The markets last week was volatile and ended down 2.8 %, we had recommended a positional short and the position is in profit now. The markets seem to be tiring and the final up move was more of a technical move tan fundamental. The Indian market is now on a PE of 23 times, which is at the top end on the market. India with its consumption story will beat world markets, but not without some correction on its way. The telecom stocks came in for some string hammering last week, the per second billing going to be made mandatory was the cause for it. The margins can fall drastically if this is mandated. We had some good news from the Reliance board to all its shareholders with a 1:1 bonus, but markets just ignored it. The Infosys results were better than expected with a 7.5 % growth again markets ignored and the stock fell. So valuations seem to be discounted. The $ weaken considerably last week against the rupee and this helped more money getting moved to commodities and emerging markets. But the $ fall is overdone, and we may see a pull back soon. This will see some unwinding of carry trade and short term pull out of money from most markets.
This week we will continue to see the results season unfold, all +ve news seem to be fully discounted, so an up move on announcement of results is doubtful but we can have markets punish any –ve surprises. The Indian market is closed on 13th Oct for state elections. On international markets, we will be closely watching the retail sales & unemployment data in the US, the movement of the $ is another cue that traders will be watching. On the Reliance saga, there is a new twist to the RIL / RNRL tussle, Mukesh bhai has said the MOU signed has been done in his personal capacity and not binding on RIL. The Supreme Court will start hearing the case starting 20th Oct, so this diwali will bring in some interesting twists in the case.
The new derivative series has seen some good accumulation last week, the derivatives positions for the week stand at Rs 99362 Crs OI, the PCR is at 1.24, the option IVs for Calls at 27 % & Puts at 30%. The derivative indicators suggest that markets are in a speculative mode and traders are betting on a breakout of the range. The technical indicators suggest, we will continue with the corrections.
Stock idea for the week (Long term): Buy Kingfisher Airlines on falls to Rs 45 for a Target of Rs 80.
Nifty idea of the week: Hold on to the Positional Trade. Positional Traders can look at going Short < 4980 for a target of 4720. Stop Loss : 5050