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India Week Ahead - 7th - 12th December 2009

|Includes:EEM, GLD, HDB, IBN, India Fund (IFN), INFY, TTM, WIT

The past week the markets the Indian market moved up by 2.8 %, this was because India had one of the best GDP growth no. @ 7.9 %, one point to be noted is that the stimulus and easy cash regime has added to 2.8 % of this growth. It is time, the government starts to pull back the stimulus and work on the real growth. The US & other developed markets may not be able to come out of the stimulus model as yet due to slow growth. The Auto Industry grew by a whopping 63 % in Nov, which is generally considered to be weak due to year end pressures. The easy money policy is not only driving the sales but also putting enormous pressure on the government as the oil prices are subsidized in India. The food inflation came in at 17.8 %, this will drive more people into poverty and will pressure to have lesser money to save. We must see the interest rate harden sooner. The government may suck out liquidity using the CRR most probably in January 2010. The gold prices softened on Friday with a 5 % fall on the back of good employment nos, the $ strengthened and closed above the 50 day average after March 2009, so we may see a short term upmove in the $ and a correction in commodities and stock markets into March 2010. The next 12 months will also see the US $ 3 trillion of short term debt being financed. Will be interesting to see who will buy these debt ? If Dubai $ 60 B debt crisis was anything, watch out for 2010 for exciting news on funding sovereign debts.

This week markets will be watching the $ movement and thereby the commodities and stock markets. India will be watching the run up to the advance tax numbers that will have to be filed by 15th December. There is a $ 74 billion in debt auction in the US along with the retail sales nos. So the markets are all on topping mode, so we may see a sideways with a – Ve bias soon. Traditionally December has been a +ve month for the markets, so big falls don’t happen this month. Also the fund managers need to manage books & NAV for their bonuses. We must see the Wall Street sharks taking in big bonus with a 22 % up move in stocks during the year.

The derivative series has seen some good roll over to the new series, the derivatives positions for the week stand at Rs 100940 Crs OI, the PCR is at 1.29 the option IVs for Calls at 22 % & Puts at 25%. We may see sideways movement with a – Ve bias.

Hold Shorts on the Index to cover by mid next week.

Stocks: IFN, EEM, WIT, INFY, TTM, IBN, HDB, GLD