Market expected to consolidate

The market is expected to consolidate at current levels, before making any big upmove.

Inflation which had been a concern for quite a while now seems to be getting over. Indian inflation fell to its lowest level in eight months in mid-May, data showed on 25 Friday 2007. The widely tracked wholesale price index rose 5.27% in the 12 months to 12 May. Annual inflation had hit a two-year high of 6.69% in late January 2007.

The market is expected to stay highly volatile ahead of the expiry of derivatives contracts for May series scheduled on 31 May

The market is also seriously worried about big IPOs lined up June onwards. It is believed to be the highest-ever capital mobilisation. Lot of liquidity will be sucked off from the secondary market. This will make its way to the primary market.

Real estate giant DLF has set a price band of Rs 500-550 per share for its initial public offer and lowered its mop-up target to a maximum of Rs 9,625 crore, against earlier estimates of up to Rs 13,600 crore. The issue will open on 11 June and close on 14 June 2007.

DLF would come out with a public issue of 17.5 crore equity shares of Rs 2 each through 100% book-building process. The post-issue dilution of the issue would be over 10%. This public issue would still be largest IPO as ONGC had raised Rs 10,500 crore through follow-on-offer, a company official said.

Also the country’s second largest bank, ICICI Bank, has sought approval from Sebi to sell Rs 17,500 crore of shares to local and overseas investors. The bank has set a target of launching the issue in June. The offer may be raised to Rs 20,100 crore depending on demand, the sale document said.

On the flip side, rumors of the Reserve Bank of India (RBI), which has already raised the cash reserve ratio (CRR) thrice since December 2006, contemplating another hike, though only on incremental deposits this time, is weighing on the bourses. There is a buzz in the market that the decision can come today evening. CRR is the percentage of deposits that banks are required to keep with the RBI.

RBI is particularly concerned about absorbing excess liquidity since it has lowered the inflation target from 5-5.5% to 4-4.5% for 2007-08.

The marketmen will also keenly await the progress of monsoon. The annual monsoon is predicted to strike the Kerala coast Sunday, 27 May 2007, four days ahead of its normally scheduled date of arrival on 1 June 2007. From Kerala the monsoon travels upwards to the parched central Indian plans and is expected to bring rains to New Delhi by the end of June.

However the fall will be cushioned as buying support will emerge at lower levels, followed by fantastic set of March quarterly and annual results from India Inc

Technically, the Sensex has strong support at 14,000 level and on the upside faces a stiff resistance at 14,600 level. Similarly, the Nifty has support of 4,180 on the downside, while on the upside there is a near term resistance at 4,300.

Crude oil prices were hovering near $64.53 a barrel and Brent at $71 a barrel exchange, Any sharp rise from here may lead to further fall.

Major March 2007 quarterly results scheduled next week include Mahindra & Mahindra, Unitech, Canara Bank, Larsen & Toubro, Hindustan Petroleum Corporation, Britannia Industries, NTPC, Tata Power Company, Punj Lloyd and Bharat Heavy Electricals (Bhel).

Neyveli Lignite Corporation, Dishman Pharmaceuticals and Chemicals, Northgate Technologies, Jindal Stainless, Aegis Logistics, HOV Services, Thermax, Crompton Greaves, Welspun India, Madras Cements, Cummins India and Action Construction Equipment will also declare their March 2007 quarterly results