuclear deal on hold.

Thursday too equities opened firm on global cues but closed in the negative given the political rumblings. Bombay Stock Exchange's Sensex closed 85 points or 0.59% lower at 14,163.98, after a high of 14,554.93.

The biggest index losers were Cipla (down 4.41%), ONGC (3.07%), State Bank of India (2.94%), Reliance Energy (2.63%) and ICICI Bank (2.47%). Banking stocks were worst hit, followed by realty. Cement and FMCG shares, however, managed to hold gains.

Nifty lost 38 points or 0.92% ending at 4114.95. The National Stock Exchange's index had touched a high of 4249.85 intra day.

STOCKS TO WATCH

Ambuja Cements is expected to advance as Holcim plans to buy a further 20% in the cement major at Rs 154 per share, taking its stake to about 56%. The Holcim group purchased 3.9% in Ambuja Cements for $220 million triggering the open offer. The price is at 20% premium to the average of Ambuja's share price over the past two weeks.

Cairn India is likely to surge since the government has approved the company's proposal to lay a pipeline from Barmer in Rajasthan to Gujarat coast. The project is estimated to cost $700 million and will take a minimum of 18 months to complete the project.

Market to remain under pressure

The market is expected to stay under pressure due to subdued trend in Asian equities. Most of the Asian markets were trading lower today. Volatility is expected to remain high.

The Central Committee of the CPI (M) yesterday, 23 August 2007, endorsed the party Politburo's opposition to the Indo-US nuclear deal and authorised it to do whatever it can to block the deal. The Politburo had warned the government of serious consequences if it went ahead with negotiations with the International Atomic Energy Agency and Nuclear Suppliers Group.

But the party appeared to have softened its stand regarding withdrawing support to the government as a post meeting statement of the party mentioned that the Central Committee does not want the current crisis to affect the government.

The market's concerns over the past few days have been that it the communist allies of the ruling coalition government at the centre decide to pull their support, the government will be reduced to a minority and that could trigger fresh elections.

As per provisional data, foreign institutional investors (FIIs) purchased shares worth a net Rs 274.64 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 530.72 crore on Thursday, 23 August 2007.

In Asia, Hang Seng (down 1.34% at 22,659.55), Japan's Nikkei (down 0.33% at 16,262.81), Taiwan's Taiwan Weighted (down 0.43% at 8,695.14), Singapore's Straits Times (down 0.90% at 3,340.60) and South Korea's Seoul Composite (down 1.09% at 1,780.14), edged lower.

However Shanghai Composite surged 1.56% to 5,110.93.

US market ended on flat note yesterday, 23 August 2007. The Dow Jones Industrial Average closed almost unchanged today at 13,235.88 marginally down by 0.25 points. Tech-heavy Nasdaq dropped 11.1 points to close at 2,541.7. S&P 500 lost 1.57 points to close at 1,462.5.

Oil prices steadied at below $70 a barrel on Friday, 24 August 2007 after Mexico's state oil firm said Gulf oil rigs suffered only minor damage from powerful Hurricane Dean and worries over the subprime mortgage woes in the US weighed. US light crude for October delivery dipped 5 cents at $69.78 a barrel

The BSE 30-share Sensex lost 84.68 points or 0.59% at 14,163.98, on Thursday 23 August 2007. From an all time high of 15,868.85 on 24 July 2007, the BSE Sensex is down 1704.87 points.

Bombay Rayon Fashions

Bombay Rayon Fashions

Ambuja Cements, PFC

Ambuja Cements, PFC

Daily Call - Aug 24 2007

Daily Call - Aug 24 2007

Daily Technical Note - Aug 24 2007

Daily Technical Note - Aug 24 2007

Morning Call -Aug 24 2007

Market Grape Wine :

In House :

Nifty at a supp of 4100 with resistance at 4155 and 4200 levels .

Sell : Intraday : BombayDye below 492 target 480 s/l of 498

Buy : Intraday : IDEA above 114 target 122 s/l of 111

Out House :

Markets at a support of 14014 & 13786 levels with resistance at 14253 & 14414 levels .

Markets to remain choppy and volatile maintain strict stop loss .

Buy : SBIN & Kotak at dips

Buy : RIL & REL at dips

Buy : Bhel and Siemens at dips

Buy : Titan at dips

Buy : HanunToys at dips

Buy : ITC at dips

Buy : ONGC at dips

Dark Horse : HLL , ITC , SBIN , ONGC ,Kotak , Gacl & INFY & RIL

TGIF : Thank God its Friday : Book profits at all higher levels as political scenario not stable .

Motilal Oswal Financial Services IPO subscribed 27 times

The IPO of Motilal Oswal Financial Services was subscribed 27.33 times by 17:00 IST, as per data availed on NSE website. The issue closed today, 23 August 2007. The IPO received bids for 8.15 crore shares compared to 29.82 lakh shares that were on offer.

The price band for the IPO was Rs 725 to Rs 825 per share. At the offer price band of Rs 725-Rs 825, PE works to 27.9 (on lower band) to 31.7 (on upper price band).

Motilal Oswal Financial Services (MOFSL) is the Motilal Oswal group’s holding company with stake in four group companies: Motilal Oswal Securities (MOSL – the stock broking arm), Motilal Oswal Commodities Brokers (MOCB - the commodity business arm), Motilal Oswal Venture Capital Advisors Pvt Ltd (MOVC - the venture capital advisory arm) and the Motilal Oswal Investment Advisors Pvt Ltd (MOIAPL - the investment banking arm).

The object of the issue was to raise funds to enable the group to improve its competitive position and support growth plans through deployment of long-term working capital, enhanced financing facility for broking customers, and additional office space and technology advancement.

MOFSL’s consolidated net profit rose 15% to Rs 69.58 crore, on 39% growth in income from operations to Rs 358.75 crore in FY 2007 over FY 2006.

Slide may continue

Market may slide further on account of weak Asian markets in morning trades and overnight fall in the US markets. Political uncertainties and continued selling pressure may also drag the domestic indices further down. The FIIs remained net sellers in equities for last couple of sessions may also weigh on the investors' sentiment. Key indices, the Nifty may get support at 4100 level and on the upside it could test higher levels at 4260. The Sensex has a likely support at 14,100 and may face resistance at 14,500.

US indices declined on Thursday as investors worried about the economic outlook after the head of the biggest U.S. mortgage company said the housing downturn could create a recession. While the Dow Jones slipped marginally at 13236, while the Nasdaq lost 11 points to close at 2542.

Indian ADRs had a mixed outing on the US bourses. Among the major losers VSNL, Rediff, HDFC Bank, Satyam, Wipro, MTNL, Patni Computers and Tata Motors shed over 1-3% each. While, Infosys, Dr Reddy's, Satyam gained marginally.

Crude oil prices gained marginally, with the Nymex light crude oil for October delivery moved up by 57 cents to close at $69.83 a barrel. In the commodity space, the Comex gold for December series lost 30 cents to settle at $668.40 a troy ounce.

Intraday Stock Ideas

Nifty (4115) Supp 4076 Res 4154

Buy Bharti Airtel (850) SL 844 Target 860, 864

Buy Cairn (145) SL 142 Target 151, 152

Buy JP Associates (823) SL 817 Target 834, 838

Sell Rolta (423) SL 428 Target 415, 412

Sell Tata Motors (622) SL 629 Target 612, 609

No-clear issue...Markets Left to chance

Where observation is concerned, chance favors only the prepared mind - Louis Pasteur.

Be prepared for wild swings yet again and chances are you could get what you want at your price. With politics likely to dominate the headlines and the market movements coupled with anxiety over the contagion in the US subprime mortgages, the bulls and traders are in for a tough time. The Left parties have lobbed the ball in the Government's (read Congress') court over the Indo-US nuclear deal. It is now for the Government to announce its next move. Just like the mess in the US housing market, nobody has a clue what lies ahead. The moot question is who will blink first?

The Left parties have made it clear they will not budge. So, it obviously has to be the Government who has to take a step back. The uncertainty will continue to haunt the market for a while, which is not good for the bulls. As a result, we may see lot of fluctuations in the market over the next few days till the political storm subsides.

At the same time, we have to continue to keep one eye on the global markets and the developments in the US economy. The crisis there is still not over and going ahead we could get some more bad news from that front. So, it will be prudent for one to remain guarded and be selective in buying shares, which should be done at lower levels and that too in quality scrips only. Today, we expect another day of wild swings after a cautious to lower opening.

ABG Shipyard could gain as a financial daily reports that it is set to buy Western India Shipyard for Rs2bn. Mercator Lines is also likely to be in action as it considers an IPO of its Singapore subsidiary. Tata Steel and Essar Steel might attract some attention as Egypt has shortlisted the two Indian steel makers for building a $3bn plant in the north African country. Gillette India, P&G, Paradyne Infotech and Kalindee Rail Nirman will declare their results today.

Cairn India is likely to advance as it has reportedly received government approval for transporting its Rajasthan crude to Gujarat coast through a pipeline. Bajaj Auto plans to halt production of two wheelers at its four decade old Akurdi plant in Pune, in September. The plant made 350,000 vehicles in 2006 and 50,000 in 2007. Production could be shifted to the company's Waluj facility.

Shree Renuka Sugars could rise as it has completed the acquisition of the Ethanol plant of Dhanuka Petro-Chem located at Khopoli, Maharashtra. The company has also set up a wholly owned subsidiary in Sharjah International Free Zone for its overseas investments. ORG Informatics has signed an agreement with Belgacom NV/SA to acquire Belgacom's satellite based business. The acquisition will involve all the customer contacts and assets.

The Nasdaq slipped and the broader market struggled after remarks by CEO of troubled mortgage lender Countrywide Financial stoked worries about the ongoing turmoil in the credit and mortgage markets.

Countrywide Financial CEO Angelo Mozilo said the housing slump may slow consumer spending and lead to an economic contraction.

The Standard & Poor's 500 Index lost 1.57 points, or 0.1%, to 1,462.5. The Dow Jones Industrial Average ended unchanged at 13,235.88. The Nasdaq Composite Index slipped 11 points, or 0.4%, to 2,541.70.

Financial shares contributed the most to the drop after the Federal Reserve said outstanding US commercial paper fell 4.2% last week, the biggest decline in at least seven years. Commercial paper backed by assets led the fall as buyers fled debt linked to subprime mortgages.

US stocks had risen in the morning after Bank of America said it was making a $2bn investment in Countrywide Financial. But the advance was short-lived, and stocks turned lower in the afternoon.

Also adding to worries was news that the Fed injected $17.5bn in temporary reserves into the banking system.

But, losses were limited as energy producers rallied after the price of crude oil rose for a second day. About five stocks fell for every three that gained on the New York Stock Exchange.

In the Treasury market, the 10-year note ended little changed to yield about 4.64%. In currency trading, the dollar slipped versus the euro and rose versus the yen. COMEX gold for December delivery fell 30 cents to settle at $668.40 an ounce.

US light crude oil for October delivery rose 57 cents to settle at $69.83 a barrel on the New York Mercantile Exchange.

European shares closed slightly higher marking their fifth winning session in a row. The pan-European Dow Jones Stoxx 600 index rose 0.2% to 369.33. The German DAX 30 closed up 0.2% at 7,511.96 and the French CAC-40 added 0.1% to 5,523.33. The UK's FTSE 100 closed up 0.01% at 6,196.90.

Major Latin American markets closed higher. Brazil's Bovespa index erased losses after Moody's lifted the ratings on the government's foreign-and local-currency bond ratings to Ba1 from Ba2.

Mexico's IPC ended up 0.7% at 29,459.82 and Argentina's Merval rose 1.5% to 2,038.29. Chilean stocks, however, shed 0.1% at 3,206.79. In other emerging markets, the RTS index in Russia gained 0.6% at 1864 while the ISE National 30 index in Turkey rose 1.17% to 59,320.

Most Asian markets were down this morning between 0.3% to 1%. The Nikkei was down 53 points at 16,262 while the Hang Seng in Hong Kong fell 230 points at 22,736. The Kospi in Seoul dropped 20 points to 1778 and the Straits Times in Singapore slipped 36 points to 3334.

Political uncertainty had the better of the bulls on the Indian bourses today, and for a change the market players forgot about the crisis in the US subprime mortgage market and the turmoil in the global credit markets. The bulls ran for cover even as the CPI (M) asserted their pre-eminent position as the key allies of the Congress-led coalition Government. After a highly choppy day of trade, the key indices ended in the red despite a firm trend across global markets. The benchmark BSE Sensex closed at 14,163, down 85 points or 0.6% from the last close after touching a high of 14,554 and a low as 14,128.

Ambuja Cement gained by 2% to Rs132 after Holcim announced that it further purchased 3.9% of the company for $220mn at Rs154 per share and to further bid for 20% of Ambuja Cement. The scrip touched an intra-day high of Rs154 and a low of Rs131 and recorded volumes of over 1,00,00,000 shares on NSE.

L&T pared its gains however managed to end with marginal gains 0.3% to Rs2396 after the company announced that they have secured order worth $70mn. The scrip touched an intra-day high of Rs2468 and a low of Rs2360 and recorded volumes of over 13,00,000 shares on NSE.

Satyam Computer advanced by 1.3% to Rs422 after India's fourth- largest computer-services provider won a three year contract from KPN, a European telecommunications provider. The scrip touched an intra-day high of Rs429 and a low of Rs419 and recorded volumes of over 29,00,000 shares on NSE.

VSNL declined by 1% to Rs378. Reports stated that India's largest provider of overseas calls lost a tax appeal of as much as Rs10bn. The scrip touched an intra-day high of Rs395 and a low of Rs364 and recorded volumes of over 3,00,000 shares on NSE.

Hindustan Zinc slipped 2.7% to Rs676.The company announced that they have cut Zinc prices by Rs6,000. The scrip touched an intra-day high of Rs719 and a low of Rs670 and recorded volumes of 56,000 over shares on NSE.

After being on the receiving end in the previous trading session, select Realty stocks bounced back. Sobha gained 1.4% to Rs745, Ansal infrastructure advanced 2.2% to Rs252. However, DLF slipped 0.5% to Rs555, Akruti was up by 1.2% to Rs475 and Parsvnath lost 2.5% to Rs269.

FMCG stocks ended with smart gains as the index gained 1.1%. ITC gained 1.3% to Rs160, Tata Tea advanced 1% to Rs676, HLL was up by 0.6% to Rs197 and McDowell added 3% to Rs1302.

IT stocks also ended higher led by gains in the index heavy weights like Infosys, the scrip gained 1.2% to Rs1811, Satyam Computer rose 1.3% to Rs422, Financial Technology added 0.8% to Rs2032.

Cement stocks recorded smart gains after Holcim announced that it further purchased 3.9% of Ambuja Cement at a premium price of Rs154 compared to yesterday’s close of Rs130.2, the scrip rose 2.04% to Rs132, ACC surged by 2.1% to Rs972, Kesoram Industries was up by 2% to Rs429 and Grasim added 0.8% to Rs2751.

Banking stocks witnessed selling pressure. SBI lost by over 3% to Rs1414, ICICI Bank was down by 2.5% to Rs824 and HDFC Bank slipped 1.6% to Rs1100. OBC, Corp Bank and Canara Bank were the major losers among the Mid-cap stocks.

Select Metal stocks also pared their gains. Tata Steel lost 1.7% to Rs559, SAIL was down by 0.5% to Rs141, Hindalco ended flat at Rs139. However, National Aluminum added 1.4% to Rs255.

Fund Activity:

FIIs were net buyers of Rs2.75bn (provisional) in the cash segment on Thursday and the local institutions pumped in Rs5.31bn. In the F&O segment, FIIs were net buyers at Rs9.49bn. On Wednesday, foreign funds pulled out Rs6.68bn from the cash segment. Mutual Funds were net buyers at Rs228mn on the same day.

Major Bulk Deals:

Sundram BNP Paribas has picked up Emkay Shares; CLSA Mauritius has sold Mahindra
Gesco; Sundaram MF has sold Royal Orchid Hotels; Prabhudas Lilladhar has purchased
SEL Manufacturing; Morgan Stanley has bought Shree Ram while UBS Securities has
sold the stock; Deutsche Securities has picked up Standard Industries while Bear
Stearns has sold it.

Lower Circuit:

LML, Atlanta, EC Network, Jaybharat Textile, Balasore Alloys, IOL Broadband, Anant
Raj Industries, Era Construction and Bag Films.

Upper Circuit:

Prism Cement, Kothari Products and Prakash Industries.

Delivery Delight (Rising Price & Rising Delivery):

Andhra Bank, Bank of Maharashtra, Birla Corp, ITC and Mahindra Gesco.

Abnormal Delivery:

GNFC, Hero Honda, ICICI Bank, Bajaj Auto and IDBI.

Major News & Announcements:

Govt to review fuel prices on Sept. 1: Oil Minister

Reliance Capital buys 26% of Victory transformer for Rs750mn

Accentia Technologies buys Thunga Software in all cash deal

Cairn gets right to buy land for pipeline – Reports

Grindwell Norton to sell stake in Lincoln Helios for Rs1bn

ICSA secures order worth Rs186mn

Standard Chartered to buy 49% stake in UTI Securities

L&T secures order worth $70mn

ITD Cementation secures Rs8.93bn order

Myanmar awards 3 deep water blocks to ONGC – Reports

Holcim buys 3.9% in Ambuja Cement for $220mn at Rs154 per share

Holcim announces open offer to buy another 20% in Ambuja Cements at Rs154/share

US Market ends flat

Comments from Countrywide’s Chairman leave a nervous feeling among investors

Clear sense of nervousness ruled over US Market today, Thursday, 23 August, 2007 as the recession debate once again heated up and credit worries rekindled. Comments from the Chief Executive of USA’s largest mortgage lender, Countrywide Financial, led to this nervousness.

The Dow Jones Industrial Average closed almost unchanged today at 13,235.88 marginally down by 0.25 points. Tech-heavy Nasdaq dropped 11.1 points to close at 2,541.7. S&P 500 lost 1.57 points to close at 1,462.5.

Sixteen out of thirty Dow stocks closed in the green today. IBM, H-P, AT&T and Mc Donalds were the main Dow winners. Boeing, Home Depot, General Motors and United Technologies were the Dow laggards.

Home-Depot led the team of the Dow laggards on reports that the company’s $10.3 billion deal to sell Home Depot's wholesale supply division might fall apart.

Countrywide Financial, CEO, Angelo Mozilo telling a television channel that the housing slump will lead to a "recession" and that there is still a tremendous liquidity problem led indices reverse their course of direction.

Market welcomes Bank of America’s equity stake in Countrywide

When market opened in the morning, the indices opened in the green. Indices rallied on news of Bank of America’s $2 billion investment in Countrywide. The news initially helped ease the worst of fears about a possible credit crunch.

But soon after the nation's largest mortgage lender’s CEO spoke about a significant decline in economic activity, it gave sellers an added excuse to take some money off the table.

Of the five sectors closing lower, Materials paced the way followed by Industrials and Financials. Technology sector closed in the green getting support from IBM and H-P. But Nasdaq closed in red as neither of them are listed on Nasdaq.

Among the Indian ADRs, all Indian ADRs ended in red today. ICICI Bank and HDFC Bank led the decliners. HDFC Bank dropped by 3.8% while ICICI Bank dropped by 2.3%. Rediff and Sify followed them dropping 1.7% and 2% respectively.

Crude rises snapping three sessions of fall

Crude oil future prices increased today. Drop in supplies of motor gasoline for week ended 17 August in yesterday’s weekly inventory report was perhaps the main reason for this. Oil market also likely found some additional support today from news that some Mexican oil supplies will be delayed due to Hurricane Dean.

Crude-oil futures for light sweet crude for October delivery closed at $69.83/barrel (higher by $0.57/barrel or 0.82%) on the New York Mercantile Exchange. On a yearly basis, prices are 2.7% lower. .

Nearly 1.4 billion shares exchanged hands at the New York Stock Exchange, with advancing stocks running just ahead of decliners. At the Nasdaq, 1.6 billion shares were traded, with declining stocks outpacing advancers 9 to 5.

For tomorrow, investors will look for economic data to help set the tone of trading. July Durable Orders will be released at 8:30 ET and will be followed by July New Home Sales data at 10:00 ET

IT Training and Education market grows at rapid pace

The Indian IT Training and Education market, which is currently dollar 656 million, is growing at a CAGR of 64 percent.

However, the Indian IT e-learning market, which is currently dollar 122 million, is growing at a CAGR (Compound Annual Growth Rate) of 73 percent, said Navug Mohnot, CEO of India QAI, while announcing education ventures in this space under the name — Edista.

QAI, the leading process consulting organisation, has decided to foray into this space in order to meet the growing need for IT training and education in the country.

Quoting interesting trends in IT education, he said 29 percent of all IT training is on demand: e-learning, as it meets just-in-time training requirements, has maximum reach and no geographical boundaries, offers homogeneity and consistency in content which can be easily upgraded.

Forseeing a huge potential in this space, QAI has launched The Edista learning, an on-demand, web enabled curriculum that offers learner centric online curriculum with real time collaboration, Singh said.

The Edista Testing Institute,which is launched in India, is aimed at addressing the fast growing software testing segment, he said. The Indian software testing segment market was two billion dollars and expected to grow at eight billion by 2008 while the size of the testing training market here was dollar 6.6 million and expected to grow at a CAGR of 50 percent.

The worldwide market for testing services is forecasted to grow to USD 13 billion by 2010 with 45-50 percent getting outsourced, Singh said, quoting a Nasscom-Gartner report on the issue.

The Edista Training Institute would soon be rolled out globally, including Asia Pacific region and Africa to meet this growing demand, he said.

QAI, which were market leaders in facilitating operational excellence in it, BPO and knowledge intensive organsations would leverage its capabilities to run the Edista Suite of Education Ventures, including Edista certifications.

QAI has certified over 25,000 professionals in software industry and over 4000 in the ITES space, Singh said adding that Edista would now be the aggregation of QAI's training and education practices with its own brand and identity.

The investment for e-learning would be Rs 4 crore spread over two years. Another Rs 4 to Rs 5 crore would be largely invested for sales, marketing and brand building while another 5 crore would be pumped into the testing institute.

Subprime woes erupt in US, but India, Japan hit most

Though the US market is in the epicentre of sub prime crisis, Japan and India have been the worst affected.

A dipstick study into the movements of select Asian and European markets infers that Japan’s Nikkei and India’s Sensex have shed 12.4% and 10.13% respectively over the past one month; the American Dow Jones Industrial Average Index has only fallen 5.49% over the past one month.

Concerns over a crisis in the US sub prime lending market - where loans are offered to borrowers who do not qualify for market interest rates because of poor credit history - had sent global markets into a tailspin since the mid-week of July.

The current sub prime meltdown in the US is consequential to scores of sub-prime housing loan defaults that began in late 2006 and has continued into 2007. The sharp rise in sub prime credit defaults has caused several major sub-prime mortgage lenders to shut down or file for bankruptcy, leading to a general market downtrend and negative sentiment.

Though most equity analysts maintain that there would be `negligible indirect effect’ of sub prime credit defaults on emerging and distant markets in Asia and Latin America, the cumulative impact has been drastic. For instance, since July 25, FIIs have sold around Rs 9741.40 crore in cash market and about Rs 3132.06 crore in the derivatives segment.

In terms of FII retreat, India, Taiwan, Korea and Thailand have been the worst affected markets in the world. China, even though with huge exposure to the US market, managed to log positive gains at 22% over the past one month.

Lalit Thakkar, director - research, Angel Broking opines that the sub prime fallout is a bigger burden for the US economy but the irony is that emerging markets have corrected more than American markets. “India receives sizeable FII inflows; within FIIs, we also get money from hedge funds.

While it has always been difficult to quantify how much influence hedge funds have on stock markets, the fact remains that time again, hedge funds owing to their over-leveraged positions have lead to liquidity issues,” he adds.

According to analysts, the trouble starts when large-sized funds (with exposure to highly leveraged sub prime markets) start liquidating their holdings in emerging markets to make good their losses in a sinking sub prime market.

In the case of Chinese market, FIIs are not allowed to pull out money at their whims and fancies; there is a lock-in period for staying invested in that market. Japan has fallen more on accounts of yen instabilities while Dow and FTSE have fallen marginally because of timely central bank intervention, say analysts.

“Whenever hedge funds start making losses, they temporarily exit from profit-making destinations. This time round, it was more of an uninformed fear-led sell off from foreign institutions. One cannot blame them (hedge funds) as the risk premium on equity investments has been rising and there could have been tremendous pressures from investors to pull out of emerging markets,” said Amitabh Chakraborty, president - equities, Religare Securities.

“Sub prime fears have clearly been factored in by Indian markets; In fact, politics has overtaken sub prime fears in Indian markets. If what we know is right, most FIIs would adopt a wait and watch approach till the government reaches a firm decision on the nuclear deal,” said a senior official of an Honk Kong-based investment company.

Daily Technical Analysis

Nifty — The index opened on a positive note, but was unable to hold onto the opening session’s gains. It declined throughout the session with high intra-day volatility.

Resistance — The index is facing stiff resistance around the 4263 level (high of 20 August 07). Yesterday’s trading session saw a strong opening and index posted a
high around 4250 in opening trade, it failed to sustain higher levels. This suggests a level of 4263 is a stiff resistance level. Intra-day resistance is around 4166.

Support — The index has support around the 200dma at 4075, breaking below the 200dma could see the index exhibit weakness and decline to lower levels around 3971.The level of 3971 is [62% retracement level from the low of 3555 (5 March 07) to
the recent high of 4648 (24 July 07)].

Conclusion — Intra-day weakness can be expected below 4075, whereas a break above 4166 could see the index test 4250 levels.