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Thursday, March 29, 2007

STRATEGY INPUTS FOR THE DAY


Short-covering, a hope for bruised bulls

A minute's success pays the failure of years.

That’s what the bulls will pray for as they are into a year which has not been promising so far. After yesterday's selloff, the bulls may have harboured some hopes of a rebound. But, they are unlikely to get much of a relief this morning as most global indicators are pointing towards one direction i.e. down. On the brighter side, FIIs pumped in Rs2.9bn (provisional) in the cash segment yesterday on a day when the Sensex tumbled 239 points. In the F&O segment too, they were net buyers to the tune of Rs2.92bn. On Monday, foreign funds were net buyers of Rs805mn in the cash segment. Mutual Funds were net sellers at Rs2.95bn on the same day.

So, what we have is a mixed set of cues. After a sharp drop, the market will surely look for a bounce. That may materialize only in case of short covering in the F&O segment. Given the fact there are more uncertainties around than optimism it will take a big effort on the part of the bulls to sustain any kind of rally going forward. IT shares may remain under pressure due to the strength in the rupee versus the dollar. Also, the volatility could be a bit higher than normal today on account of derivative’s settlement.

Global worries could unsettle the local bulls yet again. Oil has climbed to $64 per barrel on the back of rising tension between Iran and the UK over the detention of British sailors by Tehran last week. Analysts warn that any escalation in the situation would have a significant impact on oil prices. So, keep an eye on oil.

Federal Reserve Chairman Ben S Bernanke says though central bank policy makers are focused on containing inflation, risks to the US economy have increased in recent times. "Uncertainties have risen, and therefore a little more flexibility might be desirable," he told the Joint Economic Committee of Congress in Washington.

In foreign currency markets, the Japanese yen touched a nine-day high against the dollar as a slowing US economy and tension between Iran and the UK led investors to cut back on the so-called carry trades.

US stock benchmarks extended this week's losses after Fed chief Bernanke said inflation remains his main concern amid growing evidence that the world's largest economy is slowing.

Wal-Mart, General Motors and Boeing pushed the Dow Jones Industrial Average to its third straight decline as crude oil jumped to a six-month high. Financial shares, led by Goldman Sachs were the biggest drag on the Standard & Poor's 500 Index, which erased its gain for the year.

In economic reports, weaker-than-forecast durable goods data added to the data earlier this week that the housing market continues to deteriorate and consumer confidence is waning.

The Dow lost 96.93 to 12,300.36, the S&P 500 slid 11.38 to 1417.23 and the Nasdaq Composite Index shed 20.33 to 2417.10. All three benchmarks dropped about 0.8% each.

Oil prices pared some gains after the release of the weekly oil inventories report, but still settled above $64 a barrel on the New York Mercantile Exchange. Prices have been on the rise amid worries about the conflict with Iran, the No. 4 oil exporter. The front-month contract was 8 cents lower at $64 a barrel in extended trading in Asia.

COMEX gold for April delivery rose $4.10 to settle at $672.90 an ounce. Treasury prices slipped, raising the yield on the 10-year note to about 4.61% from 4.59% late on Tuesday. In currency trading, the dollar fell versus the yen and inched higher versus the euro.

European shares traded lower. The pan-European Dow Jones Stoxx 600 index declined 0.74% to 369.70. The German DAX Xetra 30 slipped 0.6% to 6,816.89 and the French CAC-40 benchmark lost 0.62% to 5,552.69. The UK's FTSE held up better, down 0.4% at 6,267.20, as the benchmark's weighting of major oil companies served to limit downside.

Stocks in Brazil and Mexico fell. In Sao Paulo, the Bovespa stocks index lost 722 points, or 1.6%, to close at 44,484.10. In Mexico City, the IPC lost 26 points, or 0.1%, to 28,098.28, though stocks bounced off their lowest levels of the session.

Asian stocks were mixed this morning. Markets in Hong Kong, China and Korea were trading higher while those in Tokyo and Singapore declined. The Morgan Stanley Capital International Asia-Pacific Index slipped 0.7 percent to 143.97 at 10:58 a.m. in Tokyo.

The Nikkei was down 158 points to 17,096 while the Hang Seng in Hong Kong gained 75 points to 19,629. The Kospi in Seoul added 3 points to 1443 while the Straits Times in Singapore was nearly flat at 3203.

HOW MARKET FARED

Yet another down day

Weak global cues and rise in crude oil prices pushed the key indices in red at open, from there on the markets fell continuously as selling was witnessed all over the bourses. The Techies led the downfall as rupee strengthened against the US Dollar dragging the IT stocks lower. Others like Auto, Bank, Capital Good and Telecom stocks followed suit dragging the benchmark Sensex to hit a low of 12861.18.

However, Sugar stocks out performed for second straight day as government may announce export rebates for sugar producers. Oil exploration major ONGC also stood firm as crude oil rose sharply. Sesa Goa was also in the limelight as the deadline for submitting bids for promoters stake ends today, the scrip was up 3% finally closing at Rs1798.

Finally, the 30-share benchmark Sensex declined 239 points to close at 12884. NSE Nifty fell 58 points to close at 3761.

Polaris slipped 1.5% to Rs177. The company declared that they would pay Rs1.25 per mid-year dividend. The scrip touched an intra-day high of Rs182 and a low of Rs175 and recorded volumes of over 7,00,000 shares on NSE.

ONGC surged over 1.7% to Rs864 after crude oil prices surged above US$64 per barrel. The scrip touched an intra-day high of Rs872 and a low of Rs825 and recorded volumes of over 19,00,000 shares on NSE.

Sterlite Optical was flat at Rs182. The Company received Power Conductors order from Power Grid Corporation of India. The scrip touched an intra-day high of Rs187 and a low of Rs177 and recorded volumes of over 1,00,000 shares on NSE.

IOC declined by 3.2% to Rs404. The company announced its entry into the refinery and petrochemicals business in Turkey with an investment of around Rs430bn. The scrip touched an intra-day high of Rs413 and a low of Rs401 and recorded volumes of over 71,000 shares on NSE.

Sugar stocks rallied for second straight day as government may announce export rebates for sugar producers. Sakhti Sugar rallied by over 15% to Rs78, Bajaj Hindusthan jumped by over 4.5% to Rs183, Renuka Sugar surged over 6% to Rs455 and Balrampur Chini added 2.6% to Rs65.

Pharma stocks also ended with smart gains. Ranbaxy surged by over 3.5% to Rs338, Dr Reddy’s Lab was up 1.5% to Rs692 and Wockhardt surged by over 6.5% to Rs397 after the company received US FDA nod for anti-inflammatory injection.

Telecom stocks were on the receiving end as profit booking dragged them lower. Reliance Communication lost 1.5% to Rs419, Bharti Airtel was down 1.7% to Rs757, VSNL declined 1.8% to Rs395 and MTNL edged lower 0.3% to Rs148.

Profit booking dragged the Banking stocks lower. Heavy weight SBI declined 4% to Rs973, ICICI Bank dropped 2% to Rs875 and HDFC Bank was down 1.6% to Rs958. Among the Mid-Cap stocks Corp Bank, Canara Bank and PNB were the major losers.

Sesa Goa gained 3% yesterday in a weak market amid grapevine that the final bid for Mitsui & Co.'s 51% stake in the company could be at a significant premium to the market price. The scrip closed at Rs1,796 yesterday with volume of over 10 lakh shares and 20% marked for delivery.