Wednesday 9 January 2008

Markets: Correction or consolidation ?

A sea saw trading session of market ended marginal in red. Markets took cues from its global counterparts and opened in red. Post that the session was highly volatile. Software and selective power stocks aided the indices. Software is seen some interest on hopes of good results. While auto, pharma, metals, oil and gas and FMCG stocks ended in the red. Mid caps and small caps were the major losers. Markets may take cues from companies quarterly performances as results are awaited. Although the Asian indices ended in green, European indices are trading in red.

There has been big optimism among retailers on IPO specially Reliance. Probably this may be one of the reasons for profit booking as money flow from secondary market to primary market. The hope is stronger cashflows From Middle East and China will prevent the big downsides. However we believe that there is likely to be a flight to safety triggered by the US slippages. The US cut in interest rates possibility is another ray of hope.

Sensex was down by 4 points at 20869.77. Weighing on the Sensex were losses in BHEL (2443.8,-2 percent), ONGC (1298.65,-2 percent), ICICI Bk (1310.45,-2 percent), Ranbaxy (411.6,-2 percent) and ACC (970.05,-2 percent). Losses were restricted by gains in NTPC (277.15,+4 percent), HDFC (3174.25,+4 percent), RCVL (820.8,+2 percent), Hindalco (212.5,+2 percent) and HDFC Bk (1745.1,+2 percent).

Sayaji Hotels is into the hotel and restaurant business. The hotels of the company are located in Indore and Baroda. The restaurant business of the company is managed by a 100% subsidiary 'Sanchi Hotels Pvt Ltd' under the brand name of 'Barbeque-Nation'. The concept is good and we like the business model. Capex plans of the company include setting up a new 4 star hotel in Pune with expected room rental revenues of Rs 3,300 per day. Hotel would come up in Waked near Pune with room inventory of 240 rooms. The stock has rallied on the interest of some big investors. Keep watching this space to know more.

KEI Industries Limited (KEI) is one of the established player and the second largest power cable company in India. KEI is into manufacture of high and low tension cables (HT and LT), control and instrumentation cables, house wires and stainless steel wires. The Indian Power Cable market is estimated at more than Rs 8,500 cr. About 67,000 MW of power generation capacity and 60,000 circuit km of transmission network are proposed to be added by 2012 as per 11th Five Year plan. The expenditure estimated for power generation alone is at Rs 270,000 cr and Rs 69,500 cr for power transmission. The cost of power cables is around 3% of the investment in power generation and 2% for power transmission. This will generate a huge demand for power cables in near future. KEI is growing aggressively by expanding capacity to meet domestic and international demand. On the whole the macro scenario seems to be best for KEI in future. Do read our note on KEI to know more.

Technically Speaking: Sensex traded highly volatile and finally ended flat. It made intraday high of 21,113 and days low of 20,701. Volumes were good at Rs 9610crs. The breath was in favor of Declines, where Advances stood at 760 and Declines at 2136. Sensex resistance stands at 21,100 and support lies at 20,520.