See Nifty’s final target at 3000-3200 levels: Gujral

According to technical analyst Ashwani Gujral, the 3,600level was 50% retracement of the entire bull market. “I think a pullback could lead up to 3,760 to about 3,810 odd levels. I think the final target will be 3,000 to 3,200 on the Nifty,” he said.

Here is a verbatim transcript of the exclusive interview with Ashwani Gujral

Q: For the near-term can you play for a pullback then technically speaking?

A: The 3,600 level was 50% retracement of the entire bull market –– it sort of held for the day. I think a pullback could lead up to 3,760 to about 3,810 odd levels. But I think this would be a pause before the Titanic sinks to the seabed; I think the final target will be 3,000 to 3,200 on the Nifty.

Q: As a trader what would you do – if you were short, would you cut short positions or would you initiate any longs at 3,690?

A: There is not problem with carrying positional shorts. Short-term short should have been covered yesterday. You need to wait for this pullback to end; it will probably end around 3,760 to about 3,800 so at that point you can go in for fresh shorts. These 4-5% rallies after 40-50% kind of decline in several stocks would not help. In fact, people should use them to get out of poor-quality stocks.

Q: From what you see, is the market settling into any sort of range? Is it giving you any boundaries on either end?

A: The boundary, 3,800, got smashed yesterday when we decisively closed below it. Now, technically you open up a further range lower that was the width of the previous range around 800 points lower from 3,800. Now it remains to be seen whether we go and retest 3,800 and whether we are able to test the lower end of this band — around 3,000. But once a range breaks on the downside and a range that has survived for a bit you should expect lower levels to come in. Also the bulls have been battered so badly that even pullbacks will become difficult to sustain because people lack the conviction of holding on to positions.

Bail-out plan: US Senate passes $700bn rescue package

The Senate passed a revised $700 billion (£380 billion) rescue plan for the US economy last night and began persuading their colleagues in the House of Representatives to follow suit, as the world continued to wait for a settlement on the largest bail-out in history.

The bill’s passage by a majority of 74 to 25, with strong support from both parties, was eased by the addition of a bundle of “sweeteners”, including temporary tax breaks for business and the middle classes.

It will now go to the House, where first version of the emergency was defeated on Monday, and where its passage is far from certain. A vote will be taken on Friday at the earliest.

George W Bush, speaking from the White House, said the bill was “essential to the financial security of every American”.

“The American people expect – and our economy demands – that the House pass this good bill this week and send it to my desk,” he said.

Republicans who voted heavily against the first bill may be wooed by the tax cuts, worth $110 billion, though they have objected to the cost of the bail-out.

The new bill also included temporarily raising the limit on the size of bank deposit guaranteed by the government federal to $250,000 (£136,000) from $100,000 (£54,000), a move designed to calm nerves among the public and small business owners and prevent a run on banks.

In a coordinated change of presentation, Senate leaders and the presidential candidates Barack Obama and John McCain, who broke off campaigning to vote for the bill, conspicuously avoided calling the package a “bail-out”, aware that the term was toxic with the many voters.

Echoing a refrain heard throughout the day Harry Reid, the Senate majority leader, said the vote was a “victory for Main Street, not Wall Street”.

“Supporting this legislation is the only way to make the best of this crisis,” Mr Reid, a Nevada Democrat, said after the vote which was passed at 9.30pm in Washington.

A clearly relieved Mitch McConnell, the Republican leader in the Senate minority leader, said the vote showed the Senate "at its finest".

"In the years that I've been here I can't recall a single time where, in this close proximity to an election, both sides have risen above the temptation to engage in partisan game-playing, if you will, to address an issue of magnitude, great magnitude," he said.

Despite dire warnings of financial damage from the White House and the majority of economists, the bill faces a difficult time ahead in the House. Conservative Democrats in lower chamber already voted against the tax breaks when they were presented in a separate bill recently, objecting to failure to offset the loss in revenue elsewhere in the federal budget.

Steny Hoyer, the Democratic leader in the lower chamber, told MSNBC News that no Democrats who opposed the measure earlier this week have pledged to back it, and he was not aware that Republican support has increased either. "We don't have any more Democrats at this hour," he said shortly before the Senate vote.

Left-wing Democrats are angry there is not greater help for homeowners struggling with sub-prime mortgage loans.

Other representatives from either party may be afraid of voting against their constituents’ wishes so close to congressional elections, being held on Nov 4 along with the presidential vote.

Backers of the new bailout have grown in confidence after public reaction became more supportive following the record collapse in the Dow Jones industrial index after the first bill’s defeat.

The earlier version contained major changes from the three-page proposal originally submitted by Henry Paulson, the Treasury Secretary. The £380 billino will have to be spent in stages, subject to congressional approval, while the government will take over rescued companies if their loans are not paid back. Limited impositions on chief executive pay were also inserted.

FII views : See Nifty at 5,500 levels if 3,800 holds

Ray Barros, CEO, Ray Barros Trading Group said if the Nifty follows the US markets, the markets could be in for a decent bounce. “The Nifty should be in for a decent bounce up to 5,500 levels. I see Nifty resistance at 4,500-4,600 and then at 5,100-5,200 levels. If Nifty holds lows of 3800, it can bounce to 5,500 by December.”

According to Barros, crude could bounce to USD 121-122 per barrel, then turn down to the USD 83-84 per barrel.

He expects gold to hit USD 925-935 per ounce, and then turn down to USD 700-725 per ounce.

Q: We held out to those supports of 3,800 on the Nifty, what kind of a bounce can you predict from here?

A: If the Nifty follows the US markets, we should be in for quite a decent bounce. I was thinking that the market would go into what I call a reversal of seasonals where September is a high rather than a low. But it looks as though September is going to be a low which means December is going to be the high for this quarter. That being the case we should see a bounce on the Nifty all the way back up to about 5,500.

We have a couple of levels we have to get through. We have to get through 4,500-4,600 and then again we have got to get through the 5,100-5,200 area. But if we can keep on heading north in line with the US markets, then I would expect 5,500 to be the target.

Q: So, you see it by the time we hit December? Is it going to be a clean run you think for the Nifty from about 4,200 to 5,000?

A: Yes I do, provided we can hold the lows that we managed to hold at about 3,800. If we can hold those lows, then I definitely think we are going to get up to about 5,500 by the end of December.

Q: What is happening with the commodities space, big bounce back for crude, and gold is making easy work of USD 900 per ounce? What kind of targets are you setting out there?

A: Crude is behaving the way I thought it would. Last time I was on the channel, I had said that thought we are in for a three-wave structural bounce, that bounce should take us to USD 121-122 per barrel. I think that will hold and then the market should turn back south. If those targets hold, I am looking for around USD 83-84 per barrel to be the ultimate target for crude, and then I expect it to go back up.

Gold is in a similar sort of position. It is actually pretty close to my targets of about USD 925-935 per ounce. This is where I expect gold to stop, turnaround, and hit back south. If USD 925-930 per ounce does not hold on gold, and it goes all the way back to USD 1,000 per ounce, then we have got one-two scenarios. Either the market has bottomed out and is ready to move up, which I am not quite ready to say that yet. I would expect the market to come back and retest that USD 750 per ounce area. If it does come down from USD 925-930 per ounce mark, then the bottom for me would be around USD 700-725 per ounce.

Q: In your eyes, has the Dow bottomed out for the intermediate term?

A: I think it has bottomed out for the quarter. There are good seasonal tendencies, and a very reliable pattern that has been holding for the last 15 years or so. We have a low around the third-fourth week of September then the market rallies, comes back down into the third or last week of October and then rallies straight up to the end of December.

Initially, I thought that there would be a reversal of those highs and lows, sometimes we have an inversion but in this particular case the strong bounce that we had the other day suggests that these seasonals are in place. So, the Dow should rally now to the end of December with an intermediate low around October.

Q: From amongst the entire BRIC ‑ Brazil, Russia, India, and China ‑ universe right now, if you had a chance to look at all those charts, what looks like it has got the most durable rally going?

A: I really think that the US at this stage and perhaps Indian markets are by far the strongest on a relative strength basis. I would tend to lean towards the Indian markets rather than the US simply because you are likely to get more shocks in the US.

The key instance in both cases is that we need to hold these lows that were established back in September. One should remember that particularly in the US, the Federal Government has done everything it can to prevent these markets from going south. If those lows give way, then I don’t think there is support before 9,000-9,200 maybe 9,500 at the earliest for the Dow. But relooking at the chart probably 9,000-9,200, it would be my target if these lows break. I don’t think they will but we have to keep that in mind. If they do break, we are going to get very strong directional moves.

stock analysis and recoendation by brokerages

Recommendations

Reduce Ambuja Cements, target of Rs 77: IIFL

07:00 PM | 26 September

IIFL has recommended a reduce rating on Ambuja Cements with a 12 month target of Rs 77 in its September 26, 2008 research report....

Reduce ACC, target of Rs 525: IIFL

06:55 PM | 26 September

IIFL has recommended a reduce rating on ACC with a 12 month target of Rs 525 in its September 26, 2008 research report....

Buy Nagarjuna Const, target of Rs 147: ICICI Securities

03:36 PM | 26 September

ICICI Securities has initiated a coverage on Nagarjuna Construction Co. with a buy recommendation and a target of Rs 147, reports CNBC-TV18....

Buy Punj Lloyd, target of Rs 484: Kotak PCG

03:29 PM | 26 September

Kotak PCG has kept a buy rating on Punj Lloyd with a target of Rs 484, reports CNBC-TV18....

Buy IVRCL Infra, target of Rs 316: ICICI Securities

03:22 PM | 26 September

ICICI Securities has initiated coverage on IVRCL Infrastructure and Projects with buy recommendation and with a target of Rs 316, reports CNBC-TV18....

Buy Axis Bank, target of Rs 957: Kotak PCG

03:22 PM | 26 September

Kotak PCG has kept a buy rating on Axis Bank with a target of Rs 957, reports CNBC-TV18....

Sell DLF: Goldman Sachs

03:15 PM | 26 September

Goldman Sachs has removed DLF from conviction sell but has retained a sell with a target of Rs 406, reports CNBC-TV18....

JSW Steel an outperformer: Macquarie

03:12 PM | 26 September

Macquarie Research has maintained its outperformer rating on JSW Steel with a target of Rs 1460, reports CNBC-TV18....

India Cements an outperformer: Macquarie

03:07 PM | 26 September

Macquarie Research has upgraded its rating on India Cements to outperformer with a target of Rs 162, reports CNBC-TV18....

Buy Zee Entertainment above Rs 204.50: ICICIdirect.com

02:44 PM | 26 September

ICICIdirect.com has recommended to buy Zee Entertainment Enterprises above Rs 204.50 with a stoploss of Rs 203.50 and targets of Rs 206/210/higher....

Sell Bombay Rayon below Rs 350: ICICIdirect.com

02:05 PM | 26 September

ICICIdirect.com has recommended to sell Bombay Rayon Fashions below Rs 350 with a stoploss of Rs 351 and targets of Rs 345/340/lower....

Buy Godawari Power, target of Rs 260: Karvy

12:45 PM | 26 September

Karvy Stock Broking has maintained its buy rating on Godawari Power & Ispat with a target of Rs 260. Godawari Power & Ispat (GPIL) has recently announ..

12:00 PM | 26 September

ICICIdirect.com has recommended to sell Triveni Engineering below Rs 86 with a stoploss of Rs 86.50 and targets of Rs 85/84/lower....

Buy Satyam Computer above Rs 332: ICICIdirect.com

11:00 AM | 26 September

ICICIdirect.com has recommended to buy Satyam Computer Services above Rs

332 with a stoploss of Rs 331 and targets of Rs 335/345/higher....

Sell Union Bank below Rs 144: ICICIdirect.com

10:10 AM | 26 September

ICICIdirect.com has recommended to sell Union Bank of India below Rs 144 with a stoploss of Rs 145 and targets of Rs 143/138/lower....

markets will sink to 10000 levels

Ridham Desai, MD and Co-Head Equity, Morgan Stanley, said the markets have made lower tops and bottoms, which confirms that we are definitely in a bear market. "Price damage is the first indicator. Around 75% of the price correction is over in the current bear market. Fundamentals have also given way. A lot of stock market drivers are taking us further into the red. The bottom may lie around 10,500. So, the markets are likely to se more downside for the next six months." He feels that valuations have come off. "Markets are trading around 14 times forward earnings. They are still not cheap. Valuations will get attractive around 10 times earnings." According to Desai, the markets are seeing a bear market rally. "There can be an 20-40% upside in the markets, but investors should sell into it, as one will never know when bear market end. It can only be defined in hindsight." The markets may not go though a prolonged sideways move like the one in the 1990s, he said. For the markets to rise, Desai said, crude prices need to top out. "Consensus estimate for FY09 growth has come in at 20%, which needs to be revised downward. We see more pressure on EBIDTA margins and downward adjustments. However, earnings bottom is dependent on policy response to economic woes like inflation." He feels that investors need to patient. "One will get good buying opportunities on corrections. Investors can buy in small amounts for in investment perspective of around 2-3 years. They need to look at price erosions and valuations, which is the most fundamental tool. Investors also need to put capital to work slowly. They will see better times to invest further." Desai does not see the markets hitting new highs very soon. "We can go back to the old highs by July 2010. However, equities will still remain the best asset class with CAGR returns of around 20%." On politics, he said that expectations on reforms increase around formation of new governments. "Elections are likely to happen in May 2009. By then, the bear market may be over

AIG can also be next victim of bankruptcy

NEW YORK: Insurer American International Group Inc struggled for survival a day after a financial tsunami swept away investment bank Lehman Brothers and forced the sale of rival Merrill Lynch in the biggest financial industry shake-up since the Great Depression.

AIG scrambled for a financial lifeline on Monday after investment bank Lehman Brothers Holdings Inc failed to find a rescuer and Merrill Lynch & Co Inc agreed to be taken over by Bank of America Corp.

The US Federal Reserve has hired investment bank Morgan Stanley to review options for AIG -- which has lost some 92 percent of its value so far this year -- a person familiar with the situation said Monday.

AIG's precipitous stock decline has led ratings agencies to threaten downgrades that could force it to post more collateral and nullify insurance contracts, possibly setting in motion a chain reaction that could threaten its survival.

In an ominous sign, two ratings agencies went ahead with downgrades after the market closed on Monday.

"AIG seems to be the next guy on the chopping block," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey.

Again seeking a private solution to Wall Street's woes, the Fed had asked JPMorgan Chase & Co and Goldman Sachs Group Inc to explore arranging $70 billion to $75 billion in loans to support AIG, among other financing options, another person familiar with the situation said.

Fearing a financial meltdown, the US presidential candidates sparred Monday over who could best restore the system's health, with Republican John McCain pledging reform and Democrat Barack Obama saying hands-off Republican policies were the problem.

US stocks tumbled across the board, with the Dow Jones industrial average dropping 504 points as Wall Street had its worst day since markets reopened after the September 11 attacks.

There was speculation that Wall Street's worsening meltdown could prompt the Fed to ac

indian stocks aafecting from lehman bankruptcy

lehman Brothers has filed for Chapter 11 bankruptcy after Barclays and Bank of America abandoned talks to buy the company. Following the news, the IT space felt a fair bit of pressure. With Lehman Brothers filing for bankruptcy and Bank of America taking over Merrill Lynch; the key question would be - do these companies have significant exposure to the Banking, Financial Services and Insurance (BFSI) space and what would be the impact?

As has been observed in the previous three-four quarters, every time there is a client-specific issue, it shows up on the financials in the next one-two quarters.



Lehman Brothers, which has filed for bankruptcy, seems to have very little outsourcing done as of now and the exposure remains with Wipro and Tata Consultancy Services (TCS). Wipro has given a statement that Lehman Brothers is not such a significant client and they are not worried about it. Extrapolating what Wipro has said, TCS may not see much of the impact.



But one needs to watch out for what happens with Merrill Lynch because Merrill Lynch was a significant client for both Satyam and TCS. The one which is going to suffer from Merrill Lynch’s takeover is going to be Satyam because it was a significant top client for them. Where TCS gains over Satyam is it has in relationship with the acquiring company Bank of America, which gets more outsourced work. Infosys and Bank of America have a very steady relationship. So Infosys maybe one of the gainers.



S Mahalingam, CFO, TCS has said that the company has a very steady-state relationship with both Merrill Lynch and Bank of America. So he is expecting no impact coming from this part of work at least.



HCL Technologies has done a little bit of work for Lehman Brothers but the management has clarified that it is over and they are not going to be impacted by it. EDS does a lot of work for Bank of America globally. So one needs to wait and watch of what kind of shape this takes and whether any work pours down to Mphasis.



When one puts all of this together, there is some loss but given that most of our top five companies have over 40-45% exposure to BFSI space, then mood is worried and concerned right now. Everybody is calling their relationship manager and trying to figure out what is happening officially because normally there is a two-three months' time, by when the impact actually flows down to the offshoring vendors.

sensex @ 10000 by december end

HONG KONG: Patrick Shum, chief strategist, Karl Thomson Securities, said the Sensex may drop to 10,000 by the end of the year.

At what levels, in terms of price correction, does India become good on a valuation basis to look at?

Shum: I guess at the end of this year, the Sensex may drop to 10,000 points. I think at that level, it is a good time for buying. Before that, I suggest investors should be more patient and wait for the correction.

What is your worst-case scenario for inflation and interest rates now?

Shum: Inflation is over 12% - so it is higher than the economic growth, and we can see in India that the economy is under stagflation. The central bank will have less flexibility to implement their policys... so uncertainty will affect investment sentiment.

What is the flow of money from the FII side into Asia? Are they looking at equities in emerging markets?

Shum: Most of the equity markets is still facing pressure because a strong US dollar means money is returning to the US. So, in the near term or the rest of this year, money flow to Asian markets will be low, and the equities markets will face certain pressure.

You said India is probably heading towards stagflation? Is that correct?

Shum: I think investors, for the rest of this year, should hold more cash and increase their cash holding... I can see more downside in the coming months.

From an economic stand point, I didn't catch the word stagflation. What is that?

Shum: In economic terms, you can see the sub-prime crisis in the US, and in the European market, we can see negative GDP growth. So, in economic terms, I think the global economy will slow down.. so it's not a good time for investments.

What accounts for the rally that we saw in Indian equities all through July? We were one of the outperformers ...

Shum: I think in the near-term, the Indian market will underperform but in the long- term, let's say 1-2 years, I think India will outperform because the fundamentals are still good... in the near-term, strong inflation will erode consumers' purchasing power. I think the valuation of the Indian market is relatively higher than other markets...

I think the market will become weaker because inflation is still there, and I think because of strong oil prices and food prices, inflation pressure will increase and the central bank may raise interest rates again.