9am with Emkay; 3 November, 2010

Visit http://indiaer.blogspot.com/ for complete details �� ��

9am with Emkay

Banking Sector Update; Mid-term review of Monetary Policy 2010-11

n    RBI hikes both Repo and Reverse Repo by 25bps maintaining the LAF corridor at 100bps

n    Inflation, capital flows and rising current account deficit continue to remain key risks to the economy

n    RBI highlights specifically for first time that that the likelihood of further rate actions in the immediate future is relatively low

n    The increase in risk weights and standard asset provisioning for some home loans more negative for real estate companies than banks and will have very marginal impact

n        Dealer Comments

The markets started the day’s session on a subdued note with almost 60 odd point’s upward gap led by mixed cues from the world markets particularly the Asian counterparts. Post the positive opening markets swayed between the zones till almost noon trades awaiting the announcement of the RBI policy regarding hike in key interest rates. There was almost zero enthusiasm till the policy announcement in absence of any major flows in the markets. Post the key rate hikes markets displayed a good buying interest particularly in the banking space as RBI stated that another rate hike in immediate future remains low. As soon as RBI announced of teaser rates for home loans to be discontinued stocks from the realty pack saw good selling pressure as banks would face a crunch in selling home loans. Besides even cement stocks saw very good buying interest post announcing good dispatch figures for the month of October 2010 showing a growth of almost 26% for all companies put together. Going ahead all the global markets will be closely watching the outcome of the QE2 by US fed in its ongoing two day meeting. The overall traded volumes were once again lower compared to the earlier day by almost 10% and were at Rs 1009 bn. While delivery based volumes were also quite lower compared to the earlier day at 40.8% of the total traded turnover. While on 2nd November 2010, FII’s bought shares worth Rs. 4.61 bn in cash segment (provisional) while in the F&O segment they were net sellers to the tune of Rs 6.46 bn whereas Domestic Funds sold shares worth Rs. 2.02 bn (provisional).

n        Technical Comments

Range-bound session

After a lackluster opening market just remained sideways throughout the entire session to end on a flat note. Moreover, since past two sessions Nifty has just been within a range of 50 odd points, with upper boundary packed at 6139 and lower boundary packed at 6094. Furthermore, Nifty is feeling some selling pressure on every attempt to go pass its golden retracement (61.8%) area packed at 6152, which indicates that unless we go pass this hurdle probability that one more leg on downside is still pending holds higher weightage.

BSE Capital Goods:

BSE Capital Goods index has resumed its uptrend after doing a decent 50% correction of its recent up leg. Also there is a higher top higher bottom formation on the daily charts indicating that the overall trend is again up. Moreover, the index also pierced the resistance of 20-DSMA on closing basis. Hence we are now looking for the targets in range of 17,050 to 17,200.

n        Results Today

Aurobindo Pharma	CESC	Ent.Network	GAIL (India)	GTL	K E C Intl.
M T N L	Mcleod Russel	Oriental Bank	Rain Commodities