Market Analysis: Weekly roundup till Nov 6

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Sensex
Sensex is just a percentage from its all time high of 21,206.7, where it touched on Jan 8, 2008. Sensex gained 4.9 per cent and closed at 21,004 during the week, while Nifty ended the week at 6,312 was up by 4.9 per cent over its previous weekend"s close.

During the week BSE Mid-cap and small-cap indices gained 4.5 pc and 4.2 pc respectively. All the Sector indices closed in green during the week.

The BSE Bankex and Consumer Durables indices were the top gainers among sector indices up by 7.5 pc and 6.8 pc respectively.

Asian Markets are trading mixed. US stocks rallied for a fifth week, sending the Dow Jones industrial average to its highest level since before Lehman Brothers Holdings Inc"s, 2008 bankruptcy.

The Federal Reserve announced $600 billion bond purchase plan to boost growth and employment.

Going Forward

Indian equity markets are swollen with a rush of overseas funds that have already bought some Rs 12 lakh crore worth of shares.

Since corporate earnings and economic growth in emerging markets are superior to that of the US and European Unioin.

The $600 billion of government bond purchases by Federal Reserve to revive the economy, is not only defeating the purpose, but also harming the developed nation"s by making their economies less competitive.

The excess fund flow into the emerging markets may provide the upward pressure on emerging asset markets in the coming months.

Corporate

HCL, Ingram lead race to acquire Sonata Software
HCL Group and Ingram Micro, are in talks to buy controlling stake in Bangalore based Sonata Software. Sonata is a Mid-sized software provider focused on offshore services, and domestic software product distribution and implementation.

Inigram Micro is a largest distributor of IT hardware and software products globally.

Acquiring Sonata"s Software re-selling business will help deepen its footprint in India. Sonata has a relationships with leading software and solution vendors such as IBM, Microsoft and Oracle and is an implementation partner for them.

The promoters of the Company, Rajan Raheja and SB Ghia hold close to 44 pc stake and want to sell it. At Monday"s closing Price of Rs 61.6 Sonata valued at Rs.647 crore, and promoters stake valued at Rs 284 crore. If the sale transaction goes through, it will trigger an open offer to acquire an additional 20 pc stake from the public share holders.

ONGC seeks stock split ahead of FPO next year
ONGC has made a case for a two for one stock split ahead of its follow-on public offer (FPO) next year. It feels this would make the issue more affordable for retail investors. A formal decision is yet to taken by the Company"s board and the government on the ONGC stock split. It is also in line with the Center"s philosophy of using disinvestment to broaden public holding.

The government, which has a 74 pc holding in ONGC, plans to sell 5 oc of its shares to raise up to Rs 15,000 crore. Its 2004 initial Public offering, through which the government sold 10% equity, raised around Rs 10,000 crore.

Economy

Loans to turn costly as RBI hikes rates by 25 bps
Reserve Bank of India raised interest rates for the sixth time this year. Home loans would turn more expensive as banks are forced to end teaser rates and due to a cap on ratio of loan to value of homes, but that could slow rate of price increases, helping buyers.

The Central Bank has raised the repurchase rate, the rate at which it lends to banks, by 25 BPS to 6.25 pc and the reverse repurchase rate by a similar margin to 5.25 pc. It also believes that the likelihood of further rate actions in the immediate future is relatively low.

(An article by DAS CAPITAL MANAGEMENT & ADVISORS Pvt Ltd)

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