The Indian markets fell by 5 % as expected, the fear over Greece was contagious across the world..Europe was badly bruised by cuts of up to 11 %. The Euro traded at the lowest in 14 months against the $. The fear is will this spread across Europe and will it pull US down too? Looking at the public debt some developed countries have is crazy, Ireland has 13 times GDP as debt, UK 5 times, Netherlands 4 times…so the Euro is doomed to fail. Most of Europe has the highest incidence of tax up to 60 % and is a welfare state, so fiscal measure to control would be tough. So Greece is just a preview to what will happen to the rest! By when will this all happen is anybody’s guess? The US is now probing the 1000 point drop on the Dow in 3 minutes, the ‘Fat finger’ theory, the electronic trading glitch etc…A big fall was due in the US and the exchanges don’t have filters there and this is bound to happen. These events in the long term will benefit countries like India; there will be tectonic shift of investments to emerging markets with prudent fiscal management and transparency. India, Brazil etc will hugely benefit in the long term. The Indian story is intact and the growth projected is 8 % in 2010-11, so all corrections are good to buy and stay invested. This global correction will go on till Oct of 2010, by when we must see a bottom in Indian markets. Last week also saw the RIL/RNRL row put to rest in Supreme Court, was a good judgment that benefits the citizens of India.
This week the Indian markets will continue to look westwards for cues and will eye the IIP data for March 2010, is expected to be the best. The global markets will look at the EU member’s discussion over the weekend to strengthen the Euro & economies with special funds & intervention tools. The Indian markets is ready for a short term up move on 2 counts, the global markets are oversold and the expectation of IIP data coming in at the top end. We must also see some short covering driven rally. This bounce with all fundamentals will be a ‘Dead Cat’ bounce, so traders need to Sell into the rally than accumulating afresh.
The derivatives position for the week stands at Rs 122000 Crs in OI; the PCR is at 1.11 the option IVs for Calls at 23 % & Puts at 26 %. The derivative position gives a feel of uncertainty, expect volatility, and trade light.
Nifty on 7th May: 5018
For the week: Buy Nifty around 5020 for a target of 5160 (SL 4960)
Stock trading Ideas: Buy Hindalco @ Rs 164 levels for a Target of Rs 172 or lower SL: 158 (In 1 week)