The global markets had a good up move this week; the developed markets were up 3 – 4 % & emerging markets like Brazil & China 6 %. India was a bit tepid at 1 % up move. The trading short on Nifty hit the stop loss. This week’s global move was driven by the European bank stress test results which showed just 7 of the 91 banks need to shore up capital to the tune of $ 4.5 billion, we already have many analyst calling the exercise soft and not as stringent to test the banks. This debate can keep going. Banks fund the economy and growth, so all governments know what will happen if the exercise is stringent. History says, like humans the governments act on a reactive than a proactive mode. The classic case is the 2008 credit crisis, there were a lot of controls earlier like keeping Banking & investment banking separate but these were all merged back under pressure from the strong lobbies. Now a half hearted effort is back to reform the banking space and has been signed into law by Obama last week. The result season kicked off globally better than expected and we have companies like GE & Caterpillar raising outlook for 2010 & 2011. We need to see what happens when the $ 2 trillion of stimulus money is slowly pulled out of the system. India has been showing its resilience despite the huge global volatility, so is this de coupling from the rest of the world? Am sure this will happen in steps but not all of a sudden. The Indian government is making some smart moves to accelerate growth in cutting subsidies on petroleum products and now the implementation of GST across the country from April 2011, this move will add to 0.8 % in GDP growth. This will also bring down corruption and wastage in a big way. The monsoon continues to play truant, the monsoon to date is 17 % below normal.
This week the Indian markets will be in the thick of action with the RBI policy on 27th, the derivative closing on 29th. The global markets have seen it all and nothing more to come to prop the market. On the Geo political levels we have North Korea taking a tough position on the US / South Korea joint military exercise, Iran has threatened to cut oil supplies to countries not supporting it. There is a lot of uncertainty in the financial & geo political scene. The RBI policy will dictate the market trend, the governor need to balance growth & inflation, a tough job indeed. With a gush of FDI & FII, need to also watch the short term money especially with a stronger rupee & higher interest rate going forward.
The derivatives position for the week stands at ` 175000 Crs in OI; the PCR is at 1.56 the option IVs for Calls at 16 % & Puts at 18 %. We are hitting the IV at the lower band and the PCR is suggesting, we will see a big break out this week, not sure of the direction though as the Bears & Bulls are on equal keel.
Nifty on 16th July: 5445
For the week: No Trade – Strong Hands can try Shorting Nifty only < 5350 levels
Stock trading Ideas: No Trade