Pre-Market Report - 25.02.2008

[K.Karthik Raja]

Now or never, Stocks to catch pre-budget fever

US Markets pulled back dramatically during the last 30 mins of the
trade on Friday, keeping the die hard bull hopes alive. Reports of
bailout of bond insurer Ambac is cited as the primary reason for the
pullback. We believe Dow Jones has formed a medium term bullish
pattern on charts and Monday's positive close will confirm our
version.

Japanese markets along with other Asian markets pulled back strongly
on the back of strong global up move. Nikkei is currently trading up
317 points up nealy 2.4 percent from the previous close. Nikkei has
bottomed out a fortnight back on an upbeat GDP growth due to strong
exports.

Back home lacklustre markets are driving investors crazy from the last
40 days coupled with huge volatility. We are now in a do-or-die zone
with the biggest possible trigger, the Union Budget coming up on
Friday Feb 29th. All eye are on Mr.Chidambaram to deliver the goods.
Low expectations can be considered as a welcome sign. Export driven
sectors are hoping for a relief package and are likely to get the
same. All in all a populist budget is expected from the FM taking next
year's general elections into consideration.

At the same time Mr.PC cannot take the chance of neglecting the
country's economic growth. Infrastructure needs a big boost and there
might good news on the taxation front for common man.

Reliance Power declared a 3:5 bonus in yesterday's board meeting. The
price after bonus works out to be Rs.269 for a retail shareholder and
Rs.281 for a HNI. We leave it to Mr.Ambani to decide whether the bonus
is in agreement to the extreme high valuation of the IPO or a sympathy
towards the retail investor. The stock is likely to react positively
to the news though we do not see a huge rally in the coming days.

Private banks are likely to be re-rated on the news of HDFC-Centurion
bank merger. Stocks to watch in this space include Bank of Rajasthan,
Dhanalakshmi Bank, IndusInd Bank, City Union Bank and South Indian
Bank.

Given the volatility and the drag in the capital markets not many
investors are likely to believe in our theory. In case of a subdued
market response to the budget we are unlikely to see rallies till Q1
results or any global news that impacts Indian bourses. So in short it
is a 'Now or Never' situation for Indian markets to perform.

We expect the markets to open strongly and hold on to the gains. The
extent of gains are largely dependant on the pre-budget rally, which
we believe will set in any time.

Previous Market close box:

BSE Sensex 17349.07 -385
NSE Nifty 5110.75 -81
USD Rs.40.07
Oil Nymex $98.23

K.Karthik Raja

www.kences1.blogspot.com