DAILY REPORT FOR 29 OCTOBER, 2007

NIFTY: - Open 5564High 5716 Low 5513 Close 5702 (+134 points)

P/E 25.57 P/B 5.96 Adv 41 Dec 9

Supp 5640/5570/5500 Res 5740/5830/5880

SENSEX: - Open 18823 High 19276 Low 18629 Close 19243 (+472 pts)

Supp 19180/19000/18820 Res 19500/19970/20450

Capital Goods, Auto and Banks lead:-

· After initial hesitation bulls snatched the control and consistent buying was seen the whole day. L&T and SBI were the stars in the Nifty.

· Volumes were lower - Rs 19967 Cr in spot market and F&O Vol at Rs 73836 Cr.

· Breadth was very good – BSE Adv 1814 Dec 1159 Unch 84 NSE Adv 725 Dec 368 Unch 28

· FIIs sold Indian Equity despite a good rally. They sold Rs 1237 Cr in Cash market. But DIIs were buyers to the tune of Rs 965 Cr. Foreign Investors sold Index futures worth Rs 1600 Cr. They sold in Stock Futures too worth Rs 487 Cr. This means they must be hedging their delivery exposure.

Top Gainers: - Tata Steel, Nalco, VSNL, Ster Inds, BPCL

Top Losers: - Cipla, Dr Reddy, ACC, ABB, Zee Enter

Indian ADRs: - http://tinyurl.com/33m7dx

Outlook for Monday:-

· After correcting heavily last week, we have recovered the whole distance as Sensex gave a new all time high closing on Friday. Nifty is yet to do that feat as its all time high sits at 5736.

· P Chidambaram, the Finance Minister of India has talked about controlling capital inflows into India on Friday and that statement has to be taken a bit cautiously.

· This week is characterized by 2 major events. One is the RBI Credit Policy on Tuesday and the other is the Fed meeting on Wednesday. 5450-5500 should be considered as a good weekly support in case of any decline. One is advised to be light on positions for some time.

· 5640 should be considered as intraday support for the Nifty and we can see 5830 and 5880 once we cross previous high around 5740.

· CAIRN (204):- The stock can target 240-250 levels in 15 days time. Buy with SL of 192.

Results today – ABG Shipyard, Adani Enter, Aegis Log, Akruti Nirman, Apollo Sindh, Asian Granito, BoI, BHEL, CBoP, CCCL, Core Proj, Dhanalax Bank, Easun Reyrl, EID Parry, Electrosteel, FirstSource Sol, Fortis Health, Genus Power, GMR Ind, GMDC, Hanung Toy, HDFC, Hi-tech Gear, Hinduja TMT, House of Pearl, HPCL, ICRA, Ind-swift Labs, Indiabulls Real Estate, Info Edge, IOB, Ipca Lab, ITI, Jagran, JP Hydro, Jet Air, Jindal Steel, JM Fin, Kalpataru Power, Karur Vysya, Kaveri Seed, Kernex Micro, Lakshmi Machine, Lumax Auto, Mah and Mah, Malu Paper, Manali Petro, Maruti Suzuki, Max, McDowell, Midday Multi, Monsanto, Mphasis, MRPL, Mukand, NCL Ind, Neocure Therap, Nirma, Omax Auto, OBC, Oudh Sugar, PNB, RPG Cab, Samtel Col, Simplex Infra, SMS Pharma, Sobha Dev, SREI Infra, Sterlite Ind, Surya Roshni, Sutlej Tex, Take Sol, Tata Tea, Time Techno, Torrent Power, Uniphos Enter, United Phos, VIP, Vishal Ret, Voltamp Trans, VST, Zodiac Cloth

Disclaimer: These recommendations are based on the theory of technical analysis and personal observations. This does not claim for profit. I am not responsible for any losses made by traders. It is only the outlook of the market with reference to its previous performance. You are advised to take your position with your sense and judgment. I am trying to consider the fundamental validity of stocks as far as possible, but demand and supply affects it with vision variations.

DAILY REPORT FOR 26 OCTOBER, 2007

NIFTY: - Open 5499 High 5605 Low 5469 Close 5568 (+72 points)

P/E 25.01 P/B 5.82 Adv 36 Dec 14

Supp 5530/5465/5400 Res 5670/5735/5870

SENSEX: - Open 18519 High 18900 Low 18459 Close 18770 (+257 pts)

Supp 18700/18460/18240 Res 18950/19200/19420

Metals shine:-

· Markets started flat. But buying was seen in Metal stocks especially Nalco, SAIL and Tata Steel. Finally Sensex could close up by 257 points. Nifty too touched 5600 intraday.

· Volumes were expectedly better than Wednesday because of F&O expiry - Rs 23477 Cr in spot market and F&O Vol at Rs 103930 Cr.

· Breadth was better – BSE Adv 1729 Dec 1245 Unch 82 NSE Adv 606 Dec 478 Unch 37

· FIIs were overall cautious just before the SEBI announcements yesterday. They were sellers to the tune of Rs 625 Cr in spot market. Also they sold Rs 535 Cr in both Stock and Index Futures markets. DIIs bought Indian equity worth Rs 788 Cr yesterday.

Top Gainers: - Tata Steel, Nalco, VSNL, Ster Inds, BPCL

Top Losers: - Cipla, Dr Reddy, ACC, ABB, Zee Enter

Indian ADRs: - http://tinyurl.com/33m7dx

Outlook for Friday:-

· There is nothing new in the SEBI announcements yesterday. Previous suggestions have just been confirmed as rules now. It is a clear positive in the long term. There has not been further tightening on any front. Also no liberty has been given in any matter. But we need to see how markets will react to this.

· Uncertainty is very dangerous for the markets and now it has been removed by SEBI’s clarifications yesterday. Market should be watched for some time before jumping on to buying / selling. Next trigger is RBI credit policy on Tuesday.

· Banks and Auto stocks are pretty buoyant for last 2-3 days as RBI credit policy is to be announced on 30th of this month. A neutral policy or a rate cut will be welcomed by the market. But a rate hike will be punished quite heavily. Also US Fed meets on 31st October. That event will also be watched out.

· Technically speaking, 5530 is a good support for the market in intraday trade. Some correction towards 5460 and 5400 can happen if that gets broken. On the upside we have resistance at 5670 and above that a new high is expected.

Results today – Ador Welding, Allsec, Andhra Bank, Apollo Tyres, Asahi India, Atlanta, Atul, Avaya Global, Bata, BEML, Bharat Bijlee, Bharat Elec, Bharat Forge, Cadilla, Carborundrum, City Union Bank, Clutch Auto, Colgate, CRISIL, D-Link, Dabur Pharma, Deccan Chronicle, Dredging Corp, Educomp, Emkay, Excel, Gabriel, GVK Power, HDIL, HCC, HT Media, I-Flex, ICI, ICSA, Indian Hotels, ITC, Jindal Stain, JK Cem, Jyoti Struct, Kale Cons, Kotak Mah Bank, Lanco Infra, L&T, Micro Tech, Moser Baer, Nagar Fert, Oil Country, OBC, Pantaloon, Phoenix Lamp, Piramyd Ret, Raymond, SPIC, Syndi Bank, Tata Steel, Texmaco, Thomas Cook, TV Today, Valecha, Vimta

Disclaimer: These recommendations are based on the theory of technical analysis and personal observations. This does not claim for profit. I am not responsible for any losses made by traders. It is only the outlook of the market with reference to its previous performance. You are advised to take your position with your sense and judgment. I am trying to consider the fundamental validity of stocks as far as possible, but demand and supply affects it with vision variations.

DAILY REPORT FOR 25 OCTOBER, 2007

NIFTY: - Open 5477 High 5577 Low 5419 Close 5496 (+23 points)

P/E 24.66 P/B 5.75 Adv 25 Dec 25

Supp 5380/5320/5260 Res 5520/5580/5670

SENSEX: - Open 18727 High 18832 Low 18317 Close 18512 (+20 pts)

Supp 18320/18200/18000 Res 18560/18850/19200

Flat day:-

· Indices did see-saw whole day and closed with a small gains of 20 points on the Sensex. Suzlon was the star of the day with 10% gains.

· Volumes were higher - Rs 19787 Cr in spot market and F&O Vol at Rs 107495 Cr.

· Breadth was positive – BSE Adv 1693 Dec 1294 Unch 67 NSE Adv 586 Dec 492 Unch 43

· Both FIIs and Domestic Institutional Investors were buyers in spot market. FIIs bought Rs 1301 Cr and DII bought Rs 383 Cr Equity. FIIs were sellers in Index Fut Rs 1501 Cr and buyers in Index Opt Rs 249 Cr. They sold stock fut worth Rs 361 Cr.

Top Gainers: - Suzlon, Rel Energy, RPL, SBI, Tata Power

Top Losers: - GAIL, ONGC, Tata Motors, Hero Honda, Infosys

Indian ADRs: - http://tinyurl.com/33m7dx

Outlook for Thursday:-

· We could not hold on to the gains yesterday and closed flat. So today can be a negative day also. 5380 should work as a good support for the Nifty and a correction around that is not ruled out. Resistance for today is 5580 and 5670. ONGC and Reliance can determine the trend of the market and they should be watched today.

· SEBI is to announce decision on P-Notes today. So the street will watch what the regulator has to say. Any negative surprise there can lead to a good correction in markets.

· One needs to be very stock-specific at this point of time and should avoid big leveraged positions.

· Sun Pharma (996):- Buy for target of 1075-1090. Keep SL at 1060.

(Keep SL in short-term trades)

Results today – ABB, ACE, Alfa Laval, Alps Inds, Autoline Ind, Ballarpur Ind, BHEL, Bank of Rajasthan, Cairn, Century, Century Enka, Chambal Fert, Cranes Soft, Cummins, Datamatics Tech, DS Kulkarni, Elecon Eng, Euro Cera, Everest Ind, FAG Bearings, Federal Bank, Gillette India, GSPL, Hitachi Home, HOV Serv, Hyderabad Ind, Idea Cell, ING Vysya Bank, JK Paper, Liberty Shoe, M&M Fin, Motherson Sumi, Munjal Showa, Natco Pharma, Nicholas Pira, NIIT, NIIT Tech, NOCIL, Peninsula, PFocus, RCF, Redington, Rel Cap, Sagar Cem, Shrenuj, STFC, SRF, Sun Pharma, Tata Coffee, Tata Inv Corp, UTV, Voltas, Zuari Inds

Market keeps date with SEBI for final word on P-notes issue http://economictimes.indiatimes.com/Investors_await_SEBIs_final_word_on_PNs/articleshow/2488195.cms

Disclaimer: These recommendations are based on the theory of technical analysis and personal observations. This does not claim for profit. I am not responsible for any losses made by traders. It is only the outlook of the market with reference to its previous performance. You are advised to take your position with your sense and judgment. I am trying to consider the fundamental validity of stocks as far as possible, but demand and supply affects it with vision variations.

DAILY REPORT FOR 24 OCTOBER, 2007

NIFTY: - Open 5185 High 5488 Low 5176 Close 5473 (+289 points)

P/E 24.53 P/B 5.72 Adv 45 Dec 5

Supp 5380/5330/5275 Res 5500/5590/5670

SENSEX: - Open 17910 High 18542 Low 17910 Close 18492 (+878 pts)

Supp 18300/18150/18000 Res 18550/18860/19200

Big rally:-

· Consistent buying was seen whole day especially in banking and capital goods stocks to take the Sensex up more than 900 points intraday.

· Volumes were good - Rs 17657 Cr in spot market and F&O Vol at Rs 97393 Cr.

· Breadth was fantastic for a bullish day – BSE Adv 2223 Dec 762 Unch 88 NSE Adv 914 Dec 176 Unch 31

· FIIs bought Rs 390 Cr in Spot Market. Domestic Institutions bought Rs 37 Cr Equity. FIIs were buyers in Index F&O Rs 2329 Cr. They sold Stock Fut worth Rs 205 Cr.

Top Gainers: - BHEL, Rel Energy, SAIL, Unitech, NTPC

Top Losers: - HCL Tech, Ambuja Cem, TCS, Wipro, Infosys

Indian ADRs: - http://tinyurl.com/33m7dx

Outlook for Wednesday:-

· US Markets are positive with all Indian ADRs gaining. Major gainers were Satyam 12%, VSNL and HDFC Bank 7% each.

· The upward momentum should continue. 5590 and 5670 are levels that need to be achieved as quickly as possible. A flat day in a day or two will mean some weakness in days to come.

· 5380 is nearest support for the day and that means intraday corrections, if they occur can be large.

· Indraprastha Gas (123):- Buy for target 142-146.

· Sobha Dev (922):- The stock can target 1020-1030. Buy with SL of 890.

(Keep SL in short-term trades)

Results today – 3I Infotech, Allied Dig, Bank of Mah, Blue Star, Castrol, Cipla, Dabur India, DCM Shriram Cons, DCW, Dishman Pharma, Dr Reddy, Eastern Silk, Geodesic, GIC Hsg Fin, Guj Amb Exp, Guj Gas, GIPCL, Hind Mot, Hotel Leela, JBF, JK Lakshmi Cem, Krebs Bio, Lupin, Mah Ugine, Marico, Merc Line, Mys Cem, Navneet, Nitco Tiles, NRC, Opto Circ, Page Inds, Sadbhav, Sakthi Sug, Sun TV, Teledata, Tourism Fin, TVS Mot, Uco Bank, Union Bank, Viceroy Hot, Vijaya Bank

Disclaimer: These recommendations are based on the theory of technical analysis and personal observations. This does not claim for profit. I am not responsible for any losses made by traders. It is only the outlook of the market with reference to its previous performance. You are advised to take your position with your sense and judgment. I am trying to consider the fundamental validity of stocks as far as possible, but demand and supply affects it with vision variations.

Why Participatory Notes are dangerous

Participatory Notes (PN) — a general name used for the investment by Foreign Institutional Investors (FIIs) through Offshore Derivative Instruments (ODIs) such as Participatory Notes, Equity-Linked Notes, Capped Return Notes and Participating Return Notes — have created a storm in the stock market, with SEBI coming out with a draft for discussion to regulate them, the RBI suggesting that they be phased out, and the Finance Minister assuring that the Government is not going to phase them out.

First things first. Let us clearly understand the fundamental issues. The PNs are a slap on the face of every citizen who is an investor. For a person to invest even in one share, several KYC (know your customer) forms have to be filled up, and PAN numbers and proof of address, etc., provided. For the PN investor the system is totally silent on even elementary information. The FIIs issue PNs to funds/companies whose identity is not known to the Indian authorities.

Hence, the PN system is blatantly discriminatory and seems to favour ghost investors. Any self-respecting market, if it discriminates at all, does so against outsiders. But we have done the unthinkable.

We should recognise and internalise the fact that funds are in search of markets, and not the other way. Given the demographic shift in the developed markets (where pension funds have to locate markets to get returns for longer periods) and the lack of huge opportunities in long-term projects, it is natural that global funds are in search of markets.

The PN route, through which a section of investors is participating in our markets, is a mystery wrapped in a puzzle, crammed inside a conundrum and delivered through a riddle. These are address-less funds that could be from dubious sources and the clamour for it is intriguing, if not outright suspicious.

Current Scenario

According to the SEBI Web site, the current position of these instruments is as follows: “Currently, 34 FIIs / Sub-accounts issue ODIs. This number was 14 in March 2004. The notional value of PNs outstanding, which was at Rs 31, 875 crore (20 per cent of Assets Under Custody of all FIIs/Sub-Accounts) in March 2004, increased to Rs 3,53,484 crore (51.6 per cent of AUC) by August 2007.

The value of outstanding ODIs, with underlying as derivatives, currently stands at Rs 1,17,071 crores, which is approximately 30 per cent of total PNs outstanding. The notional value of outstanding PNs, excluding derivatives as underlying as a percentage of AUC is 34.5 per cent at the end of August 2007.” (SEBI – Paper for Discussion on ODIs).

This implies that more than 50 per cent of the funds are flowing through this anonymous route which needs a re-think on this entire issue. This brings us to the question about who are the investors interested in Indian Papers.

Who uses the PN route?

The first category is the regular funds whose twin objectives are returns and more returns on a 21*7*365 basis. They are interested in India since the India story is very good and returns are attractive compared to developed markets. The second category is prodigal money returning. It is not a secret that a large number of politicians/bureaucrats/business-persons have accumulated wealth abroad. This has been accumulated by under-invoicing/over-invoicing, by corruption in contracts and gifts from abroad; and by not bringing in legitimate receipts.

The third category is those foreign governments/entities who would like to acquire/control Indian entities by taking them over.

The fourth category is the terror financiers who could find this route attractive and simple. The first category does not have any reason to use the “anonymous” route since the aim is to earn returns /repatriate and benefit out of interest rate and currency value arbitrage. They enter and exit as per these calculations and are not shy about the greed for maximum returns. They pay the taxes applicable and laugh all the way to the bank with bonus incentives.

The only issue is that currently the stock market is the only route for investing while several other “unlisted” sectors, such as trade, transport, restaurants and other services are starved of funds. Maybe methods should be evolved to get these regular global funds to invest not just in the top ten shares of the stock market but in the needs of the large non-corporate or “ unlisted” segments of the economy, through NBFCs. That would ease the volatility in the market since currently large funds are chasing too few shares of the Sensex or Nifty.

No more ‘safe havens’

The second category will be enthusiastic in bringing the money back into India since the KYC (Know your Customer) norms in many so-called “safe” territories like Switzerland are becoming tougher — particularly after 9/11— and the India story is very interesting and the returns and growth prospects are very good. The Government can always think of an “Amnesty Scheme” for such “prodigal funds” in the form of “no questions asked” about the source. But, once the funds are brought in, then all the KYC norms must be followed, with minimum legal and tax hassles. After all, such amnesty schemes for the domestic black-money holders in the past have met with reasonable success. Otherwise, a Special Purpose Vehicle (SPV) can be created which can be dollar-denominated to hold these funds at attractive rates and which are converted over a period of time to minimise the flow impact.

Harmful for companies

The third category spells danger for domestic companies since the unknown entity may be targeting the local company without its knowledge. With reasonable control they can pressure the current owners to settle with them or even try taking over.

This becomes more ominous in the context of several sovereign funds, like that of China, using the private equity companies to manage their funds which are non-transparent.

These PEs could use other vehicles to acquire on behalf of these sovereign funds and it may be possible that Chinese or West Asian sovereign funds may hold indirectly shares in Indian companies, particularly in software or oil or telecom, which are critical sectors.

The fourth category is the one to be worried about. The terror financier will be happy on two counts, namely the anonymity provided by these instruments and the domestic regulations on gifting the shares.

Also important is the issue of the sale of these PNs to entities that could be inter-connected to the original buyers.

In other words, the original buyer and to whom he sells could belong to inter-connected terror entitities, in which case the global entity could have succeeded in transferring funds to India with ease and anonymity.

It is not without basis that the National Security Advisor (NSA) has cautioned against terror-financing through the banking and stock market channels.

That is a cause for concern. Why are we insisting on the anonymity of the investor and the sources? Why not have confidence in the India story and realise that we can get funds with addresses since we have arrived on the global arena?

We should distinguish between clean global flows and dubious flows as a responsible country with a remarkable growth story.

(Source: Business Line)