PRE-MARKET REPORT - 27.05.2008

[K.Karthik Raja]

Selling overdone, a strong bounce back expected
May 27, 2008 | 9.40AM

Lack of global cues with US Markets closed yesterday, positive Asian
market
opening and heavy selling from the last one week have set the tone
for
strong session on Dalal Street today. Markets are trading in a lack
lustre
fashion from the last few days courtesy raising crude, inflationary
talk,
chances of raising interest rates and the list goes on.

Midcaps along with IT majors are likely to move the indices after a
subdued
mood in the past 5 sessions.

The current turmoil will continue with global markets sliding even
from the
present levels. Lets recap what happened in the last one year.

Bear Magic : Sub prime/Credit crisis, US Recession and Crude

Credit crisis

It all started with Sub prime/Credit crisis on the wall street that
started
hitting the global markets with major investment banks across the
world hit
by the magic "Subprime" mortgage market in the US. The crisis
swallowed a 85
year old investment bank Bear Stearns. The crisis was later subsided
with US
Federal Bank and European Central Banks pumping the money market with
billions of dollars.

India Impact : Though ICICI Bank has Mark-to-market losses in credit
derivative obligations (CDOs) and credit linked notes (CLNs), not
related to
subprime. Bear Stearns a.k.a BSMA in Indian context resorted to mad
selling
on the bourses and many midcaps and small cap stocks were hit as there
were
no takers in a weak market

US Recession - A Bear obsession

Sub prime and Credit crisis raised curtains to US Recession with
increasing
job losses, decrease in consumer spending, decrease in manufacturing
etc.
Chances of recession has increased (according to TV analysts) to 70
percent
from 30 percent levels the earlier year. Bush administration was taken
aback
by the media talk about Recession and signed a $168 billion in the
wake of
US general elections next year. The effect of the stimulus package
will be
seen in the next 1-2 months. US GDP numbers disappointed many analysts
and
media who wanted to party on the recession predictions. And now both
the
parties started planting/hoping/praying for official recession
declaration
after the next quarterly GDP announcement.

India Impact : Indian economy depends on the US for exports and few
sectors
that are prominent are IT, Pharma and Textiles.

Crude - Absolutely rude

Crude jumped to unbelievable levels and have doubled over the past
year and
are up 56 percent in just the past four months. Certainly the
economics are
supportive of rising oil prices as demand from developing countries
increases and supply takes time to respond, but the supply-demand
dynamic
has not changed so much in the past year to explain a 100% increase in
crude
prices. Most of the increase is due to speculative pressures as oil,
and
commodities in general, have been the only game in town for the hedge
funds
over the past year.But the market is way ahead of the underlying
economic
fundamentals and at some point, probably sooner rather than later,
there
will be a rush for the exits and the price of oil will correct sharply
and
suddenly.

India Impact : India imports crude oil. Government will try to absorb
the
majority of the crude related costs keeping in view of the general
elections
next year. Oil marketing companies will continue to bear the brunt.

TODAY STOCKS SUITABLE FOR INTRADAY TRADE

INFOSYSTCH,BHARTIARTL,RPOWER,TATASTEEL,HDIL,SUZLON,AXISBANK.

MARKET CLOSE BOX :

BSE Sensex 16348.50 -301.15
NSE Nifty 4875.05 -71.50
USD Rs.42.56
Oil Nymex $132.1