DETAILS FOR THIS WEEK TREND & TRADING CALLS 3RD MARCH 2008

D espite few expectations from the Union Budget to dole out any mithai, sentiment on the bourses turned negative by the hike in the shortterm capital gains tax and changes in treatment of STT. For the week ended the Sensex closed at 17,579 with weekly gain of 229 points and the Nifty gained 113 points to end at 5,224. The intra week high and low for the Sensex were 18,137 and 17,137 and for the Nifty were 5,368 and 5,055.
FM's claims that the Budget will bring about inclusive growth and growth momentum in economy can be maintained may prove hollow if global inflationary trends continue. Galloping international commodity prices and weak trends in US markets continued to keep the broader sentiment negative. The Budget mithais like farm loan waiver scheme and others clearly indicate that elections are not very far away.

Weekend cues from the US clearly reflect that worst on sub prime and bond insurance is not yet over. Brace for a roller coaster ride with unexpected speed breakers in the markets in coming months. For the week ahead trading range suggested for the Nifty and the Sensex are 5,030 to 5,440 and 16,800 to 18,100.

Expect support on downside for the Nifty and the Sensex at 5,100 and 4,800 and 17,100 and 16,800. For intermediate uptrend key levels to cross are 18,160 and 5,380. Adopt sell on rally strategy for present. Hope for the best, but expect the worst. Being braced for disaster - by diversifying and by learning market history - can help keep you from panicking. Every good investment performs badly some of the time. Intelligent investors stick around until the bad turns back to good.

F&O segment V olumes week segment.

improved during the ended in the derivatives Despite clouds of uncertainty decent rollover of positions for the new settlement at over 75 per cent was seen. While R-pack witnessed muted rollover, metals, pharma and cement counters saw enthusiastic rollovers. Nifty put/call ratio at 1.5 clearly reflects build up of short positions. Other sentiment indicators like implied volatility, open interest and put/call ratios in stock futures indicate highly volatile sessions in near-term.

Despite rally in bank counters after clarification that farmer loan waiver amounts will be compensated by the government, near term outlook is turning hazy. Use sharp declines in PSU banks to accumulate for long term. Pharma and auto stocks witnessed good buying interest after the Budget sops.

Buy Ranbaxy, Aurobindo, Orchid, Hero Honda, Maruti, Tata Motors, M&M and TVS Motors on declines. Expect selling in technology and fertiliser counters on rallies. Oil and Gas stocks are attracting buying at lower levels from savvy market players.

Sources indicate that Budget changes are going to benefit standalone refiners. Stay invested for present. PFC, Cairn, HLL, Glaxo, Gitanjali Gems, Maha Seamless, Voltas and Aban Offshore look good for short-term.

With many holidays curtailing trading days in March settlement F&O players are advised to avoid large positions and quickly change sides in line with the trend. Investigate each stock thoroughly before you buy. It's not enough to do the homework; one has to do the right homework. Different kinds of trades and investments call for different kinds of homework.

There's nothing more dangerous than thinking you've done all the right homework only to find out later that you've been researching the wrong aspects of a company.

Thrust on infrastructure projects and focus on public private partnership projects are likely to benefit wide cross-section of players in the construction sector. BOT players and construction companies with infrastructure assets housed in SPVs are being favoured by savvy fund managers. Dark horse buys in the sector include Roman Tarmat, Madhucon, Pratibha and Shristi Infra. Q3 results of Roman Tarmat clearly reflect the growing profitability and good results in next few quarters. Thrust on road projects is paying off for the company. Buy for target price of Rs 175 in next few weeks. ¦ Increased power sector investment and focus on transmission and distribution segment may improve the prospects of suppliers like AIA Engg, Elecon, KEC Intl, Kalpataru and Crompton Greaves.

With the goveernment stressing focus on UMPPs and also continuation of 80 IA benefits for generation and T&D projects, power and power utilities companies will continue to attract buying at lower levels from long term investors. Use sharp declines to buy REL, Tata Power, CESC and NTPC. ¦ Dull sectors like tyre and paper are likely to be back in limelight on the recent duty cut benefits in Budget. Among the tyre counters buying is suggested in Apollo Tyres, JK Inds and MRF. From the paper sector favourites include TNPL, Sirpur Paper, Speciality Paper and Seshasayee Paper. ¦ Changes in treatment of Securities transaction tax, which is to be treated like any other deductible expenditure against business income (currently allowed as rebate against tax liability) may prove to be big deterrent for day traders and arbitrage players and could impact market liquidity. As STT earlier got a 100 per cent rebate against tax liability and would now attract only a 30 per cent deduction for the highest slab, the tax implications are very high and literally kill arbitrage business. Negative impact on markets is likely to be high.