Weekly close: RBI proposes; Reliance desposes !

Markets closed flat this week after turning the tables on sentiment twice over. It was the global positives which had many markets scaling all time highs. This was fuelled by an appreciating Rupee which brought in even more flows. Its been the result flows which are driving up specific stock movement. However, the key story this week was the credit policy which had the markets taking wings. There was no hike in CRR and no tinkering with the provisions. Markets seemingly and surprisingly were worried about a rate hike. We had been saying for some time that nothing was to come as the CRR hike implementation is still to be implemented this week end and the fact that it impacts with a lag. The Rupee continued to appreciate hitting a 9 year high and is now close to $ 40 and headed there given the FII flows which were very very strong.

Inflation number again is above 6% and thats becoming a concern. Markets are reacting to that and also the Reliance net profit numbers. Reliance had been rallying in anticipation of super profits but the numbers were just in line. The valuation for Reliance is now pricing in optimism from its retail initiatives, SEZ and also the gas find. However, Reliance was the big man down as the stock came in for profit taking on the disappointment. Steel stocks had a ball of a time this week but these gains fizzled out by the end of the week.

There is a view that with UP elections coming to an end on May 8th, the Government will either cut excise duty on fuels or raise fuel prices. That had the rally in HPCL, BPCL and IOC. It was the MNC power stocks which rallied. ABB posted decent numbers and that had the stock running.The change in accounting policy added to the positives. Siemens numbers were not bad but the stock had fallen ahead of that brought in short covering. There was also talk of buybacks this week. Alfa Laval is well above its offer price of Rs 875,. Mico had an open offer at Rs 4000.

Sensex closed almost flat this week ending at 13908. The gainers of the Nifty this week included ABB +7%, Bharat Petroleum +4%, Oriental Bank 10%,PNB +4%, Ranbaxy +8%, Zee +7%, Tata Power +7%, Tata Motors +4%, Siemens +10%, There were many which were down but the big one was MTNL was down 8% and also Cipla down 7%.
Asian Electronics was a wow call we booked this week within 4 days of the call with over 8% gains. The company has businesses related to energy saving equipment. This includes capacitors leased earlier to states and now the retrofit tubelights which saves significant energy. The reports are that the company will post extremely bouyant numbers helped by a new product in the energy space. The proof is in the pudding while our clients enjoyed super profits in the wow calls.

Indo Tech transformers was a wow call we booked this week with over 10% gains and two calls really. The company is into transformers and given the demand supply situation here, the company has done extremely well. We were cautious ahead of the numbers. Another wow call which brought in profits for clients. RTS power was another one booked in the transformer space. Our wow calls have the certainty levels of good research that they will deliver.

We booked Castrol this week in wow calls. Castrol is an old time blue chip and one time component of the Sensex. however, higher crude had taken the bite out of the company as it struggled to pass on the increased raw material prices. The company benefits from an appreciating rupee as most base stock is imported. The company is more of an FMCG play and could see more gains in the next couple of months. Keep watch. Part of the call is still open. Our clients had to wait some time but then the returns in the uncertain environment were worth it.

We booked India Cement this week with good gains as well. We had a research initiated on it couple of weeks ago and that has delivered. We covered results too. Do read them. Among the wow calls also we booked Wockhardt another pharma company.. which we dont need to say much about. SKF was a research note carried couple of months ago and the stock is up almost 50%.. We had a wow call and that covered up a significant part of that gains. Clearly.. Wow calls is something which clients would do well to subscribe to with an investment viewpoint. We pick the entry points and more importantly tell you when to exit.

Technically Speaking: Wow had a technical view given for targets of 14390 and that was indicated quite often. That was where the Sensex actually has turned from. Technically 13726 are support levels and thats where the markets could see next week. The bias is down.

We are concerned on the gains in the global markets and Indian markets rallying in imitation. Crude is close to $ 65 and that will have its impact on inflation. Higher fuel prices are on cards unless Government decides to cut excise. In such a scenario the risk of another interest rate has increased. The RBI has indicated the tolerance for inflation to 4.5% and that means that they could go overboard to do this. We maintain that it would be good to take some cash of the table for now. Better to play safe !