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Thursday, January 04, 2007

STRATEGY INPUTS FOR THE DAY


Enjoy the ride…safely

Nothing is worse than active ignorance.

A joyride is good as long as you land safely. But for the markets there is no end to gains and pains. The results are yet to come in, and the bulls seem already excited. The first two days of the new year have been pretty good for the market. The Sensex is above 14k and the Nifty is quoting above 4k. The undertone remains upbeat owing to the strong momentum in the economy and corporate earnings. FII inflows continue, albeit at a slower pace.

Globally too, things appear fine from our market’s point of view. Everyone's waiting for the Fed to take a call on the US economy and interest rates. Other factor to keep an eye will be fund flows, especially into the emerging markets and particularly India within that pack. It will take some time before we get a clear picture on all these.

Locally too, some questions remain. How much more can the main indices rise from here? Will we see a correction? If yes, how long and how sharp will it be? And, most importantly when it will come? The timing of a fall is quite unpredictable. All one can do is be a little cautious when the trend is bullish. After nearly 47% returns last year from the Sensex, it may not be all that easy to make money this year. But it is definitely possible.

For today, we expect another positive start, but the current momentum may just taper off after a two-day rally. In the US, the Dow and the Nasdaq rose marginally. One good news is that oil fell sharply yesterday in New York trading to settle at $58.32 a barrel. Asian markets were mixed this morning. The Nikkei 225 Stock Average climbed 0.7% to an eight-month high while the Hang Seng dropped 50 points to 20,363.

FIIs were net buyers of Rs1.68bn in the cash segment yesterday on a provisional basis. In the F&O segment, they pumped in Rs1.57bn. Mutual Funds were net sellers of Rs79.8mn on Tuesday.

US stocks erased an initial rally in 2007's first trading day after minutes from the Dec. 12 meeting of Federal Reserve policy makers suggested that the central bank was still concerned about slowing economic growth and accelerating inflation.

Copper plunged 7.7% in New York to a seven-month low after US construction spending dropped in November. A measure of six metals traded on the London Metal Exchange (LME) dropped 1.9% following a 2.4% slide a day earlier. Copper slid 4.2% in London.

Among the Indian ADRs, VSNL surged 5.5%, Infy was up 2.3%, Wipro gained 1.4%, Satyam rose 2.3%, Tata Motors shot up 6.2%, MTNL climbed 4.4% and ICICI Bank added 1.2%.

In the emerging markets, the Bovespa slumped over 2% to 44,445 while the RTS index rose 0.6% to 1921 and the IPC index in Mexico fell 0.2% to 26,619.

Global Vectra Helicorp is likely to rise after signing an agreement to provide helicopter services to Transocean Offshore International Ventures and its affiliate for three years. The total value of contract works out to Rs430mn.

Air Deccan is expected to gain amid reports that the low-cost carrier may fly into the profit zone in the October to December quarter. Videocon Industries could be under pressure as reports say its proposed takeover of Daewoo Electronics has hit a roadblock.

NTPC is another stock to keep an eye on. The state-run power generation major is reportedly planning to sign an agreement with Nigerian Government to set up a gas-based power plant there in lieu of 3mn tons of LNG per year.

GNFC might attract some attention amid reports that it will pump in Rs11bn on setting up a TDI plant in Gujarat.

Major Bulk Deals:
Lehman Bros has picked up Asian Electronics and IOL Broadband and sold Pioneer Embroideries; ABN AMRO Bank has bought DCB; Reliance Capital has purchased EIH Associates; Lotus Global has sold GV Films; Kotak Mahindra Bank has sold NK Industries; Franklin Templeton MF has picked up Polaris.

Insider Trades:
Hexaware Technologies Limited: Goldman Sachs Investments (Mauritius) I Limited ("GSIMI") has purchased from open market 250000 equity shares of Hexaware Technologies Limited on 29th December, 2006.

Market Volumes:
The turnover on NSE was up by 37% to Rs81.54bn. The BSE Consumer Durable index was the major gainer and gained 1.61%. BSE Pharma index (up 1.42%), BSE Technology index (up 1.30%) and BSE Auto index (up 0.46%) were among the other major gainers. However, BSE FMCG index lost 0.71%.

Volume Toppers:
IFCI, DCB, Polaris, SAIL, Unitech, Hindalco, GTL, R Com, HCC, Indiabulls, IVRCL Infrastructure, Satyam Computer, Parsvnath, NTPC, GTL Infrastructure, Ashok Leyland, Triveni Engineering and Tata Motors.

Upper Circuit Filters:
Shaw Wallace, Flex Industries, Ganesh Housing, IOL Broadband and McNally Bharat.

Brokers Recommendations:
Maruti – Buy from Citigroup with price target of Rs1107

Long Term Investment:
IGL

Major News Headlines:
i-flex to buy Singapore consulting unit of Capco
Reliance Comm Board meet on Jan 10 to mull fund raising plans
RPG Transmission gets orders worth Rs1.93bn
AV Birla Group Cement sales fall 3.2% in December
Diamond Cable gets orders totaling Rs216.7mn
Tata Steel Apr-Dec sales up 11.7% yoy
IOL Broadband ties up with BSNL
ITD Cementation to sell Rs2.5bn shares to big investors
L&T secures $94mn order from Abu Dhabi
ACC Dec cement shipments up 3% yoy
Bharat Electronics Board to consider interim dividend on Jan 23
BHEL is set to bag a Rs4bn contract from Bangladesh: reports