>DAILY CALLS (ICICI DIRECT)

Sensex: We said, "After two bear candles, holding 13800-34 will be required for positive expectations for Sensex. Breaking it could be bearish." Initially holding 13834, Index attempted positive moves, but weakened later to end 2.3% lower. Cap. Goods Index lost 5.4%. Small-Cap Index finished 2.5% higher with evened A/D.

The action formed the third consecutive bear candle. Having lost over 1200 points within 3 days, Index will test 38.2% and 50% correction levels to latest part of the rally at 13695 and 13314, respectively. Today will make it clear if it finds buyers at 38.2%. Support, however, confirms if it can move above previous day's high.

To see full report: CALLS 220509

>DAILY MARKET & TECHNICAL OUTLOOK (ICICI DIRECT)

Key points
■ Market Outlook — Open flat
■ Positives — New government to take oath today
■ Negative —MFs selling

Market outlook

■ The Indian market is likely to open flat today. It ended sharply lower on Thursday, as traders booked profits in frontline stocks and bought undervalued small-cap stocks. Weak cues from the overseas market also kept the large-cap indices under check. Today the markets are expected to open flat with a mixed trading session. More clarity would emerge over the weekend, as investors are likely to take cues from new cabinet formation

■ The Sensex has supports at 13480, 13200 and resistances at 13840, 14040. The Nifty has supports at 4190, 4150 and resistances at 4290, 4340

■ India's wholesale price index rose 0.61% in the 12 months to May 9 compared to an annual rise of 0.48% in the previous week and 8.57% in the corresponding week a year ago

■ Asian shares pared back early losses in the morning session on Friday, to trade mixed, with fiscal and economic concerns dragging sentiments down. Stocks tied to a recovery in growth, including technology and automotive shares, weighed on markets

■ US stocks fell on Wednesday, led by financials in a late-stage sell-off, after the Federal Reserve gave a more pessimistic view on the economy, tempering hopes for a quick recovery. The Dow Jones industrial average fell 52.57 points, or 0.62%, at 8,422.28. The Standard & Poor's 500 Index lost 4.64 points, or 0.51%, at 903.49. The Nasdaq Composite Index was off 6.70 points, or 0.39%, at 1,727.84

■ Stocks in news: Tata Power, Patel Engineering, Dr Reddy’s Lab.

To see full report: OPENING BELL 220509

>INDIA STRATEGY (MORGAN STANLEY)

No Need to Chase Stocks, But Buy the Dips

■ Strategic view is to buy the dips rather than sell the rallies: We think that the October 2008 low may have been the low of the bear market that started in January 2008. Whether a new bull market has begun will partly depend on government’s policy response and partly on global outcomes.

■ Significant medium-term development: We agree with the market’s reaction that the political development is a significant inflexion point for India’s medium term. Over the past 15 months, the electorate has been displaying growing maturity, we believe, in choosing its representatives for the country’s law-making bodies.

■ However, there is no need for panic buying: The market’s bizarre 17% rise yesterday in response to the election results is reminiscent of the 17% intra-day fall in May 2004 in response to the election results then. Just as in May 2004, it did not make sense to panic sell, it
makes no sense to panic buy now.

■ The government’s job is cut out: The government has the challenge to revive growth in a difficult global environment and deal with a large fiscal deficit. We expect the government to stimulate growth and grow out of the fiscal situation. This augurs well for equity markets, though not so well for bond markets.

■ Investor skepticism: Valuations are rich, and paper supply will likely rise in the short run. The market’s performance for the rest of the year depends largely on government action, we believe. We can see why investors are expressing discomfort with this situation. After all, in the past, most governments have failed to deliver. However, in the context of the quality of this government’s mandate, it seems that the market’s optimism may not be misplaced. At the same time, we remain cognizant of the risk of disappointment.


To see full report: INDIA STRATEGY

>INDIA INFRASTRUCTURE (BNP PARIBAS)

Railways: on the right track
We attended the IndiaRail 2009 conference in New Delhi on 12 May 2009. The key speakers at the conference were policy makers and industry representatives. The agenda of the conference was to discuss opportunities in the sector.

Opportunities galore …
Opportunities in the sector are close to INR2.7t over the next five to eight years, of which the INR800b-900b will be awarded in the next two years. The Dedicated Freight Corridor (DFC) is the largest opportunity worth INR680b. Other areas of opportunities include station modernization, port connectivity, gauge conversion, rolling stock and logistic parks. The Railway budget for 2009-10 has earmarked INR379b (compared to INR367.73b for 2008-09 revised estimates). Major beneficiary in our coverage from these investments is Larsen and Toubro, which we believe will benefit from its latest venture into the railways segment. The company also has investments in Kalindee Rail Nirman (Engineers) Limited (owns 14% of the company) that specializes in track and signaling systems.

… but challenges remain
We believe land acquisition is the most significant challenge, which could delay project implementation. Other key challenges highlighted by the industry representatives were related to inability of Indian players to execute projects on a turnkey basis due to obsolete technologies.
Shortage of trained engineers and suppliers is another impediment. However, these impediments may not materially affect the overall investment rationale.

Key takeaways
■ Increased focus on investments through Public Private Partnerships
■ Thrust on Dedicated Freight Corridor (DFC)
■ Major beneficiaries – rolling stock manufacturers, players offering track and signalling technologies, logistic & construction companies
■ Financing for the DFC from Ministry of Railways’ internal generation, budgetary support, multilateral and bilateral agencies, private investments and market borrowings.


To see full report: INDIA INFRASTRUCTURE