The Indian market went to a script with high volatility and closing 2.7 % down, the fear of another global meltdown due to the EU concerns of the debt crisis arising across the nations, now famously called the PIIGS (Portugal, Ireland, Italy, Greece & Spain). The sovereign debt is a huge cause of concern across the world and the G7 is meeting over the weekend to see how they can tackle this. The easy part is to continue the stimulus and keep printing more money and manage it, the repercussions will be runaway inflation which can go absolutely out of control. The PIIGS nation surprisingly has > 60 % of their reserves in gold vs 5 % in countries like India / China. There is the fear of huge supply soon for gold from these nations which can affect its price soon. In India we had the NTPC issue launched last week just scraping through with the help of SBI & LIC. This does not auger good for the rest of the divestment planned by the government. It is unfortunate the disinvestment committee is saying it is a plot by some FII’s & investment bankers to scuttle the issue etc. There is a market reality and they don’t accept they got their timing wrong. Most promoters including the government do not leave money on the table for investors, the NTPC issue is a classic one issue @ Rs 201 when the Avg. price over 3 months was Rs 210. The secondary price was Rs 205 yesterday. Hope these investment bankers don’t kill the new public offers market in India. The Parikh panel recommended steep raise in the prices of petroleum products, but our government may not go ahead with this due to the rising inflation.
This week, the markets will continue to look westwards for any cues, the G7 meet to tackle the sovereign debt issue, Bernanke’s statement on 10th on the wind down of stimulus and the $ 80B debt auction. The budget expectations will also play a big role as we move forward this month. The $ index has hit a technical resistance of 81this week, we can expect a correction there driving emerging markets & commodities this week. India is one of the few countries that have been pro active in expressing its intent to wind down the stimulus. This smart economics is very healthy in the long term and will bring in funds by loads to India.
The derivative positions for the week stand at Rs 107000 Crs OI; the PCR is at 1.05 the option IVs for Calls at 23 % & Puts at 28%. The fear is slowly creeping into the markets; we must see volatile sessions ahead. The technical levels tell us, we must get an up move which may stretch to 4900 levels.
Nifty on 6th Feb: 4757
For the week: Sell Nifty @ 4850 - 4900 for a target of 4650, in 2 weeks. (Do not try buying the Nifty for a 100 point up move from present, is prudent to short while it moves up)