The week saw a deep correction as expected with a 5.4 % fall, we have been expecting this fall and it came. The global markets were going up on a weak $ and all the noise that the global economy is growing back again, this is on $ 2 trillion of stimulus induced growth. Can the world stabilize with all these dope needs to be seen, personally am of the belief that the world is still not out of the woods. The US GDP growth was 3.5%, but looking at the nos. closely, we will find there is a 1.66 % of it has come on the back of a ‘Cash for clunkers’ scheme that helped the auto sales and thereby the growth. The US is reeling under a > 10 % fiscal deficit, so they need to spend less and save more, if they need to get out of the woods. We in India saw the RBI coming out with the winter policy and leaving all rates unchanged, but giving a clear direction that the rates will head north soon. The Inflation expected is at 6.5 % by March 2010, Industry expects it to be at 10 %. The core sector growth fell sharply to 4 % for September vs. 7.8% in August. Most of the results season is done, the top line growth for Sept quarter has been – ve (8.5%), but operating profits are up 35.5 % on the back of reduced input cost and interest costs. The negative growth on Sales is a worrying thing. So watch for more cues around this.
This week markets must be reeling under the 9 sessions of 9 % fall, looking at the numbers closely, we can expect a temporary bounce from the 4650 levels and can go up to 4850 – 4950 levels. The short term money will get out as the $ has started strengthening, this will drive commodities and stock markets down. The US has seen consumer confidence dip; also there has been a downgrade of banks like Citi. The CIT is expecting a bail out and the talks are on, if this fails. This can open up a big fall in the banking & financial sector. For India, we do not have big news, except for the October sales numbers of autos, cement & steel, the number must look good. In the medium term, India will go with the liquidity based trend from the FII’s. I would think, the Indian market will mirror the world markets and must head down in the months to come despite the fact, India will be a growth market.
The new derivative series has seen some good accumulation last week, the derivatives positions for the week stand at Rs 83278 Crs OI, the PCR is at 1.13 the option IVs for Calls at 25 % & Puts at 26%. The derivative indicators suggest a level if indecision, mixing technical’s with positions, we may get a small up move from the 4650 levels to 4850. The medium term trend is down; we must head to the 4050 levels soon.
Nifty idea of the week: Short Term 3 – 4 Days – Buy the Nifty @ 4650 levels with a Target of 4850 SL. 4620
Positional Traders can look @ Shorting in the range of 4850 – 4950 levels for a final Target of 4050 levels.