Anand Rathi - Daily Strategist

The NIFTY futures saw a marginal fall in OI 0.13% with prices closing at 3548.75 indicating that lot of longs liquidated their positions and fresh short positions were built up in the market as the market was not ready to sustain at higher levels. Global factors also induced weakness in the market. We may not see aggressive short covering and fresh money coming in the market till the market doesn't sustain above 3750 levels .The nifty futures closed at a substantial discount of 28 points to spot nifty suggesting that futures market is oversold as compared to cash market. Selling pressure was witnessed even when markets recovered. The FIIs were sold nifty futures to the tune of 87.54crs .The PCR has come down from 0.99 to 0.93 levels again indicating weakness in the market .The volatility has risen from 27.70 to 34.95 levels indicating volatile trading sessions ahead and increase in premiums of call and put.

Among the Big guns, ONGC saw fall of OI to the tune of 2.90% with prices coming down 3.24% indicating lot of long positions are liquidated in the counter performing in line with the market whereas RELIANCE saw rise of OI to the tune of 6.74 % with prices coming down 4.32 % indicating that the counter is seeing lot of fresh short positions built up indicating further weakness in the counter.

On the TECH front, TCS, INFOSYSTCH, SATYAMCOMP, WIPRO saw fall of OI with sharp fall in prices indicating that lot of long positions are liquidated in these counters.

The BANKING counter lead by ICICIBANK & HDFCBANK saw OI coming down marginally and prices going down indicating longs liquidating their positions and fresh short positions formed in these counters whereas SBIN saw heavy fall in OI to the tune of 10.56 % with fall in prices to the tune of 4.22 % indicating liquidation of long positions in the counter.

In the METALS TATASTEEL, HINDALCO, STER, NALCO saw liquidation of positions whereas SAIL, JSWESTEEL saw fresh short positions built up in these counters indicating further weakness in these counters.

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Considering the overall scenario and the markets fell down sharply mainly due to global cues any recovery in foreign markets may lead to sharp short covering in our market ., we feel one should hedge the positions. Traders are advised to place strict stop losses.

From the Research Desk

Ahmedabad Visit Note

Cadila Healthcare Limited.

Recommendation Maintain BUY
CMP Rs316
Target Price Rs417

We expect CHL to record revenue CAGR of 20% to Rs24.9bn over FY06-09 driven by strong growth in the export formulations market. Domestic formulations growth is likely to rebound in FY08 and would be above industry average growth. We estimate operating margins to expand by 450bps to 21.7% over FY06-09 driven by US contribution, turnaround of Zydus France and strong foothold in the domestic formulations space. Although there are concerns over the patent loss of Pantoprazole, the management is confident of no launch at risk by generic companies considering the complexity of the product. We estimate net profit to witness revenue CAGR of 32% to Rs3.5bn during the same period. At Rs316, the stock is trading at 17.7x FY07E EPS of Rs17.8, 14.3x FY08E EPS of Rs22.1 and 11.4x FY09E
EPS of Rs27.8. We believe CHL should trade at 19x FY08E and 15x FY09E considering increasing visibility in export formulations, strong foothold in the domestic market and return ratios in excess of 22%. We introduce FY09 estimates and maintain BUY with a target price of Rs417, an upside of 32%.

STRATEGY INPUTS FOR THE DAY

Yen-abling a bear arrest!

For fast acting relief, try slowing down.

After a 16% fall from the top in the Sensex, the bulls can hope for some relief today. A positive trend across Asian markets could well pave the way for a higher opening. Most stock benchmarks in Asia are up between 0.5-1.5% following Monday's mayhem. The reason one may ask. Yen, the much dreaded Japanese currency, has broken the sequence of three consecutive days of advance against the dollar and the euro.

Another relief could come from Friday's FII figures. Foreign funds, which have been a major driving force behind the four-year rally, actually pumped in Rs3.25bn ($73.3mn) on a day when the Sensex lost 273 points. Mutual Funds on the other hand were net sellers to the tune of Rs2.09bn on the same day.

Monday's provisional data from the NSE shows net selling of Rs7.32bn by FIIs. However, one has to wait for the final figure from market regulator SEBI before jumping to conclusions. In the F&O space, they were net buyers of Rs850mn.

We expect a technical (or should we say sentimental) rebound at the start of trading. F&O indicators point to an oversold situation with the Nifty March futures trading at a significant discount. Having said that, just like one swallow doesn't make a summer, one should not get carried away as there could be fresh selling post a rebound. So, take every bounce with a pinch of salt. Short-term traders are likely to be the worst hit, while for those who idolise people like Warren Buffet this is the ideal time to cherry pick one's favorite stocks.

Things are going to be pretty volatile this month. Unless there is renewed buying from the bulls at lower levels, this market will continue to be choppy with mostly negative bias. Also, inflation and interest rates have to stabilise. Globally, the liquidity factor has to improve considerably. Valuations are still quite high despite the correction. Global risk appetite seems to be on the wane and the risk-reward ratio has swung in favour of the former. Caution is the key word as making money won't be a cake walk this year.

US stocks slumped for a third day running as investors continued to exit equities amid worldwide weakness. Worries about the fallout from the sub-prime mortgage lending business and fears of defaults in the housing market also added fuel to the fire.

The global selloff in equities pushed yields on US Treasuries to levels reflecting expectations the Federal Reserve will cut interest rates this year. The S&P 500 and Dow Jones touched their eighth decline in nine days.

The S&P 500 lost 13.05 points, or 0.9%, to 1374.12. All 10 of its industry groups retreated. The Dow slipped 63.69 points, or 0.5%, to 12,050.41. The Nasdaq fell 27.32 points, or 1.2%, to 2340.68. All three benchmarks closed at their lowest since November.

In currency trading, the dollar fell to a three-month low versus the yen. The dollar rose, however, versus the euro after the European currency also slumped versus the yen.

Treasury prices were little changed, with the yield on the 10-year note at 4.5%, little changed from Friday. COMEX gold for April delivery fell $4.90 to settle at $639.20 an ounce.

US light crude oil for April delivery fell $1.57 to $60.07 a barrel after the slide in global markets spread to commodities. The front-month contract was trading nearly flat in extended trading in Asia.

Russian stocks fell sharply, weighed down by declines in commodities and Asian stocks. The RTS index recouped some of its early losses, but ended down 3.2%. It is now down 9.6% on the year, making it the worst-performer year-to-date among major global benchmarks together with India. In Mumbai, the benchmark BSE Sensex closed down 3.7%, for a 10% decline on the year.

Latin American stocks fell as investors continued to move money out of emerging markets. In Sao Paulo, the Bovespa index fell 2.8%, to finish at 41,179.16 and Mexico's IPC benchmark index of the 35 most traded shares fell 2% to 25,788.37. The Bovespa in Brazil is now 7.4% on the year, and the IPC is down 2.5%.

European stocks dropped for the fifth session in a row with investors worried about a host of concerns including mortgage lending in the US, the strength of the Japanese yen and Chinese stock valuations.

The German DAX Xetra 30 dropped 1% to 6,534.57, the French CAC 40 fell 0.7% to 5,385.03 and the UK's FTSE 100 lost 0.9% to 6,058.70.

Market Watch & Insider Trades

Insider Trades:

Pyramid Saimira Theatre Limited: Swiss Finance Corporation (Mauritius) Ltd has purchased from open market 775000 equity shares of Pyramid Saimira Theatre Limited on 2nd March, 2007

Gujarat Ambuja Cement Ltd: Shri P B Kulkarni, Director has sold in open market 20000 equity shares of Gujarat Ambuja Cement Ltd on 27th February, 2007.

Market Volumes:
The turnover on NSE was down by 4.5% to Rs85.51bn. BSE Capital Good index was the major loser and lost 5.51%. BSE Auto index (down 5.18%), BSE Consumer Durable index (down 4.68%), BSE Pharma index (down 4.64%) and BSE Metal index (down 4.59%) were among the other major losers.

Volume Toppers:
IFCI, SAIL, Gujarat Ambuja, R Com, NTPC, ITC, TTML, Reliance Industries, Tata Steel, India Cement, Ashok Leyland, Hindalco, MTNL, Indiabulls, Firstsource, HLL, Nagarjuna Construction, HCC and Praj Industries.

Lower Circuit Filters:
Amara Raja, Ansal Infrastructure, Crisil, Gujarat Flurochemicals, KSB Pumps, Shaw Wallace, Mangalam Cement, Autoline Industries, Fedders Llyod, Nirlon, GMR Industries, Gulf Oil, Kesoram Industries, Shree Precoated, Swan Mills, Texmaco, Tulip IT and Unitech.

Brokers Recommendation:
Era Construction – Buy from Kotak with target of Rs500

Long Term investment:
Sun Pharma

Major News Headlines:

Wipro, Oracle in pact to support IPTV providers

Hindalco Board to mull interim dividend on 12th March

L&T board to consider interim dividend on 13th March

KLG Systel Board to consider interim dividend on 12th March

Century Textiles Board to consider interim dividend on 14th March

TV 18 to give Rs2 a share as mid-year dividend

Sterlite Optical receives UL certification for structured data cables

M&M Board approves bidding for 43% stake of Punjab Tractors

SAIL April-Feb output at 11.4mn tons VS 10.9mn

Moser Baer to invest $250mn on solar cell plant

HOW MARKET FARED

Will the bear onslaught continue?

Bears continued their reign as domestic markets continue to get infected by global cues. Bulls were down & out as the benchmark index fell over 450 points and NSE Nifty declined over 150 points led by heavy selling in heavy weights like L&T, RIL, Infosys and Tata Steel. The BSE Mid-Cap and the small cap indexes also participated in the downfall dragging the benchmark Sensex to hit a low of 12344.44. Finally, the 30-share benchmark Sensex slumped 417 points to close at 12415. NSE Nifty fell 150 points to close at 3576.

L&T declined by over 5% to Rs1383. The board of Directors of the company has announced that they would consider interim dividend on 13th March. The scrip touched an intra-day high of Rs1462 and a low of Rs1375 and has recorded volumes of over 12,00,000 shares on NSE.

JSW Steel was down over 8.5% to Rs430. The company posted a 30% growth in crude steel production. The scrip touched an intra-day high of Rs468 and a low of Rs422 and recorded volumes of over 13,00,000 shares on NSE.

Technology stocks also have been among the major losers. Mid-Cap stocks were among the major losers, Rolta dipped over 13% to Rs283; Polaris was down 9% to Rs157 and NIIT Ltd dropped over 7.5% to Rs693. Wipro, Infosys and Satyam Computer were the major losers among the heavy weights.

Power stocks were on the receiving end. Suzlon declined over 6% to Rs985, Tata Power was down nearly by 4% to Rs508 and REL slipped 1.2% to Rs469.

Aviation stocks also crashed down on back of selling pressure. Jet Airways plunged by over 9.5% to Rs542, Air Deccan slumped over 9% to Rs106 and Spice Jet declined 2.2% to Rs45.

Telecom stocks were also battered out. Reliance Communication declined over 3.5% to Rs398, Bharti Airtel slipped 2.8% to Rs686, VSNL was down 1.3% to Rs355 and MTNL edged lower 0.8% to Rs134.

Select Cement stocks witnessed fresh buying towards the end. Gujarat Ambuja Cement gained 2% to Rs112; Grasim edged higher 0.3% to Rs2101. However, India Cement declined 6.2% to Rs158 and Mangalam Cement was locked at 55 lower circuit to Rs159.

Edelweisss - PCG DAILY MARKET CALL 06-March-2007

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Anand Rathi - Daily Technical Note

Nifty and Sensex have exhibited bearish candlesticks.

Technically, one may use the level of 3450 (Nifty) and 12000 (Sensex) as the stop loss level.

Nifty faces resistance at 3750 and Sensex at 12800.

BSE Smallcap and BSE Midcap Indices have exhibited a bearish candlestick.

CNX IT has exhibited a bearish candlestick.

In the Punter's zone we have a sell in Tata Steel & buy in Hind Lever , Grasim.

In the technical zone we have a buy in Hcl-Tech , Bhel & Infosys Tech.

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Weakness to continue

The Sensex corrected more than 2000 points from its all time high and is expected to dip further on concerns of slowdown in US economy. Also the weakness in global equity markets on sliding Chinese equities, unwinding of yen carry trade may put pressure on the domestic market. However, firm Asian indices in morning trades and FII turning net buyers on Friday when market had a sharp fall, may add to market advantage and help the sentiment to turn positive. Among the domestic indices, the Nifty could test higher levels of 3670 and may dip to 3480 on the downside. The Sensex has a likely support at 12344 and may face resistance at 12440.

US indices witnessed choppy trading during intra-day trades and ended on a weak note on Monday amid weakness in global markets and worries about the fallout from the subprime mortgage lending business. While the Dow Jones was down by 64 points at 12050, the Nasdaq ended 13 points lower at 2341.

Indian floats ended largely with losses on the US bourses. Patni computer was the major loser and fell over 6% and HDFC Bank was down around 5% while, Infosys, Satyam, Wipro, Dr Reddy's, Tata Motors, Rediff and VSNL lost over 1-3% each. However, ICICI Bank was up over 1% and MTNL remained unchanged.

While the Nymex light crude oil for April delivery moved down by $1.57 cents at $60.07 a barrel. In the commodity space, the Comex gold for April series tumbled by $4.90 to settle at $639.20 a troy ounce.

Domestic bourses may track Asian recovery

The market is likely to recover today tracking recovery in Asia-Pacific markets. However, upside may be capped due to margin calls. Margin calls are normally triggered when markets show hyper volatility or witness abnormal slides.

Key benchmark indices in Hong Kong, China, Japan, Australia, South Korea, Singapore and Taiwan were up by between 0.3% to 1.4%.

Indian stocks had tumbled in the past few days due to sell-off in global markets and also due to disappointment from Union Budget 2007-08 announced on 28 February 2007. The fall was accentuated as margin calls were triggered.

Analysts attribute the sell-off in global markets over the past few days to worries pertaining to the US economy, volatile markets in China, and more frequently, the unwinding of yen carry trades, or when investors borrow the yen to take advantage of low interest rates in Japan, and then invest in higher-yielding assets.

Global markets will closely eye this week US economic data such as reports on employment, productivity, unit labor costs and factory orders. US stocks ended lower on Monday, undermined by rising concerns about defaults in the US subprime mortgage market. The Dow Jones industrial average fell 63.69 points, or 0.53%, to 12,050.41. The Standard & Poor's 500 index declined 13.05 points, or 0.94%, to 1,374.12. The Nasdaq composite index tumbled 27.32 points, or 1.15%, to 2,340.68.

FIIs were net buyers to the tune of Rs 324.90 crore on 2 March 2007. This was in contrast to their huge outflow of Rs 3080.80 crore in four trading sessions, from 26 February 2007 to 1 March 2007. The inflows had surged in early-February 2007 following an upgrade in India’s sovereign ratings by global rating agency, Standard & Poor's, (S&P) on 30 January 2007. The FII inflow was a robust Rs 2909.90 crore in five trading sessions, from 2 February 2007 to 8 February 2007.

Investsmart - Morning Call

Market Grape Wine :

In House :

Nifty at a support of 3420 levels with trend reversal above 3745 levels for
the Nifty .

Buy : ABB above 3343 s/l 3295

Buy : ZeeEnt above 219 target 234 s/l 209

Buy : Colgate & IciciBank in F&O




Out House :

Sensex at a support of 12400 & 12345 levels with resistance at 12595 &
12786 levels .

Markets to be very choppy and volatile with short covering at lower levels
not ruled out .

Buy : Maruti & M&M

Buy : RIL & RelCap

Buy : Aban & SesaGoa

Buy : Gacl & Grasim

Buy : JSWSteel & Sail

Buy : Praj & IFCI

Buy : INFY & Sayam

Dark Horse : RIL , JP , JSW , SesaGoa , ABB , Praj , IFCI , IBulls & Bharti

Emkay - Morning Notes, Budget Impact - Software

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An investment cookbook - Chetan Parikh

In a great book, Secrets of the Investment All Stars, the author, Kenneth A. Stern, writes about some steps for investment success.

“Being a successful investor requires skills similar to those of a successful chef. Every cookbook stresses that you need to read the entire recipe before beginning, make sure you have all the ingredients, and not deviate from the recipe until you have practiced it several times. This wonderful advice, if adhered to in investing, will virtually guarantee an improvement to your investment return.

1. Be observant. I respect and admire the all-stars, but I don’t believe they are inherently superior people. They are simply savvy at observing life. They are very good at looking under rocks for opportunities, trends, and cultural shifts that the rest of us don’t see. Or, where we just see a rock, than anyone else. And they know which ones of these rocks will unveil value that should make a stock rise. They are always thinking investing. When they go shopping, they look at what is being bought. When they listen to the news or read the paper they are thinking, “How will this event affect my investments?’ When their kids come home and tell them they have to have a new pair of green canvas shoes, the all-stars instinctively begin to analyze how this new schoolyard craze might affect not just shoe manufacturers, but also the sellers of canvas, cotton, and green dye.

2. Never think that being a successful investor is just picking stocks. Being a successful investor requires timing, proper asset allocation, and patience.

3. Learn basic accounting. Much of stock analysis is based on what companies are worth. To know the worth. To know the worth, you need to be able to read the financial statements and then be able to interpret them. Free cash flow, return on equity, price to earnings and sales ratios should be second nature to you. In the ‘Fundamental Analysis’ section of this book I provide a cursory overview of how to use accounting while evaluating a stock. While you don’t need to take an accounting class (accounting courses often don’t teach how to evaluate a company), I do recommend reading a book on accounting that focuses on how to use accounting to evaluate a company. Robert A. Cooke’s 36-Hour Course in Finance for Nonfinancial Managers (McGraw-Hill, 1993) is an excellent starting point.

4. Learn basic charting. Charting will help you spot trends and time your purchases.

5. Find out where to get information. We live in an information age. Just about anything you need to know is readily available on the World Wide Web and at your local library. Not only do you need to know where to get the information on the Web or in your library, you also will need to become proficient at sorting out useful information from noise.

6. Have clear investment goals. What are you trying to accomplish? How long will this money be invested? What are the tax consequences? Never invest unless you have a plan, unless you know do you need to save? What return on your investment do you need to meet your goal and time frame? Too many people invest aggressively in a way that could lose them money, even though their plan said they didn’t need huge returns. Now they jeopardize their whole plan if they lose money, whereas they would have been fine if they would have taken the low-risk approach and stuck to the plan.

7. Truly understand your risk tolerance. You and I have lied to ourselves about this before. You say you can stand risk, but only if you are making money, right? How will you feel if you invest $100,000 and the day after you write your investment check, your account drops 30% to $70,000? It happens fairly open. Are you really ready to weather such a market drop? Can you still follow your discipline? The bottom line is never invest without knowing the risk versus reward ratio. What are the chances of the investment going down and by how much? Embrace risk—without it there is no profit.

8. Forget what the stock price was a year ago. Forgot what you paid for the stock. You will learn that if you are worrying about buying a stock because it’s too high, or you don’t want to sell a stock because it’s either not up enough, too far up, or down, you’re focusing on the wrong stuff. Evaluating a stock has no bearing on what it was worth a year ago, or what you paid for it.

9. Stick to your discipline and don’t become emotional. This is easy to write, harder to say, and even tougher to do. However, maintaining a coolly disciplined, unemotional view of your investments will make you a better, richer investor. If you decide to be a value investor, stick with your value discipline through thick and thin. Understand, I am not recommending you chose only one discipline. Many investors use several disciplines. But what you should not do is become frustrated with the one-month or one-year return on your value investments, then switch willy-nilly to momentum investments. Time rewards your tenacity and discipline. In the words of Sir John Templeton: “Buy when the blood is in the streets, even if it is your own.”

Don’t invest in fads. You’ll continually hear new theories. For example, buy the lowest priced Dow Jones stocks with the highest dividends. If everyone begins to do this, the anomaly that might have existed is blown. Finally, don’t get emotional and don’t second guess yourself. The one time you second guess is the one time you’ll miss the “big one.’

10. Level with yourself. You aren’t going to pick every winning stock. You can be right and wrong, because if you invest properly, you probably need to be right only 55% of the time. I remember being shocked at first when I interviewed Foster Friess and David Katzen (of Zweig and Associates). I asked what percentage of stocks they actually lost money on. They smiled and said sometimes 40% or more. I then asked how they could still maintain such an incredible track record. Their response was because the stocks that they lose on generally go down less than the gain on the stocks that go up. I used to beat myself up if I had one losing stock. I don’t anymore.

If you ever get to the point where you think you’ve figured out the market, cash in everything. You’ll never completely figure out the market. There is no single key to the market. It is ever changing and it is rarely logical. Did you ever see a stock that just had the greatest news, but it went down? Why? You will be given hints, but remember that no hard and fast rules exist. And never forget that every time you think you bought a winning stock, someone was willing to sell you that same stock.

11. Invest for the long term. Attempting to guess short-term swings in individual stocks or the economy is a difficult, almost impossible, task for even the best stock pickers or economists.

12. Remember, cash is king. Regardless of the market you’re in, cash is, and always will be, king. Even if you’re earning only 4% or 5%, you need to always have some cash. The cash is necessary to buy more stock, limit losses, and be ready for a good deal. Never be 100% invested in stocks.”

FIIs in buying mode

Net inflow of Rs 325 crore on 2 March 2007

FIIs were net buyers of equities on Friday (2 March 2007), the day when the market fell sharply.

FIIs were net buyers to the tune of Rs 324.90 crore on 2 March 2007. This was in contrast to their huge outflow of Rs 3080.80 crore in four trading sessions, from 26 February 2007 to 1 March 2007.

FII net inflow of Rs 324.90 crore on 2 March 2007 was a result of gross purchases worth Rs 3442.40 crore and gross sales of Rs 3117.50 crore. The Sensex had declined 273 points that day due to a sell-off towards the fag end of the trading session.

The inflows had surged in early-February 2007 following an upgrade in India’s sovereign ratings by global rating agency, Standard & Poor's, (S&P) on 30 January 2007. The FII inflow was a robust Rs 2909.90 crore in five trading sessions, from 2 February 2007 to 8 February 2007.

Citigroup - India Market Watch

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Citigroup - India Economics

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