Money Tree

Both NIFTY and Sensex closed in the red after a volatile session. The NIFTY had a gap down opening in the morning and slipped to 4126 and from there it bounced back and went in the positive territory for some time but fell down again in the last leg of trade to close at 4145 down 34.5 points from its previous close, Sensex also lost 122.37 points to close at 14063.81. The major contributors to the fall in NIFTY were ACC down 5.27 percent at 762, OBC down almost 5 percent at Rs. 212, HDFC down 3.72 percent at Rs. 1751, VSNL down 4.3 percent at Rs.452, TATA Steel down 5.19 percent at 583, SAIL down 4.57 percent at Rs. 124 and HP and BP were also down more than 3.5 percent at 261 and 331 respectively. A few Nifty gainers were hindalco up 3.23 percent at 128, satyam up 2.5 percent at 493.7 and ONGC up 2.3 percent at 872. The advance decline ratio was also negative with 368 advancing stocks to 729 declining.

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The markets after having a gap down opening bounced back in the morning and thereafter remained volatile to end negative in the end. The NIFTY closed at 4179.50 down 18.75 points and Sensex closed at 14186.18 down 69.75 points. The advance decline ratio was also negative with 399 advancing stocks to 667 declining stocks on NSE.
The NIFTY fell down near 4150 levels where it found support and was pulled back in the green. It remained above 4200 levels for quite some time but could not hold and fell down from above 4200 levels. We had indicated in the morning that a strong support exist at 4142 levels and if breached NIFTY would slide further, but the NIFTY did not breach this level and was pulled back from 4150 levels.

The markets today, after opening flat in the morning, fell down about 2 percent in the last 2 and half hours of trade. The sharp sell off came in when the NIFTY went below 4250 levels and thereafter it went below 4200 levels and closed at 4198.25 down 86.40 points and Sensex fell 279 points to close at 14255.93.
Some shorts also started building up after the NIFTY fell below 4250 levels and the NIFTY futures discount rose to 27.15 points with a very high turnover of Rs. 55,824 crores. It was a day of major profit booking with high volumes, which is not a good signal for the markets. The advance decline ratio was also negative with 861 declining stocks to 242 adcancing stocks on NIFTY.
The major draggers were Banking, oil and steel sectors with RIL down 3.3 percent at Rs.1687.35, RPL down 3.1 percent at Rs.98.55, PNB down 5.14 percent at Rs.509.75, SBI down 3.35 percent at Rs.1388.20, Tata Steel down 3.66 percent at Rs. 617.70 and sail down 4.67 percent at Rs. 132.55. The sentiment was negative as the ECB was expected to raise interest rates and there are apprehensions in the US markets that the US FED may also hike interest rates therefore the overall international sentiment was turned negative.

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Reliance Capital

We had recommended Reliance Capital at Rs. 745 on 3rd May 2007 and thereafter it has been in an uptrend and has crossed Rs. 1000 levels recently. The stock did not go below our recommeded level since then. The current market price of the stock is Rs. 971.95.

We had recommended Dish TV on 3rd May 2007 at Rs. 110-112 with a short term target of Rs. 135. Today the stock traded above our target price for a long time and closed at Rs. 134.15 today. We had maintained that once the stock crosses Rs. 110 level decisively then it would have its next target placed at Rs. 122 and then Rs. 135. Today it has aceived our final short term target and the stock afer crossing Rs. 110 level did not go below that as indicated in our recommedaiton.

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The inflation as announced today for the week ended on 12th May 2007 stood at 5.27 as compared to 5.44 the previous number. This is slightly above the expected level, however it has improved from the previous level and is marching towards the targeted level of below 5.
The inflation number is being watched closely by the Reserve Bank of India as it may need to take some measures to bring it below the desired level.
The rupee has found support between 40.55 to 40.60 levels, some traders predict that RBI has started intervening and may not let the dollar fall below 40.5 levels. A big quantum of foreign money is expected to come into the system in the coming month and then it would become very difficult for the dollar to hold above Rs. 40 levels. Some experts are now contemplating another CRR hike by the RBI to suck the excess liquidity from the banking system.

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The rupee has appreciated more than 10 percent in the last one year and the rally seems to be continuing. The exporters are holding their nerves witnessing this seemingly uncontrollable rise against the dollar. But why the rupee is appreciating and is RBI taking any measures to put reins on it and is it good for economy or will it create problems going ahead. We will endeavor to answer all these questions in the following discourse.

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What’s buzzing today

Divi’s Lab

Divi’s Lab is leading the midcap pharma pack. On the back of good quarterely results, the stock is up more than 8 percent at Rs. 4398 as against a close of Rs.4057 yesterday. Matrix Labs has also posted good set of numbers and is following the trend, the stock is up 6.7 percent at Rs. 235 as against its yesterday’s close of Rs. 220.20.

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GLOBAL MARKETS

US Markets

The US markets closed almost flat on Wednesday.

Dow Jones closed at 13525.65 down 14.30 points or 0.11 percent
Nasdaq Composite closed at 2577.05 up 10.97 points or 0.42 percent.

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The much awaited DLF ipo is expected to open on 11th June 2007 and the price band is likely to be Rs. 510 to Rs. 600 per share. The total issue size is expected to be near Rs. 10,000 crores, one of the biggest issues in Indian primary market.
SEBI has given its nod to the OMAXE IPO and the same should also hit the markets in the month of June or in early July. The last real estate player to come out with an IPO was Orbit Corporation which came out with a successful IPO last month.
The overall real estate sector is in an uptrend with Unitech recently making its all time high and other players like Ansal Properties, Parsvnath Developers, Mahindra Gesco, Sobha Developers, etc also in an upmove.