Yesterday the market drifted lower in volatile trade as weak global cues weighed down sentiments on the domestic bourses. Banking, refinery and IT shares declined. Auto shares recovered in the latter part of trading as global crude oil price shrunk below $68 a barrel, close to a 3 and half month low. Cheaper oil price sent private sectors surging, with Jet Airways surging shooting above like a rocket The markets yesterday were extremely volatile, after an initial over 100- point fall, the BSE Sensex recovered, recouping most of its losses by morning trade. However, it drifted lower again in early afternoon trade and it had plunged over 100 points for the day to a low of 11, 815.43 . However, the Sensex remained in the red throughout the day. London's FTSE 100 was down nearly 1%. In Asia, key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were all in the red. Robust data on US labour costs and services sector growth sparked concerns about the Federal Reserve resuming its campaign of rate increases, pulling Asian and European markets down. But the silver lining is that BSE clocked a turnover of Rs 3,299 crore, compared to Wednesday's Rs 3,084 crore. In an otherwise weak market, select side-counters spurted. Birla VXL, Media Video, Garware-Wall Ropes, Videocon Appliances, Sri Ganapathy Mills, Vesuvius Industries, Munjal Auto, Chembond Chemicals, DIC India, Machino Plastics, Amtek India, IndusInd Bank, Exide Industries, Chandra Prabhu International Ltd, Shivalik Global Ltd, Hazoor Media and Power Ltd, and Indian Resort Hotels rose between 7 - 20% for the day. Also my recommended counter in the Morning RPG Transmission(which was mentioned as R...T...), Shri Ganesh Forgings Ltd(Which was mentioned as S...G..F) and Adlabs films also rose. Tilaknagar Industries Ltd, BSEL Infrastructure Ltd, and Gujarat Hotels Ltd also showed some gains, while Haldyn Glass Ltd though having good prospects and fundamental went down. Wall Street Story: Yesterday, the US stocks fell for the second straight day , after an extremely choppy session in which worries about inflation and interest rate policy again caused investors to retreat after a strong August rally. Wall Street has been trying to anticipate whether the Fed will keep interest rates stable -- or resume its rate hikes to keep inflation in check -- when it meets later this month.Warnings from several homebuilders raised investors' concerns about an economic slowdown and comments about inflation from San Francisco Federal Reserve President Janet Yellen offered little comfort. San Francisco Federal Reserve Bank President Janet Yellen defended the central bank's pause from two years of interest-rate increases and said inflation may recede ``faster than many forecasters expect.'' In her first comments on the economy since last month's Fed meeting, Yellen said inflation is still too high for comfort. At the same time, she said the economy has yet to feel the full effects of 17 consecutive rate increases since mid-2004. The remarks reinforced speculation by investors and economists that the central bank will keep borrowing costs unchanged for a second month when policy makers meet in two weeks. A cooling housing market may hurt consumer spending, she said today in a speech in Boise, Idaho. ``With inflation too high, policy must have a bias toward further firming,'' Yellen said. ``However, our past actions have already put a lot of firming in the pipeline. With the lags in policy we haven't yet seen the full effect of our past actions.'' Yellen, 60, a former economic adviser to President Bill Clinton and a voter on the rate-setting Federal Open Market Committee this year, said inflation is likely to ``move gradually lower.'' The Fed's Aug. 8 decision to leave its benchmark rate at 5.25 % was ``prudent,'' Yellen said. Yellen told reporters after the event that she approaches the Sept. 20 meeting with an open mind. The so-called real fed funds rate, which adjusts for inflation, is both ``mildly restrictive'' and ``appropriate,'' she said. Yellen also said data suggest both the housing market and the overall economy are cooling; the question for investors is how quickly is that occurring. New research by John C. Williams, an economist at Yellen's bank, shows less evidence of ``persistence'' in inflation over the past decade, Yellen said. ``Inflation has tended to revert to its long-run average, which, over that period, is within my comfort zone,'' she said. The Williams research ``is important because, if it holds up, it implies that inflation may move down from its elevated level faster than many forecasters expect,'' Yellen said. ``Recent data suggest that the needed slowdown is indeed underway,'' Yellen said. ``We'll probably see growth that is healthy, but somewhat below the rate that is sustainable in the long run.'' Yellen is a former member of the Fed's Board of Governors and has headed the largest Fed district by population, area and economic output since June 2004. She has voted with the majority on every rate decision, including her term as a governor from 1994 to 1997. ``Her comments suggest she would be in favor of holding interest rates steady for a while,'' said Gary Thayer, chief economist at AG Edwards & Sons Inc. in St. Louis. ``Fed moves over the past few months have been enough to temper economic growth and reduce the risk of inflation. Interest-rate futures show investors expect the Fed to hold the overnight lending rate between banks at 5.25 % for the rest of the year. The December fed funds contract yields 5.28 %, indicating traders see about a 19 % chance of a quarter- point rate increase. Treasuries were little changed yesterday, with the two-year note yielding 4.81%. Stocks on the Wall Street dropped as some traders interpreted Yellen's speech as suggesting the Fed may not be finished lifting borrowing costs. The Dow Jones industrial average fell 74.76 ponts, or 0.66 %, to 11,331.44. Broader stock indicators also declined. The Nasdaq fell 12.55 points, or 0.58 %, to 2,155.29 after posting its largest single-day point drop in more than a month on Wednesday, and the Standard & Poor's 500 index was also down 6.24 points, or 0.48 %, at 1,294.02. "It seems to me that the market is trading lower on the fears that the economy is perhaps having a hard landing versus a soft landing," said Jim Herrick, head of equity trading at Robert W. Baird & Co. He contends the mounting news about a housing slowdown has spooked investors because of the major role the robust housing market played in driving economic growth in recent years. But what I feel that the US investors were just waiting for a opportunity to book profits as with these kind of data coming from US Fed, there is harly any chance for the increase in rates in the next FOMC, meeting scheduled on 20th September. Also, most market watchers world-wide don't expect the central bank to raise rates at the Sept. 20 policy meeting. The rise in unit labor costs notwithstanding, it's really too soon to say the inflation picture has worsened. The Richmond Fed, along with the central bank's Philadelphia branch, voted to increase the discount rate before the Aug. 8 meeting, minutes showed today, a sign of greater dissent over policy than indicated by the 9-1 vote on the separate fed funds rate. The discount rate was left at 6.25 %. ``We shouldn't expect any further increases in the funds rate for the visible horizon,'' said Neal Soss, chief economist at Credit Suisse in New York, who worked as an assistant to former Fed chief Paul Volcker. ``You need inflation to deteriorate more than otherwise to inspire them back to tightening.'' "Everyone is talking about inflation, yet oil and gold prices have been down in the last few days," said Donald Selkin, director of research at Joseph Stevens. Crude oil has slumped more than $10 since peaking in mid-July; meanwhile, gold - a classic hedge against inflation - has slumped considerably over the past two sessions. Selkin said the revived debate about inflation was giving investors a reason to take profits after the unusually strong August. In addition, Selkin said stocks were vulnerable to the seasonal weakness that is typical in September, not to mention the start of the pre-earnings announcement period from corporate America. Oil Story: Oil prices declined after inventory figures showed rising refining capacity was helping add to U.S. gasoline and distillate inventories. Crude prices, which had recently been above $70 a barrel, had already fallen as tensions over Iran's nuclear ambitions eased, due to a lighter-than-expected hurricane season and news that a Gulf of Mexico platform is producing more than before it was struck by Hurricane Katrina. Also, demand was expected to fall as the summer driving season ended and since the US and Chinese economies are both showing signs of some slowdown. Crude settled down 18 cents at $67.32 a barrel. Today it has moved down further and is trading at $67.05 a barrel when this report is being prepared. The major gauges swayed throughout the session, alternately sliding and attempting to stabilize, with investors caught between wanting to retreat and hoping to build on the strong August advance. The tech-heavy Nasdaq briefly turned higher in the mid-afternoon, but the advance was short-lived. Stocks slumped on also Wednesday after a surprise jump in unit labor costs in the day's second-quarter productivity report sparked worries about wage inflation. India Story: A section of the market men expect the market to consolidate after a solid surge since late July 2006. Crude oil price has declined sharply from a record high of $78 hit in July 2006. This, in turn, has aided the rally on the domestic bourses over the past few days, raising hopes that the government will not raise domestic retail fuel price in the near term. FII inflow holds the key: India-dedicated funds have started receiving inflows in recent months, which has resulted in a steady influx from FIIs in Indian stocks since late July 2006. Domestic mutual funds are sitting on a good amount of cash, and may step up buying at the lower level. Most of the sectoral indices ended in the red today. BSE IT sector index lost 1.3% to 4,280.89. The BSE Oil & Gas sector index lost 1% to 5,717.08 and BSE Healthcare index shed 1.2%, to 3,598.71. Among the gainers, BSE Auto index rose 0.39%, to 51,45.39 and BSE Metal index rose 0.19%, to 8,573.88. Today markets are expected to open in the green and I feel this fear about this US Fed rate interest hike is just unfit for the Indian markets, as India has very little trade with the US unlike Japan or South Korea or some other Asian states. Hence we do not have to look too often on the US economy for taking cue, how the markets in India will fare. Today’s Recommendations: Buy: 1.Tilaknagar Industries Ltd at Rs.50, with a target already mentioned. 2. Haldyn Glass Ltd.
3.BSEL Infrastructure Reality
4. S….T….
5. Amtek India at Rs.322.20 with a Stop loss of Rs.120.
Keep watch on Media Video which rose yesterday due to call from a PMS firm. Sell:
1. United Western Bank. But if the India Bulls ratio of 1:6 is considered then it looks a little attractive buy. But I would stay away from this counter. 2. Balrampur Chini
Hold:
1.Haldyn Glass Ltd [Those who have already bought]
2.Chandra Prabhu International Ltd
3. Hazoor Media & Power Ltd
4. Shivalik Global Ltd
5.Soma Textiles & Industries Ltd
Some textiles stocks are looking attractive after a long term. Alok Textiles is also looking attractive. Bank of Japan has decided not to raise the interest rate and hence this news is expected to help the Indian markets rise in the morning trade. More in the following mails...... Best wishes, Suman Mukherjee India.
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