Markets Weekly

BSE Sensex: - (17434)
The Sensex last week opened at 16641 attained a low of 16546 and made a high at 17497during the week. The Sensex finally closed the week at 17434 and thereby showed a net gain of 696 points on week to week basis. The Nifty gained 3.51%. The CNX Mid cap kept in step, with a gain of 2.51%. BSE Metal Index was the major gainers among all indices, gained 9.27%. BSE IT Index, Consumer Durable Index, Banking Index did well, all gained more than 5%. While BSE PSU Index, Auto Index remained silent, all gained nearly 1%.
BSE Oil Index, FMCG Index and Reality Index gained nearly 2%.Hindalco was the star among the Sensex stocks, gained 17.37%. RCOM, REL, Ranbaxy, ICICIBANK, Maruti, Infosys, TCS followed it, all gained between 6% and 11%. There was heavy selling pressure in ONGC counter, dropped 7.57%. Bajaj Auto, ACC, HUL, Grasim also joined the decline. JSW Steel, Chambal Ferti, Lupin Ltd were the top three gainers among F&O liquid counters, all gained more than 21%. Nat. Alu, Hindalco, Mphasis, Titan, Matrix, Nag. Fer followed it all gained handsomely. Purvankara, IOC, Voltas, IVR Prime were under pressure, all lost between 5% and 8%.

Support: 17300, 16950. Resistance: 17750, 18150.

Price Pattern View: -
Last time we found ‘Bearish Engulfing’ reversal pattern on the weekly chart, while this week we didn’t get the follow up of that bearish pattern and got ‘Piercing line’ pattern on the weekly candle stick chart which is bullish reversal pattern. Psychology reading of these action causes concern to the bears and a potential bottom has been made. If the top of the Bearish Engulfing pattern is crossed then bulls will have upper hand because in technical analysis rejection of bearish pattern means much more bullish sign and the Sensex will be headed towards 18200.

MARKET OVERVIEW AND TECHNICAL OUTLOOK
The markets closed the session on a positive note but were volatile since morning and didn’t react much to the higher inflation numbers, which stood at 7.83% versus 7.61%, that was way above market expectations of 7.59%. Shares from banking and metal advanced on renewed buying interest. European markets which opened after Indian markets, advanced. Asian market, which opened before Indian market, was mixed. The Sensex closed above 17400 and the Nifty above 5150 mark. The Indian Rupee touched 42.89 per dollar. Market Turnover for the day stood at Rs 57401, Most active counters were Aishwarya Tele, HDIL, SAIL, Reliance and Cairn India,Chambal on the bourses. For the next trading day Nifty is having resistance at 5181, 5204 and having support at 5120, 5082.

Market ends higher – Volatile days for market
The markets closed the session on a positive note but were volatile since morning and didn’t react much to the higher inflation numbers, which stood at 7.83% versus 7.61%, that was way above market expectations of 7.59%.

Shares from banking and metal advanced on renewed buying interest. European markets which opened after Indian markets, advanced. Asian market, which opened before Indian market, were mixed. The Sensex closed above 17400 and the Nifty above 5150 mark. The Indian Rupee touched 42.89 per dollar.

Market Turnover for the day stood at Rs 57401, Most active counters were Aishwarya Tele, HDIL, SAIL, Reliance and Cairn India,Chambal on the bourses.Monday 19th May 2008 will be trading holiday on account of Buddha Jayanti .Tuesday Market is expected to open on Flat note after a long weekend.

We can see Nifty spot to open at 5150-5160 in opening. Nifty spot if able to maintain above 5140 then we can see rise in market till 5175-5190 , now we can see the fresh buying will come in market only above 5190 and which could take Nifty towards 5215-5250 in short time. Nifty having support at 5110-5075 below 5075 we may see more profit booking which could take Nifty towards 5040-5015 in short time.

Looking at Daily chart of Nifty Stochastics and RSI are positive and we can see the 200 dma exist at 5190 for Nifty so we expect that Nifty to test that Resistance area once that level would be the breakout or profit booking area for the Nifty. One can focus on Gujrat Alkali, Escorts, HDFC Bank, Essar Oil, Rcom, and Tatasteel for Tuesday trading.

NEWS HIGHLIGHTS
Economy: Wholesale price index-based annual inflation rate moved up to an uncomfortable 7.83 per cent for the week ended May 3, an over 42-month high. During the week, prices of items like edible oils, cement and iron and steel (which have seen government intervention) declined, but its impact on the index was negated by an across-the-board increase in prices of food, manufactured products and mineral oils.

Corporate: Public sector lender Indian Bank has posted a modest 2.7 per cent increase in net profit at Rs 241.6 crore for the January-March quarter of 2007-08 as compared to Rs 235.31 crore in the corresponding period of the previous fiscal.

Momentum Indicator: -
Relative Strength Index on the daily chart is moving in tandem with the price. It is in the positive zone. Medium term moving averages converging each other while short term moving averages crossing over positively giving short term buy signals. On the daily chart 100 DMA (17556) and 200 DMA (17504) are restricting the rise while 50 DMA (16350) is giving support to the market. ADX line is moving side way indicating no major trend in the market. D+ and D- line cross over positively giving buy signal for the short term but the gap between two is narrow suggests that volatility is low and it will expand after major trend reversal emerge. On the whole all pictures indicate range bound moves between 16500 and 18000.

Tactics: -
Long-term investors should wait for the next intermediate downtrend to come to an end. Swing traders should go long only after the next market decline, as the market rose continuously for 900 points in just three trading sessions. Since the rise on Thursday and Friday was sharp and long, we could see some retracement to 17150- 17050 before it go up further. So short term investors and intraday players should monitor Friday’s low closely if it breaks that level than they should be prepare for small decline in the indices.

Stocks inFOCUS
RCOM - The stock closed at Rs. 602 on Friday. It has made a 52 week low at Rs. 465 and 52 week high of Rs. 844. The 14 days Moving Average of the stock is currently at Rs.561. On the daily charts, the stock is in buy on MACD and its 14-days RSI is currently at 56 (above 50 is consider to be in strong hands). It has strong support at Rs. 590. One can buy and accumulate the stock at Rs. 602 stop loss of Rs. 585 for a target price of Rs. 630-640.

HDFC BANK - The stock closed at Rs. 1500 on Friday. It made a 52 week low at Rs. 991 and 52 week high of Rs. 1825. The 14 days Moving Average of the stock is currently at Rs. 1508. On the daily charts, the stock is in buy on Stochastics and its 14-days RSI is currently at 55 (above 50 is consider to be in strong hands). It has strong support at Rs. 1470. One can buy and accumulate the stock at Rs. 1500 with closing below stop loss of Rs. 1470 for a target price of Rs. 1580-1590.

TATA STEEL - The stock closed at Rs. 891 on Friday. It made a 52 week low at Rs. 527 and 52 week high of Rs. 1048. The 14 days Moving Average of the stock is currently at Rs.838. On the daily charts, the stock is in buy on Stochastics and its 14-days RSI is currently at 68 (above 50 is consider to be in strong hands). It has strong support at Rs. 870. One can buy and accumulate the stock at Rs. 891 with closing below stop loss of Rs. 870 for a target price of Rs. 900-920.

SAIL( CMP : 186 ; NEUTRAL)
SAIL has announced its fourth quarter results. The company's Q4 net profit up 25% at Rs 2376.8 crore versus Rs 1901.8 crore. Its net sales were up at Rs 13350 crore from 10385 crore. It’s Q4 other income was up at Rs 618 crore from Rs 640 crore.
For FY08, the company's net profit stood at Rs 7536.8 crore as against Rs 6202.3 crore. Its FY08 net sales at Rs 39508 crore versus Rs 33923 in FY07. According to Market estimates, its Q4FY08 net sales were seen up 20.34% at Rs 12497.53 crore from Rs 10385 crore. The company's Q4FY08 PAT was expected to go up 37% at Rs 2606.1 crore from Rs 1901.8 crore. The company has outperformed the market expectation.

Auto Line Ind (265) TGT 315
The stock made an all time high of 463 during Feb07 and fell sharply up to 153 levels in Nov 07 in secular fashion. The stock formed good base near 160 levels. From March 08 the stock showed tremendous strength on the chart and rose sharply. It crossed the major resistance of 260 with good volume. Price pattern along with momentum picture suggests that the bull operators are very much active in the counter. One can invest on decline considering the support of 245 with a stop loss below 220. Target for the stock is 315

Chennai Petroleum Corporation (CMP: 350 ; OVERWEIGHT)
Chennai Petroleum Corporation reported a phenomenal rise in standalone net profit for the year ended March 2008, beating analysts` expectations by wide margin. During the year, the profit of the company surged 98.66% to Rs 11,229.50 million from Rs 5,652.70 million in the previous year. The analysts` polled by Bloomberg had estimated profit of Rs 8,775.97 million during the year. The company posted earnings of Rs 75.41 a share during the year, registering 98.66% growth over prior year. The analysts` projected profit of Rs 61.51 a share. Net sales for the year climbed 13.46% over prior year to Rs 280,186.10 million as against Rs 256,141.48 million forecasted by analysts. Total income during the year rose 13.69% to Rs 281,470.70 million compared with the prior year period.

Trend Analysis: -
The week ended 9th May was very negative with substantial loss in the Sensex therefore in our last weekly news letter we mentioned that ‘the Sensex is on the verge of entering the intermediate down trend’. The level for intermediate down trend was 16589. The Sensex breached that levels on Monday on intraday basis but didn’t remain below those level and closed well above it, thus intermediate up trend remained intact. After crossing the level of 17085 for the Sensex the indices climbed back into intermediate uptrend on Thursday. This confirms that the recent downtrend signal can be considered as false one, as the decline was too small and short-lived. The Sensex got the support near the up ward slopping trend line coupled with a weekly trading gap around 16570 during the last week. We were anticipating good support of 38% pull back level of the last major rise near 16580 area and market bounced very much from those level. If we consider the last week’s low of 16546 as higher bottom of the rise from 14677 to 17735 and moves to cross 17735 then expect the rise to get extended towards 18200-18400. Till the high of 17735 is not crossed, every rise will be a rise to create a lower top to surrender the gains. One thing one should keep in mind that the Sensex is moving in the Rising Wedge pattern since last two months which is bearish sign. It means upside is capped near 18200-18300 areas and trader should book profit near those levels while if the market decisively breaks the level of 16800 than the channel break down will bring the Sensex down. Immediate support on the down side is 17000 where the trading gap on the daily
chart is. The recent established intermediate uptrend would end if the Sensex breaches 16,626. The equivalent triggers are 4,932 for the Nifty, and 6,705 for the CNX Mid cap index.

All the indices are in major (long-term) downtrend, which means that we are still in a bear market. The level above which the long term up trend remain unchanged, if the Sensex closes above its last intermediate top of 18895, and the Nifty above 5545. The CNX Mid cap index will be in a long-term uptrend if it closes above 7378. In our last weekly news letter we were expecting the level to come down to the recent pick provided the intermediate down trend bottom out with out causing much damage. But the Sensex’s intermediate up trend remained intact last week. The next intermediate downtrend will be an important one for the market. A bull market will become a real possibility if the intermediate downtrend bottoms out quickly with minor loss. On the other hand, a persistent decline with new bear market lows will mean that we had just been through a pull back rally during the past few weeks.

All Asian markets closed in the green on Friday. European markets were in line with Asian markets on Friday with a gain of nearly 1%. US markets remain muted, DOW JONES and NASDAQ closed with minor loss while S&P -500 closed in the green. Global markets are in a similar situation. They too are back in clear intermediate uptrend, after coming close to falling into intermediate downtrends. The picture is therefore of an intermediate uptrend that was threatening, but survived here and globally also.

Fundamental View:-
Domestic Factors are Major Trigger for Market Direction :-
The week was good for the market regardless of the flow of negative news. The market is likely
to be rangebound in the absence of any major domestic trigger, with Q4 March 2008 results
nearing end. Next week is a curtailed trading week as the market remains closed on Monday, 19
May 2008, on account of Buddha Pournima.

Inflation data will be closely watched as it remains as a major worry and hindrance for the
domestic growth. High inflation may compel the government to take more fiscal measures to rein
in prices in addition to slew of measures taken recently.

The wholesale price index rose 7.83% in 12 months to 3 May 2008, higher than previous week's
annual rise of 7.61%, government data released on 16 May 2008, showed. It was the highest since an annual reading of 7.93% n 6 November 2004. The annual inflation rate was 5.74% during the corresponding week of the previous year.

The government has taken a slew of fiscal measures such as ban on export of cement and non basmati rice, cut in import duty on some items and imposition of export duty on some steel items to rein in rising prices.

Excise duty collections declined by 3.9% to Rs 64.10 billion in April this year, as compared to Rs
66.73 billion in the same period last year. Customs duty collection however, registered a 25%
growth at Rs 90.18 billion in the first month of fiscal 2008-09, as compared to Rs 72.21 billion in
the same month in 2007-08.

The Indian rupee hit a 13-month low at Rs 43 a dollar on Friday weighed down 3-1/2 year by
high inflation rates, but recovered to end stronger as exporters cashed in on dollar holdings. The
partially convertible rupee ended at 42.53/54 a dollar, off an intraday low of 42.92, which was its
weakest since Apr. 12, 2007. It had closed at 42.75/76 on Thursday.

Foreign institutional investors (FII) have, so far, sold shares worth Rs 529.10 crore this month, till 14 May 2008. They sold shares worth Rs 10,887.20 crore in calendar year 2008, till 14 May
2008. Domestic funds sold shares worth Rs 639.80 this month, till 14 May 2008.

The BSE Sensex rose 697.87 points or 4.17% to 17,434.94 in the week ended Friday, 16 May
2008. The S&P CNX Nifty rose 175.10 points or 3.51% to 5157.70 in the week.