Jose Koshy's  Instablog

The past week saw some volatility and the markets touched a low of 4550 levels and then pulled back to 4800+ levels. This confirms the traders & investors are confused with the state of the market. Looking at the global economy, we continue to see things have not improved as dramatically as people think. The US has seen unemployment touch 10.2 %, this is sure to affect consumption & also burden the US government. The UK government continued to pump in $ 45 B into 2 of the largest banks. The G20 summit continues to talk about not pulling out the stimulus. The US has passed the health care reforms bill that will cover 96 % of Americans and cost the exchequer huge monies. So we are seeing a lot of socialistic model of governance in the capitalistic economies. In turn we have India talking of pulling out of the stimulus & hardening of interest rates going forward. The smart thing India did was to buy 200 tones of Gold from IMF last week, this still is just 5 % of the forex reserves, it may be prudent for the government to take this to 10 % going forward. The government also spoke about the disinvestment of PSU’s upto 10 % and raises money for social programs. This step will help in reducing the fiscal deficit of the government.

This week markets do not have any major news to play on, technically the $ looks ready for a spurt, it is trading a shade below the 50 day average and most of the people pessimistic about the $ and have moved it to alternative asset class like stocks & commodities. There is a huge $ carry trade that is happening – borrowing cheap $ and investing in high risk/return. If this starts to unwind, we can have a crash in the global markets. India will have the IIP data for September coming in, if we go with the excise collection numbers, this will surely be lower that the August numbers. The inflation on food articles is at 13.4 %, the sales volume for last quarter came in at       – 8.5 %. So where is the growth?

The new derivative series has seen some good accumulation last week, the derivatives positions for the week stand at Rs 93000 Crs OI, the PCR is at 1.31 the option IVs for Calls at 27 % & Puts at 30%. The derivative indicators suggest we may be in for a sideways movement with a – ve bias. The next 2 weeks look weak keeping all the factors in mind.

Positional Traders can look @ Shorting in the range of 4850 – 4950 levels for a final Target of 4050 levels.

The Cement Stocks look weak, look at shorting the stocks on any up move.