Close: A see-saw week... and still looking for direction !

The markets this week were driven by global cues with interest rates globally seeing change. Global markets were steady for most part of the week. However, there was major weakness by the end of the week with US economic data pointing to negatives. The global markets also reacted the same way but Indian Markets stood out though they started off very weak too.

Indian Markets showed typical behaviour remaining choppy. They seem to have decoupled from the global markets for now. A strong start was ended with a weak close and a weak start was invariably ended in a strong close and this happened almost every day of the week. Some of the banks reported numbers which were good. It was the UP elections which kept the markets on tenterhooks. The results came in line with market expectations. The fact that BSP will be able to form a government on its own and has less dependence on the Congress is somewhat negative. The Congress which is ruling in the Centre has not been able to make its presence felt in any major state and thats not positive at all for policy making. We expect that policy making could suffer as sound economics could be given a go by for populism. Maruti balance stake was sold off this week. The buyers were the Institutions including Insurance companies and Mutual funds. The stock was priced at Rs 796. The stock was strong during the week but came off post the sale as really this sale does not have any impact on fundamentals which face increasing cost pressures and also competition.

Inflation was placed at 5.68% and that was lower than 5.77% of the previous week. Though inflation is now at a more comfortable level, a CRR / SLR cut seems unlikely. The first thing we expect the RBI will do in the face of lower inflation is to make the Rupee a bit weaker by buying Dollars. The Rupee ended the week at Rs 41.31 to a Dollar somewhat weaker than last week. Industrial Production for March came in at 12%+ and that is a strong positive for the markets. The refinery stocks had a good rally. On one hand the crude prices were lower and secondly the sharing of the subsidy was changed in favour of the refineries and to the detriment of ONGC.

Sensex ended the week down about 80 points this week. Banks were strong during the week on the hopes of a CRR / SLR cut which we think is away from reality. Many Mid caps were bouyant which included Rolta, Educomp, India Infoline, Financial Tech, Everest Kanto etc on the back them being included in the FNO segment starting next week.

Major movers in the indices were refineries and banks.The gainers in the week included Bajaj Auto + 6% BPCL +7%. State Bank +3%, The tech stocks and auto stocks were some of the losers / drags on the index. Infosys -3%, Mahindra -9%, ONGC -3%, Satyam -3%, Tata Power -4%, Wipro -4% were on the losing side. topnew.gif (1104 bytes)

Bajaj Auto does a wheely. ; Sugar found Mayawati sweet ; SKF seems set for a frictionless performance !

Bajaj Auto news of demerger of the auto and Finance business had the stock rallying. Well we had a quickie call and it was much before the markets talked about. The stock is about to deliver close to 8% on the call. Merill downgraded Bajaj Auto to a sell and upgraded Hero honda on the back of Bajaj Losing marketshare in the last couple of months. However, we think that this view is being short sighted and is more reactive. Bajaj has launched a wonderful vehicle Discover DTSi 135 cc and pricing close to 100 cc we believe could take the 'splendour' out of Hero Honda.

Sugar stocks rallied on Friday. BSP head, Mayawati made a statement that sugar cane prices should be linked to the sugar prices. It is a certainty that Mayawati would form the Government in state of UP which is the largest sugar producing states. The sugar companies have been reeling under losses with sugar prices unable to even meet the cane prices. Such a formula would do wonders for the industry. Sugar stocks rallied strongly. We had a BTST call on Renuka Sugar futures and the call booked Rs 12000 in a matter of minutes.

SKF bearings had an analyst meet. The management gave us incremental confidence on the companies strategy and outlook. The stock has been a wonder over the last 4 months delivering over 50% returns. We had a wow call here and have covered it over the last 6-8 months. What was disappointing was that India, though being among the most competitive amongst the SKF global basket, is not being focussed on for global production. "This could happen and remains a possibility" so in a sense the big growth from that avenue is not immediate. However, the most exciting part of this company is the comprehensive approach to deliver solutions to the clients.. rather than products. The company's Direct consumer Delivery (DCD) model is one which makes SKF as a one window for any product made by SKF globally. This ensures higher revenues. Near term the margins will fall off as the March quarter margins were helped by a stronger Rupee and the kick off in the DCD model. Lower duties for imported bearings came in the first quarter itself but will no longer be there henceforth. Another negative is that slower growth of 2 wheeler impacts them and thats been the story for now. The CEO however heldforth the view that he believed that 2 wheeler growth will remain in the 12-14% range.. The story is a good steady one. A stock to accumulate on weakness. Given the interest of investors.. for the analyst meet, really the weakness will be tough to come by. The stock is now close to Rs 400. Our wow call delivered 30% returns in this one.

Technically Speaking: Sensex recovery from the lows on Friday was encouraging. However, the Sensex for now is making lower tops. Sensex is now ranged between 13910 and 13450. Break out of these levels will give the direction on that side.

Fundamentally speaking : Its the liquidity in the system which will be put under pressure in the next couple of weeks. ICICI bank's issue of Rs 20000 crores plus the DLF issue of Rs 5000 crores and then a couple of thousand crores in NHPC etc are the big ones tapping the market. Not to forget the Rs 2000 cr plus that the Maruti selloff has removed from the market. Interesting to note that ICICIs issue will have to have a dominant share of domestic money given the FII restrictions. Such a large issue will surely have to have the issue at a big discount. Thus the players will short the ICICI future and look to take the issue at the discount. This will keep pressure on the Index. The State bank results are slated for tomorrow and they will impact the beginning of the week. So all in all the fundamental triggers are lacking. Global cues in terms of the US economic news is not positive. Inflation is getting under control. However, now that UP elections are behind us the Government may look to hike fuel prices which could have its impact on inflation negatively.