Weekly Close: Alls well that ends well !.. But has it ended ?

Volatility continued across the globe with anticipation from Fed on its attempt to rescue the US economy. All eyes were on Fed's decision as the interest rate was cut by 50 bps but really it had nothing to help. Even though Indian economy is said to be independent of US.. FII participation's is quite a marketmover in India. FII's sold nearly Rs.12k cr in the month of Jannuary 2008. RBI also had their meet on credit policy this week..Positively surprising there was no policy change. The markets did not see it positively though.. specially the banks. This independent thinking finds favour with us. Trading sessions this week continued to be highly volatile given the F&O settlement week. The expiry of the Januray serries brought in relief as in the poison was largely out of the system. Final day of the session witnessed bit of volatility but rallied with value buying at the final hours of trade which pushed sensex to close nearly 600 points up.

Sensex and Nifty both ended down marginally. Sensex was supported by HDFC +10.53%, Tata Steel +8.81%, Maruti +8.59%, Bajaj Auto +8.5%, TCS +5.95%, Cipla +7.94%, Tata motors +5.43%, HUL +4.37% and Infosys +4.21%. While the dragger's were DLF -13.77%, Rcom -8.29%, NTPC -7.76%, LNT -4.66%, BHEL -4.48%, ICICI Bank -4.39% and ACC -4.34%.

Mid cap index were down 4% and Small cap index slipped 3.5% down.

Inflation for the week ended Jan 19 Stood at 3.93%. Now its inching up. Inflation was low so far but it was a base effect. Now as the base effect is over we will come to know the actual inflation number. For now it seems to be headed up. But crude remains a worry. Govt. has been talking of increasing the petrol and diesel price for long but we believe that it will possible avoid hike on face of election.

The third quarter review of the Annual Monetary Policy for the Year 2007-08 brought in a surprise. RBI left key policy rates unchanged as against a cut which was widely anticipated. There is slower growth witnessed in certain sectors, but by and large the domestic economic fundamentals remain intact believes the RBI. The RBI had a hawkish stance on the back of excessive credit growth, overheating of economy and inflation worries. The stance is neutral now. There has been a high level of liquidity with strong FII inflows and the excess liquidity was soaked up with high CRRs. This we believe will be the first to change. We believe that over the next six months, the RBI would cut rates in line with the continued global easing. Not that it matters. FIIs have limited access to Indian debt and the interest rate differential does not still matter in the context of money flow. Thus, the RBI does have the privilege to play its independent tune and this is good. We believe that going ahead the banking sector will be a key beneficiary of lower interest rate environment and near term shocks would provide for opportunities in this sector.



Near term the focus will shift to the Budget. As always it has become a non event but thats some reason for hope for the markets. We call it a noon event as policy making no more often than not happens outside this event. Focus on Agriculture, Defense, Education we believe will offer the defensive plays.

Eveready numbers didn't seem good on the face of it but there are signs of improvement. The company made loss on the back of high deferred tax. Zinc moved down from the level of $ 4000 per tonne to $ 2900 on yoy basis. Currenly zinc is around at the levels of $2300 - $ 2500 per tonne and that augurs good for the margins. Do read our note for details.. Certainly this could be exciting.

Bajaj Auto numbers were lower than market expectations. Net profit was down 5%. The company posted an exceptional expense of Rs 102 cr with Rs 51 cr written off this quarter as 712 workers opted for VRS at the Waluj plant. Net revenues were down by 3%. The decline in the sales was seen due to lower volumes and the company took a one time hit of Rs 28 cr for Platina in its inventory where the selling price was reduced. The value unlocking talked off through the demerger could limit the downsides. One could hold the stock to benefit from the upsides post the demerger. Our note will give you better understanding on this one.

Garware Offshore (GOSL) reported healthy numbers. The increase is on the back of re-pricing exercise on one of the existing AHTSV and PSV priced at a significant higher price of $8800 from $4500 and PSV III Everest which has been deployed with British Gas for a period of 3 years at $17200. Garware operates vessels that support oil and gas drilling activities in India. Garware owns and operates four anchor handling tugs cum supply vessels (AHTSVs) and 3 platform supply vessels (PSVs). With the current upswing in oil exploration both globally and in India, Garware is well placed to benefit and grab the rising demand with competitive pricing. The favorable charter freight rate scenario is also likely to support Garware's growth in the medium term. But we are not convinced.

We will come with more result analysis next week. Mcleod and Paramount are in the pipe line.

Technically Bear Markets: Interesting to note that almost all markets, Technically are in a bear phase. A fall of the indices of round 20% from its highs within 2 months is defined as the entry point of the bear markets. All markets have seen a sell off and one can say that they have entered the bear market phase. Having said that, its important to understand that bear markets should reflect the expected economic conditions. For now economic conditions in India dont seem to be ready for a bear market. At least not yet.

Sensex traded with low volume of Rs 4479 cr with Declines ahead of Advances. Sensex Support lies at 17500 and Resistance lies at 18300 -18400 levels. For sensex we maintain a target of 19200.