INDIAN STOCK MARKET REVIEW: 8th SEPT 2008

BOUNCEBACK EXPECTED IN THE EARLIER PART OF THE WEEK

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A sharp fall in oil price triggered a solid rally on the bourses at the initial part of the week but a dip in global equities and local political concerns act as a spoilsport and wiped off all the initial gains. Uncertainty over the Indo-US nuclear deal came back to haunt the bulls as reports emerged that nuclear-deal could fall and US will terminate the agreement if India conducts a fresh nuclear test. Though, inflation receded to 12.34%, it failed to enthuse the bulls as it continues to remain above the RBIís tolerance level for the sixth straight month. Finally, the 30-share BSE Sensex lost 80.70 points or 0.55% to 14,483.83 in the week. The S&P CNX Nifty lost 7.70 points or 0.17% to 4352.30.

Despite sliding oil prices, stocks across the globe fell sharply, last week, on global economic growth worries. Wall Street suffered its worst decline in more than two months on Thursday, 4 September 2008, hurt by more signs of weakness in the labour market and the growth fears. In Europe, investors fretted over European Central Bank projections that showed an increase in inflation forecasts and a cut in growth expectations compared with their last prognosis three months ago. And coupled with domestic political concerns over Indo-US nuclear deal weighs on the domestic bourses with a latest controversy sparked by the disclosure of correspondence between the Bush administration and US Congress that the Indo-US nuclear pact would be off if India conducted a nuclear test.

Banking stocks were in the thick of action as lower inflation improved near term sentiment for the beaten down sector. Bank shares witnessed choppy trade due to alternate bouts of buying and selling. BSE’s banking sector index Bankex jumped 163.16 points or 2.33% at 7,172.85 in the week. Power and capital goods stocks were the other major gainers. Metal stocks under performed as steelmakers like Ispat, Essar, JSW and Uttam Galva are learnt to have slashed metal prices by up to Rs 2,000 per ton in line with sharp fall in metal prices globally. Gujarat-based government companies like GMDC, Gujarat Alkalies, GSFC, GSPL and GNFC had a rough week after state government asked them to set aside30% of their PBT for social causes.

Sliding oil prices calmed inflation concerns. Oil price declined sharply in response to less damage from Hurricane Gustav than the oil industry feared. Light, sweet crude for October 2008 delivery settled at $106.70, its lowest level in five months. A softening of inflation for a second consecutive week has raised hopes that we may in the last lap of the interest rate hike cycle. Annual inflation rose 12.34% in the year through 23 August 2008, lower than previous week’s 12.40% rise. Inflation, however, remains far above central bank’s target level of 7% towards the year ending March 2009.

In the coming week, market will cheer the NSG green signal to India which the market was waiting for too long. The 45-nation Nuclear Suppliers Group (NSG) has approved a US plan to engage in nuclear trade with India this Saturday. Following the green signal by the NSG that will cement the Indo-US Civil Nuclear Cooperation, India has finally come out of the 34-year old nuclear apartheid. The approval came after almost three days of meeting in Vienna on Saturday. The NSG meet was called to minimise any damage to the Nuclear Non-Proliferation Treaty (NPT), which India has not joined. The market will also react to a crucial US job data due on Friday, 5 September 2008, after Indian markets closed. A sharp slide in global crude oil prices and reports of a satisfactory distribution of monsoon bodes well for equities. So having these bullish ammunitions in store, market men may expect a bounceback in the market in the coming week. But such bounceback may be shortlived due to decelarating economic growth, which is haunting the market for a pretty longtime.

Technical View: On short term basis 14400 -14600 is a support zone below which it could test 14050 and 13700. Volatility will continue to be high for some days.

STOCK TO WATCH OUT- ROLTA INDIA