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Friday, May 25, 2007

Market Update


Ray of hope for bulls

There's a place so dark you can't see the end…
And dust / a spot of light floods the floor…

Just as the bulls were struggling to find any direction amid concerns of CRR hike, dullness across the global equity market and apprehensions regarding the surge in Rupee, a ray of hope emerged from IT counter, that sparked an impressive comeback for the bulls. Amid all the gloom and doom, Indian bulls bucked the negative trend across the world and marched ahead with IT stalwarts leading the way.

Marketmen believe that the recent rise in rupee has reached to an important level. Around which RBI may intervene to protect the margin of exporters. Value buying in IT stocks drove the key indices higher. Rupee was stable around 40.59 per dollar today, holding at the strongest level since May 1998. Speculations that the Indian rupee may decline from a nine-year high and lower inflation provided the much-needed ammo for the bulls to advance further. India's inflation slowed to an eight-month low in the week ended May 12 due to a drop in textiles and food product prices.

Finally, the BSE 30-share Sensex closed at 14338, up 35 points or 0.24% and NSE Nifty closed at 4248, up 33 points or 0.80% over the week led by gains in REL, Satyam Computer, NTPC, Tata Steel and HLL. Technology, Oil & Gas, Metal and Capital Good stocks contributed significantly towards the gains over the week. Banking stocks witnessed some profit booking after a terrific run up over last one month.

Auto stocks closed lower after crude oil prices roar past $65 per barrel mark. Bajaj Auto also contributed towards the weakness across the sector. The scrip lost over 5% over the week. Bajaj Auto continued to underperform, on concerns that a plan to let Allianz SE raise stakes in joint ventures could lead to the erosion of shareholders value. Tata Motor declined by 2% to Rs726, M&M was down by 0.2% to Rs731 and Hindustan Motors dropped by 3.7% to Rs32.

Robust economy growth boosted the Capital Good stocks led by gains in BHEL, the scrip advanced by 3.2% to Rs2802, L&T gained 1% to Rs1739, ABB surged by over 4% to Rs4488 and Punj Lloyd advanced by 1.1% to Rs182.

IT stocks recovered towards the end of the week on value buying. Satyam Computer rose by over 3% to Rs471, Patni Computer surged by over 7% to Rs549, Infosys edged higher by 0.2% to Rs1985 and Wipro gained marginally 0.2% to Rs543.


Expectations of normal monsoon rains boosted the FMCG stocks. HLL, ITC were in the limelight over the week shrugging off concerns of late arrival of Monsoons. Earlier, in the week, the MET announced that India's monsoon, has stalled over the Bay of Bengal. HLL spurred by over 5% to Rs203, Tata Tea rallied by over 8.5% to Rs915, United Spirits zoomed by over 7.5% to Rs1140 and Britannia added 6% to Rs1504.

Metal stocks were also among the major gainers as the index gained by 2.3%. Index heavy weight Tata Steel led from front as the scrip gained by over 5% to Rs623, SAIL was also up by over 6.5% to Rs148, Jindal Steel rose nearly by 8% to Rs163 and JSW Steel added 2.3% to Rs613.

Oil & Gas refinery lost some ground after smart gains over last week. Oil Marketing companies fell sharply after Brent crude oil price surged over $70 mark. In comparison with the rise in international oil prices, the local prices of the products have not been increased, contributing losses for the companies. HPCL dropped nearly by 7% to Rs279, IOC was down by over 5.5% to Rs475 and BPCL dropped 2.8% to Rs364.

Mid-Cap and Small Cap stocks also advanced further in line with the heavyweights. PTC India, Raj TV, Ceat and NIIT Tech were among the major gainers. PTC surged smartly over the week by 15% to close at Rs66, the company is partnering with MCX for a national electricity exchange. NIIT Tech rose by 17% to Rs604 after the company announced bonus issue in the ratio of 1:2.

A new high for Sensex?

After Nifty’s turn this week, to surge past all time high, it could well be another historic week again, this time for benchmark Sensex to make a new high. Well! Bulls would certainly hope so. Benchmark Sensex is just 385 points away from its previous peak achieved on Feb 9 '07. However, given so much bullishness around, it would be wise to apply caution at every level. The trend of the local rupee will continue to play a deciding role for the markets. Inflation has cooled down considerably to an eight-month low, indicating that interest rates are nearing their peak.

Though the medium to long-term outlook is bullish, volatility is likely to persist with F&O expiry in the coming week. Although stock specific activity will continue depending on the flow of news, the market is expected to consolidate at higher levels. Global cues will again play an important role for the markets, as the mood on the market is being dictated by trends in global markets.