Weekly Close: Markets Looking for direction !

It was a holiday week with markets closed for 2 days in the middle. Markets started with a big negative with ICICI results declared being quite disappointing. Also the intention to raise huge money is what had the markets squirming. All banks saw some pressure on Monday. However Markets made a recovery helped by the cement, steel and Tech counters. The Rupee was weaker on Monday on expectations that the RBI was ready to intervene having increased the Monetary stabilisation funds availability. With holidays the participation was surprisingly not less. There was good level of activity. The two wheeler numbers were a disappointement. Hero Honda did well but Bajaj and TVS numbers were extremely disheartening. Tough to digest the view that the industry growth will slow to 5%. We were expecting benefits of the lower priced excise free bikes to spur growth. But that does not seem to be happening. Bajaj Auto rallied despite bad sales numbers for April on talks that the business split would be discussed in May. Cement stocks got a gift of sorts from the PM with the Dual excise regime shifted to an advalorem one. The impact of this is not too positive but it does away with the negative of the head on conflict between the Finance Ministry and the Cement industry. It is clear now that there will be no cement ban.

Sensex closed flat this week. Nifty however gained half a percent. The gainers were ACC + 4%; Bajaj Auto +4%, Gail 8%, HCL t +4%, Hero Honda +4%, Tata Power +4% Among the major losers was HLL which was down 6% this week. topnew.gif (1104 bytes)

Stocks delivered this week as well.

Castrol was a winner this week and that was over 25% gains on the wow call. Castrol benefits from an appreciating rupee and a weaker crude oil. Base oil prices are slipping and thats what brought in the interest. We expect this company will be compared to an FMCG plays as its Workshops come online. The Lube business however will see pressure from higher life and better quality engines which use even less Lube oil. There are talks that the parent may buy it out and get it delisted.

Aftek was another one giving in some smart gains this week.. though we closed the call with some gains. HPCL also gave gains and so did D-link. We closed RTS power with decent gains. The company did not report any good results.

The tyre companies are doing well. We had research put out for Apollo tyres. The companies performance has been good and with lower rubber prices life is quite easy here.

Technically Speaking: Markets are taking a breather. A close below 13828 would have the markets headed for 13500 levels. It would be a major negative because a lower top has been set up. So its important that 14390 is taken out on the upside. However the resistance at 14240 needs to be taken out ahead of that.

Fundamentally speaking : Results are coming in still and the Auto majors are the ones to report and also the biggie SBI. Almost all others have been fairly ok. There is nothing which these numbers will change. However inflationary pressures across the globe are increasing. The appreciating rupee offsets that to some extent.. but inflation in India continues to be high and this is despite the base effect. So really we are concerned. We believe that the upsides will be tempered by inflationary pressures.