Primary Issues loose sheen with Indian Investors

The euphoria created with Reliance Power IPO and the response it received from all categories of clients vanished with its closure, and secondary market melt down, Wochardt Hospitals Ltd issue has not received the minimum subscription, inpsite of reducing the price band, extension of time for subscription, and might have to return the application money to investors who subscribed till date, since minimum 90% subscription is required for listing on exchanges, as per SEBI guidelines.

 

As feared, our indices could not clear 5DSMA due to bear pressure, and due to triggering of stop losses there was a steep fall and finally Nifty closed just around January closing levels Nifty(5137.45) & Sensex(17648.71), at the end of the session. Whether September closings of Nifty(5021.35) & Sensex(17291.10) offer support to the indices on closing basis would confirm the medium term trend for our markets, since today is the last day of the week and indices have posted losses consecutively for the past 3 weeks, ever since correction started in January' 2008.

 

In any panic situation, 200DSMA standing at Nifty4970.43) & Sensex(16896.67) would offer good support for our markets and long term portfolio builders can pick blue chip stocks at such opportunities, for substantial returns by year end, since the long term bullish trend is still intact for our indices, though US markets and Japan are in bearish trend.

 

Investors should stay away from public issues offering with  high unreasonable premiums, since the turmoil in seconday markets will always have their effect on the primary markets too.

"Recession fears daunt US markets again"

Our indices traded in a narrow range yesteray entire day, and closed almost flat at the end of the session inspite of weakness in asian & european markets. The low volumes represent lack of participation by retail and HNIs and the supply at 100DSMA levels confirms the bear grip on the markets.

 

US markets have opened negative and had registered 3rd largest fall in the last 3 months, Singapore nifty idex futures opened 240 points down, indicate a weak to negative opening for our markets too. In case our markets take support at 5DSMA Nifty(5313.94) & Sensex(18292.85) and bounce from there, that is the time to go long on for intra day trading, if one is a professional trader. Risk averse investors should stay away from markets till stability returns to the markets, which can happen after some more weeks.

"Reliance Power Listing on 11th Feb'2008"

Our indices had a gap up opening taking overseas cues and due to short covering Nifty given a break out above 5404 level and closed above 5460 at the end after substantial volatility. The raise from 5137 level of thursday closing to 5545.40 in just two sessions, naturally invited supply from trapped investors, to create liquidity, as most of the analysts predict another round of bearishness to set in once again during the year. Nifty and Sensex have closed above 5DSMA at the end of the session inspite of volatility and face resistance at 100DSMA Nifty(5602.38) & Sensex(18855.80) during this week.

In our view, the sceptism among most of the traders and investors, is reflected in the low volumes, since the price wise correction has taken in shortest time, thus, time wise correction will take some time for return of investor's confidence in secondary markets. Reliance Power will be listed on the exchanges on 11.02.2008; if the demand for these shares is good, as witnessed in the grey market premium before and at the time of subscription, the allottees would reap in good returns, which shall reduce the losses suffered recently, might improve the sentiment to positive, on the expectation of investor friendly budget, as this would be last budget from UPA government.

In view of fears of recession once again daunting US economy, US indices closed in negative territory, wiping out the gains of friday, which shall affect the sentiment, and a gap down opening of Nifty, and volatile trade can be expected and the Nifty might trade within the range of yesterday (5315-5545) for the day,

"Improvement in liquidity with investors to bring in stability in our markets"

Our indices have closed in negative territory for the 3rd week in succession, after reaching all time highs in Jan'2008. The 30% correction from  the top and 10% circuit down on 22.01.2008; due to continuous selling by FIIs, and margin calls from brokers in the carnage, wiped out almost all small traders, and affected the sentiment of retail investors and HNIs too, who have mostly blocked their liquidity in largest IPO..Reliance Power and others. Reliance Power refunds started reaching the investors from 02.02.2008, and the allotment is completed to all eligible investors.

 

US FED announcing another 50 basis points cut on 30.01.2008, brought some calmness to thier markets which are now pricing futher rate cuts during this year, and now concentrating on the performance of individual companies. All is not gone out of shape or bad even in an economy which has slowed and showing signs of recession. All markets with these developments shown some relief rally and were volatile as CBOE voaltility index touching 35 last week. Currently it stands at 24 suggesting that some sideways movement with lessened volatility for the markets during this week.

 

Inflation touching 4% levels as announced on last friday, indicate that RBI may not tinker with the rates for the present and also in view of petroleum product price increase being referred to cabinet this week, which once passed on to consumers/economy will push the inflation futher up in the weeks to come. Huge dollar inflows expected on account of subscription to recent IPOs, will continue to exert pressure on rupee, is another concern for RBI. Thus, Monetary management being the top priority it will be left to individual banks and financial institutions to deal with the interest rates structure owing to their Asset liability Management policies and tools.

 

Nifty & Sensex have closed above 5DSMA which stand at 5235.44 & 17977.10 respectively last week. If these levels are held during any weak ness during the week, there will be stability in the markets in the coming weeks and once, 6000 on Nifty and 20000 on Sensex are cleared with increased volumes, the bullish sentiment shall return to markets, which will challenge previous highs.

 

Strategy: Purchsing Index heavy weights on every dip in small quantity can reap in substantial returns by year end.