Weekly Close: tossing a coin for direction would have been easier !

This week was really a case of mice trying to bell the cat. The US market was as unpredictable as ever and the Indian Markets opened gap up and gap down depending on the US markets close. There was no mind of its own, though internal factors did come into play during the day. All said and done the takeaway this week is that the US economy is less shaky than it was appearing to be.

This week marked the beginning of the largest Indian IPO ever and this from DLF. Interestingly it is already around 4 times oversubscribed. Another one from ICICI is round the corner and that is for Rs 20,000 crore. This fear had had the markets down. Now that we face the issue, markets have digested this so really impact is not there to be felt.

Markets are headed into June which is the 2Q reporting season. Newsflow has not been encouraging. Rains have been delayed because of the Middle east storm Gonu. However, as per reports this should help the monsoons to be well spread and normal even despite the delay as pacific oceans will be cooled. Inflation numbers came in at 4.8% and that was some more relief. The big news which was positive was IIP. The April Index for Industrial production grew by 13.6% against an expectation of about 11%. This growth was led by manufacturing which grew by 15%. This has brought in fears that the RBI will be tough and will hike CRR. . Important to note that these numbers are for April. The last CRR hike of 50 basis point was implemented by the end of April and the effect of that is still to take effect into the IIP figures. Slower growth in Auto for May is where its been seen already and also in Housing,

The tech sector saw a smart bounce earlier in the week taking the cue from some sudden weakness in the Rupee. But this strength could not be sustained and was met with some profit taking. Later part of the week saw strength in Cement. However that too did not sustain.

Sensex closed up about 98 points for the week. Among the major gainers there was ACC +6%, Bhel +5%, HPCL +4%. The tech stocks were the losers though losses were less than 4%.

The tech sector was weak this week on profit taking post the run up seen last week. Wipro, Satyam , TCS were losers this week. Investors suddenly have got kicked up about the tech sector last week. We mentioned in our previous notes. DSP also is wondering whether its time to buy.. By the time she decides.. may be it will be time to sell. In our view, it would be unwise to be bullish about this sector yet. There is strong optimism and the feeling of deja vu may be felt for few days. But really, we are unwilling to bite yet. The sector remains in an overweight in most portfolios. The business traction remains good. However, the pressure on salaries is tough and we think that the rates for the projects will not increase with the same pace and the growth numbers in the bottomline are likely to not surprise in any big way.

Crew B O S was a note we covered this week. The company's performance was good and the company did well with its fashion assessories. However, the stock was weakish. Near term performance will not be exciting as the company is consolidating its manufacturing facilities.

We had a note on Balkrishna Tyres. This company is focused on Off the Road tyres.. the Earth Moving Equipment tyres, Agricultural Implement tyres etc. The company is expanding its capacities to meet the global demand. Here is a company which is globally competitive. It as over 3% of the global capacity and growing well. We are bullish on this one. Do read our note on this one.

Technically Speaking: Sensex took resistance at 14280 and slipped back. A close over this level would have given a big trigger to the markets and brought in the buyers. As of now the cat is still in the bag and jury is not out. Its not that markets have turned bearish but they have not turned bullish. A close below 14000 will decisively be indicated to be negative. A close above 14300 would be deemed bullish.

Fundamentally speaking: The demand conditions are a bit soft. The interest rate environment is biting and there are worries of a further CRR hike. We dont think this will happen.. rather we advocate that this should not happen. Inflation is lesser of a problem now and growth has slowed. The conditions are getting ready for easing. However till as much time things get clearer, markets will continue to look for direction. All eyes will be westward .. waiting for cues from how the US close each day as has been the case this week.