Weekly Wrap-Up March 23-03-2008

Currency

After 75 bps rate cut by Fed in this week, interest rate arbitrage opportunity further widened. But FIIs seems not in a mood to exploit this opportunity, after SocGen’s index arbitrage game in Europe boomeranged. FII figures in secondary equity
market also indicate continuous net withdrawal. Ballooning Oil bill & pressure on govt to liberally import primary articles like wheat & Edible Oil is pushing Rupee downward. Rupee is marching towards 41.25 after break-out from 4-month old trend-line.

Crude Oil

We are repeatedly mentioning through this weekly report that rally in Crude Oil is without fundamental justification after fading of short & medium term factors like Iran issue, winter season in northern hemisphere & possibility of a global slow-down.Rally in Crude Oil in past two months seems more of an inter-play between institutional investors. That’s why Crude Oil plummeted in this week on an excuse of a Fed rate cut. Entrapped Bulls will desperately try to protect $ 100 level.

Call Money & Bond

Inter-bank Call rate spiked modestly at the end of short week.
Financial year end, stressing inter-bank liquidity. RBI is pouring money through Repo window.
Yield on 10-year benchmark G-Sec remained stable but expected to spike in next week as headline inflation
spiked by 83 bps to 7.92%.

Equity Market

FIIs turned slightly positive at the end of short week, after heavy selling in first two sessions.
Domestic institutions are supporting market at every bottom lonely, since past three months.

Sectoral Performance (BSE Indices)

Despite a stream of negative developments about banking & financial services sector from US, IT index remained stable in this week. TCS, Wipro & Satyam gained 1-3% on weekly basis but flagship Infosys remained in a red. Stock lost 2% on weekly basis despite 2.2% gain on last trading session of this week. Participants seems building a paltry long position in IT stocks in this week on positive expectations from new H-1 B rules from US. But these desperate Bulls might have to wind-up their positions in next week, as US proposed tighter rules for new issuance of H-1 B visas. Proposed rules will not allow multiple applications from different employers for a same employee. This will bring Indians at par with other IT skilled economies, at least at entry level.

HUL managed to float while ITC lost 2.4%. FMCG index is underperforming in a falling market, post Jan.’08 panic. A silent but definite restructuring seems happening in HUL as every (say)fortnight; an advertisement from HUL appears in a leading business newspaper about disposal of residential flats in plush areas like Colaba, Malabar Hill & Pedder Road. Strong hands seems taking not of such developments, especially post Jan.’08 panic.
Hero Honda lost 9% while Bajaj Auto lost 16.5%. Maruti lost 1.5%. M&M gained 1.4%. 5% gain on last trading session in Tata Motors helped stock to gain 2.3% on weekly basis. Auto stocks are showing mixed trend.
After many weeks, Capital Goods index under-performed in a falling market. When cat is out of bag it is time to take action. After weak IIP & Capital Goods growth data for Jan.’08, bears seems covered their shorts while bulls seem building a case for an oversold rally.
L&T & BHEL lost 1-2% but Mid Cap components like Alstom, Thermax, Praj, Voltas lost hefty 10-20%. Planning commission vicechairman voiced from Singapore that growth for next year might be in a range of 8-8.5%, below than what FM was expected in a budget speech i.e. 8.7%.
Cipla got interim relief against Roche on a generic version of a cancer drug from Delhi high court. Though bulls were building defensive position in Cipla in a falling market, they also seems not discounted such a possibility. Stock went up 0.8% on last trading session while gained just 0.3% on weekly basis. But stock lost just 3% since beginning of 2008 against lofty 26% deep in Sensex. Ranbaxy & Sun Pharma lost 3% while Dr.Reddy managed to float.
Glaxo lost 9.6%.

7% weekly loss in Reliance was counter-balanced by 1% loss in ONGC. Gail lost 1%. Bulls seem losing hope of extending tax holiday to refineries post 31st March 2009. Public, Private Refineries lost 2- 8%.
Realty heavyweight DLF & Unitech lost 4.75% each but Realty index lost 8% indicates other Mid & Small Cap components lost ground heavily. Ever rising inflation fading hope of interest rate cut. Mumbai metropolitan regional development authority (MMRDA) sold prestigious plots at BKC for a relatively less price. In fact no bidders
came forward for two plots.