Indian Equity Indices - From The Desk Of Research

Indian equity indices went through a turbulent week as they failed to negotiate a close above the neutral line for even a single session and eventually snapped the week with a cut of over two percent. The week largely remained characterized by choppiness because investors were reluctant to pile up positions and indulged largely in stock specific activities as corporate India continued to divulge their fourth quarterly report card. Volatility gradually accelerated session after session as the April series Futures and Options settlement neared while quarterly earnings' announcements by RIL,Wipro,Bank of Baroda, Ambuja Cement,

Crompton Greaves, TVS Motors were punished badly as they remained below Street's expectations.On one hand spiraling international crude oil prices become the headache of policymakers while on the other, worries over global economic recovery loomed large, given the fact that world's biggest economy continues to grow at a tepid pace. The April series F&O settlement day turned out to be another pathetic trading session for the Indian stock markets as the selling pressure gathered greater momentum after government released the disappointing food inflation numbers which stayed absolutely flat at 8.76% on annual basis during week-ended April 16 compared with 8.74% recorded in the previous week. Rate sensitive counters like Real Estate and Bankex witnessed relentless selling pressure through the week ahead of the RBI's annual monetary policy review meet on May 3rd where it is expected to bite the bullet and hike rates by 50 bps to cool the spiraling inflation which has vehemently hovered at uncomfortable levels on the back of crude oil prices which have skyrocketed by over 50% in last six months. The Foreign Institutional Investors on the other hand ploughed back their money from the local markets to the extent of Rs 2,703 crore in the week on expectations that deteriorating domestic macro headwinds will have adverse impacts on the companies' earnings thereby reducing the returns on investment. The Bombay Stock Exchange (BSE) Sensex lost 466.27 points or 2.38% to 19,135.96 during the week ended April 29, 2011. The BSE Mid-cap index declined by 141.07 points or 1.95% to 7,094.23 and the Small-cap index shed 163.26 points or 1.84% to 8,715.31. On the sectoral front, Reality lost 201.17 points or 8.45% to 2180.10,

Capital Goods (CG) shed 607.16 points or 4.45% to 13,036.91, Bankex declined by 468.163 points or 3.46% to 13545.13, Oil & Gas tumbled by 301 points or 2.92% to 10,008.27 and Metal index down by 467.98 points or 2.81% to 16,190.59,were the top losers on the BSE, while Health Care(HC) adding 74.77 points or 1.21% to 6232.55 and FMCG advanced 24.78 points or 0.66% to 3755.16 were the only gainers on the sectoral space. The S&P CNX Nifty trimmed 135.20 points or 2.30% to 5750. On the National Stock Exchange (NSE), Bank Nifty lost 3.46% to 11,483.75, CNX mid-cap shed 1.36% to 8,200.95, CNX Nifty Junior declined by 1.35% to 11,376.70 and CNX IT tumbled by 0.92% to 6718.35. Conclusively we expect slightly range bound scenario between 5555-5960 though sentiments remain subdued for the upcoming sessions. Any closing above this 5960 with substantial volumes for at least 2 consecutive days may generate another 2-3% return and we might see 6070-6080 in the short term.HAPPY TRADING......

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Trade In Crude Being Extra Alert Mansukh Monthly Report

Crude oil price still appears to go up but how long this bullishness will sustain is very difficult to predict. So do trade in crude but being very active & cautious.

A MONTH ago Brent crude oil stood at around $96 a barrel and Hosni Mubarak was ensconced as Egypt's ruler. Now he is gone, overthrown by a display of people power that is shaking autocratic leaders across North Africa and the Middle East. And oil has surged above $111. Little wonder. The region provides 35% of the world's oil. Libya, the scene of growing violence this week, produces 1.7m of the world's 88m barrels a day. So far prices have not been pushed up by actual disruptions to supply. Oil hit a peak even before news emerged that some foreign oil companies operating in Libya would stop some production and that the country's ports had temporarily closed. As we think, oil prices are driven both by current conditions and by future expectations.

Oil markets don't like surprises. The sudden ousting of Mr Mubarak and the unrest in Libya, Bahrain, Yemen, Iran and Algeria (which between them supply a tenth of the world's oil) have added 16% to oil
prices. But the big worry is that spreading unrest will culminate in another shock akin to the oil embargo of 1973, the Iranian revolution or Iraq's invasion of Kuwait. Oil is now more global than it was during those previous crises. In the 1970s production was concentrated around the Persian Gulf. Since then a gusher of non-OPEC oil has hit markets from fields in Latin America, West Africa and beyond. Russia overtook Saudi Arabia as the world's biggest crude supplier in 2009; OPEC's share of production has gone from around 54% in the mid- 1970s to just over 40% now.

If Libya's oil stopped flowing importers would look to Saudi Arabia to make up the shortfall. The oil could probably flow to fill the gap in Europe, Libya's main market, in a matter of weeks. That is ample to plug a Libyan gap but would hasten the day when growing world demand sucks up all spare production capacity and sends oil prices rocketing. Despite rising prices, Saudi Arabia has so far been reluctant to turn its stopcocks. OPEC claims that the world is amply supplied with oil and seems content with a price around $100 a barrel. Traders hope that Saudi Arabia will boost production stealthily or that OPEC will call a special meeting to raise quotas and calm markets.

The worst-case scenario for oil prices would be some kind of disruption to Saudi supply itself. That concern has become livelier given the unrest in neighboring Bahrain. The tiny island kingdom produces little oil but is of vital strategic importance in the Persian Gulf, a seaway that carries 18% of the world's oil. America's 5th Fleet, which polices the Gulf against troublemakers (i.e. Iran), uses the country as a base.

The Saudis may also fear that protests by Bahrain's Shia population could spill over their own borders. Saudi Arabia's eastern provinces are home to both its oil industry and most of its Shias, who may also have cause for grievance with their Sunni rulers. One crumb of comfort is that oil facilities across the region are generally located far from the population centers, where protests tend to be concentrated, and are well defended against anything but a concerted military assault.

The impact of a crisis would therefore depend on how much oil production was lost and for how long. Even seismic shocks in oil- producing countries might not cut off supplies for very long. Yet the example of Iran shows what can go wrong. The world could probably weather a short-lived crisis. But the damage if oil prices spiked and stayed high for a long time could be great for the recovering economies of the rich world. As for the prospects of reducing the importance of the Middle East to global oil supplies, forget it. Strong Asian demand is likely to mean that OPEC's share of oil production rises again as it pumps extra output eastward. A troubled region's capacity to cause trouble will not diminish.

India’s domestic Oil production is insufficient (at 0.8 million barrels per day), to meet with growing demand of oil in the country. India is hugely depends on the OPEC countries for his requirements. Instability in political scenario and some rise in crude oil prices will also affect National Stock Exchange and Bombay Stock Exchange. Equity market and commodity and exchange market, seems to get most affected from this.

Turning Point Of Gold: Remain Bullish

January has been a tough month for gold. From its year-end 2010 price of $1,420 an ounce to its recent low just over $1,320, gold has lost some $100 - about seven percent.

On Wednesday, the World Gold Council published its annual Gold Investment Digest for the fourth quarter and full-year 2010 with some interesting insights.

According to the World Gold Council last year’s price performance was driven by developments in key gold markets:

• China saw increased investment activity, driven in part by innovative new gold investment vehicles offering improved access to the gold market.
• Jewelry consumption rebounded in India, the world’s largest gold market.
• Globally, investors remained concerned about uncertainty in the macro-economic environment and turned to gold to hedge against weakness in the US dollar and rising inflation in many economies.

We find the last point particularly interesting, as the USD Index finished the year slightly higher than was the case in 2009. However as we have observed, after 2006 things are much more complicated than simply USD up = gold down and vice-versa.

For the past two weeks we have experienced the risks that we might all face in 2011 and mentioned the problems caused by rising food prices and the social unrest they might unleash. We didn’t expect it to happen so soon.

After Tunisia’s revolution and the ouster of its president after 23 years of rule, Egypt seems to be next on the North African crisis list. One of the main grievances of the protesters in Egypt, just as it has been in Tunisia, has been the soaring price of food in the shops. The crisis and food shortages may spread to other Arab countries and no one knows where that can lead. We only know one thing—in times of crisis and uncertainty, people turn to gold for a safe haven.

The sentiment for the USD Index is short-term bullish which also has bullish implications for gold and silver. Recall that during the past few months, the USD has been leading the precious metals and here could very well ignite a turnaround for the metals.

In this daily short-term chart, we see that once again a cyclical turning point has come into play Summing up, gold appears bullish in the short-term; however the sentiment for the medium-term is mixed. Much depends on how the resistance levels hold the next short-term rally. If they hold and stop the uptrend, then it may very well be prudent to exit a portion of one's long-term positions.