Weekly Report

Opportunity to accumulate stocks:
Sub-prime woes in the US spread its wings into European markets giving the markets all over the world a jolt in the arm. Huge volatile movements in world markets across the globe rocked the financial system. Earlier in the week soothing remarks from US Fed had lifted the sentiment. Fed kept the rates steady at 5.25 per cent for a ninth consecutive time. The mayhem started after BNP Paribas, France’s biggest bank froze three of its asset-backed funds in the US on sub-prime concerns. Indian markets depicted a yo-yo movement on back of uncertainty to swing between 14,500 – 15,500 levels to finally close down by 270 points at 14,868 levels. While the Nifty moved between 4,500 – 4,200 levels to lose 68 points for the week closing at 4,333 levels. FII’s were net sellers amidst global sell-off, booking profits in emerging markets to sell equity worth Rs 1,450 for the last week. The F&O side on the other hand witnessed net inflows for the last week for Rs 900 crore. Domestic funds activity was on the lower side but was net buyers for Rs 450 crore. Crude prices moved lower on concerns of a slow down in demand from the US to move to $71 mark losing five per cent for the week. Crude prices could move between $70 – $74 mark. Global markets were hit by US mortgage markets, which continue to haunt world markets. Banks across the globe were forced to pump in huge amounts to avert a liquidity crisis. However, what was most surprising was that Dow and Nasdaq closed with weekly gains of over a percent while Asian, European and major markets across the world saw huge sell-offs. Shanghai was the only exception that closed up with gains of four per cent. Sectoral indices Sectoral indices on the Indian bourses took a hit on increased volatile movements. All, except the IT index closed in the red for the week. IT stocks bucked the negative trend following tightening of ECB norms, which could result in lesser inflows of dollars. Metals were the worst hit as prices on the LME took a hit on back of BNP crisis. Metal index lost four per cent. Sensex heavyweights depicted heavy volatile movements with most of them closing the week with losses. Cement stocks too bucked the negative trend to recover from earlier losses after reports suggested that cement offtake was on the higher side in the month of July 2007, which is supposed to be the slack month in the entire year. Mid-cap action Mid-caps and small-caps attracted some profit booking at start of week but seem to have weathered the storm that hit the world markets. In fact the small-cap index closed in the green over the previous week while the mid-cap index recovered from its lows to post-moderate losses. It seems that there has not been any major selling in the mid-cap front, which could be good news going forward. Mid-caps stocks have been leading stocks to move north when markets have been recovering and moving upwards. Leading financial institution stocks like IFCI, IDBI, IDFC have evicted lot of buying interest and have hardly lost ground from their respective peaks. With the large caps swinging like a yo-yo on uncertain conditions, mid-caps have found lot of buying support. Week ahead While global markets has taken a toll on most of the markets over the world, Indian markets seem to have weathered the global mayhem losing six per cent from its peak level at 15,868 despite the large swings. Mid-cap performance has been better and there has not a major unwinding of positions in the F&O. FII’s too have been marginal sellers unlike the May 2006 mayhem when they were heavy sellers. Markets have been gaining support at 4,200 mark for the Nifty Futures and 14,500-14,700 mark for the Sensex to rebound from lower levels, which could suggest that the worst could be over. Markets over the world have been reacting to news in the US financial markets and could see a further sell-off if more negative news continues to flow in. However, I strongly feel that the worst could be over at this level and this could be the best opportunity to accumulate stocks. Panics often offer the best opportunities to buy. Technically, markets could yet consolidate between 14,700 – 15,500 levels and move higher in coming weeks. Cement stocks like ACC and India Cement and banking stocks like SBI and IDBI look attractive buys at current levels. Stocks to watch GMR Infrastructure: I continue to be positive on this stock and a move above Rs 870-875 in the futures could take the stock higher to Rs 900 mark. Support exists at Rs 790-800 levels. United Spirits: The stock could be one of the star performers in coming days. Resistance stands at Rs 1,470-1,475 levels (futures) above that expect rocket like movement upwards to Rs 1,600 mark. Support exists at Rs 1,360-1,365 levels. ICICI Bank: This could be one of the last opportunity to accumulate this stock and any positive weekly closing could take the stock back to Rs 925-930 mark.
source: jaldimoney.com