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India - Week ahead - 31st May - 5th June 2010

|Includes:CRB, EEM, India Fund (IFN)
The Indian markets were up 2.5, the Indian markets along with some emerging markets were star performers this week after hitting a low earlier this week. Money is flowing to emerging markets at a faster pace now. The Euro crisis seem to be ruling the headlines and all markets seem to be only thinking of them forgetting the fundamentals of the emerging markets. I was reading a report from Citibank that the developed world’s finances have deteriorated the highest in the last 100 years. It will only get worse going forward, as tough measures will contract growth tremendously affecting their economies. In India the Ambani non – compete agreement is seen as a game changer for both the group. The food inflation continues to rule high in India fueling higher inflation, the PM has said the inflation will cool off to 5 – 6% by December 2010. There is a liquidity crunch in the market post the 3G auction, as the finances need to e arranged for the telecom companies. This move along with others can push the rates northwards in the days to come, so interest sensitive sectors will be affected.
This week the Indian markets will look at the May nos. and act accordingly, n the global arena, we have the Euro area trouble adding to the volatility, now Greece is done, so speculations are rife that Spain is next in line. The US senate has passed a bill not to support the bailing out of EU through the IMF (20 % of IMF is contributed by US), they can’t afford to contribute. The next crisis in the US which seems to be brewing is Municipal bond default, there are many Greece type situation at least in 10 states. We don’t seem to have a lot of good news in the global arena going forward. Technically, markets are over sold, so there was a pull back and may continue for another week with high volatility.
The derivatives position for the week stands at Rs 100189 Crs in OI; the PCR is at 1.2 the option IVs for Calls at 23 % & Puts at 25 %. The positions don’t say much to trade yet. The position looks like a sideways movement is in store at 4980 – 5120 levels.
Nifty on 28th May: 5066
For the week: No Trading
Stock trading Ideas: Sell Tata Motors on up moves to Rs 770 for a target of 670 in 3 weeks.
Happy Trading!
Stocks: IFN, EEM, CRB