Monday, February 23, 2009

Market Khabar 23-02-09

Spooked by lacklustre interim budget and deepening global recession, markets witnessed the biggest weekly fall since October. On the BSE, the Sensex closed below the 9,000-level shedding 792 points at 8,843 and the Nifty on the NSE tumbled by 212 points to end at 2,736.  Disappointment over the lack of stimulus package for the economy in the budget and weak global cues have triggered yet another wave of sell off from FIIs.

Domestic institutions were also in sell mode. The only positive trigger left before the announcement of the general elections is the possibility of interest rate cut by the RBI due to a sharp fall in inflation. True to predictions, gold prices crossed $1000 per ounce mark as investors flocked to the yellow metal to preserve capital amid fears of financial and economic instability.

Given the plunging stock markets, gold prices could touch $1150 an ounce due to investment and speculative buying.
It is pertinent to note that the US, Japan and Europe fell into the first simultaneous recessions since World War II. Markets are still facing confidence crisis making investors risk-averse.

For the week ahead, chartists predict trading range of 8,360-9,400 for the Sensex and 2,570-2,880 for the Nifty. Expect support for the indices at 8,630 and 8,340 and 2,660 and 2,570.

A rebound may see indices encounter stiff resistance at 9,340 and 2,870. Indices are likely to remain in the choppy range for the next couple of weeks. Avoid adventurous large trading positions for the time being.
In sports, gambling, inves-ting, and life, there is little value in knowing what happened yesterday. The rewa-rds come from anticipating the future.

* Scepticism about CEOs has become a factor for weakness in US markets, as worries remain that another Ponzi scheme could be brewing, along the lines of Bernie Madoff or Robert Allen Stanford. Similar situation is developing in India after the Satyam fraud.
Companies belonging to high profile promoters such as Mr Vijay Mallya, Mr Anil Ambani and second rung promoters like Shantanu Prakash (Educomp), Tulsi Tanti (Suzlon) are facing the ‘heat’ of investors. With more skeletons from the corporate cupboard likely to get exposed, investors sho-uld do homework on stocks more diligently.

* Market players are of the view that the revision of the market lot of 243 stock futures would entail a sharp rise in the trading cost as more margins would be required to trade. After the revision, lot sizes of some stocks are huge in quantity like NFCL (21,000), GVK Power 19,000), Dish TV (20,600) and Ispat Inds (24,800). Manipulation of prices due to the low participation is possible, say old timers.
Tread carefully in stocks with large lot sizes. Caution indicated in 15 securities (Orbit, Brigade, Matrix, Purvankara, Parsvnath, Core Projects, NIIT Tech and others), as these are going out of F&O segment from March series onwards. Short squeeze in some counters not ruled out.

F & O
Post-interim budget, heavy unwinding of positions was seen in the derivatives segment. Both February and March futures of Nifty were seen trading at steep discount to spot. Roll-over of open interest ahead of settlement week gives a mixed picture.

The rollover in Nifty was mostly on the short side, while changes in lot sizes impacted the rollover in many stock futures. Open interest was highest in the Nifty 2,800 strike call opt-ion and Nifty 2,700 strike put options. Sentiment indicators like India VIX, put/call ratio, open interest and implied volatility indicate heightened volatility.

Auto, power, capital goods and FMCG witnessed good rollover. Expectedly banking counters witnessed hea-vy selling. Accumulate PSU bank counters for medium-term returns. Cement and sugar counters showed some resilience. Buy at current levels for both short and medium-term gains. Metals, realty, infrastructure, telecom and IT continued to play see-saw.

Use rallies to initiate shorts at higher levels. Valuation of Satyam Computers in the proposed sale of the company by its board may trigger action in other midcap and smallcap IT companies. Look out for activity in ‘punter’ counters like Rolta, Polaris and others.

Positive open interest build up was seen in side counters like HOEC, Great Offshore, IRB Infra, GE Shipping, Dabur, APIL, Matrix Labs and GTL Infra. Mild rally indicated in the counters. Rumours of open offer from Mylan are doing rounds in Matrix Labs. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting.

C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

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