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India week ahead - 11th - 17th October 2010

|Includes: EEM, India Fund (IFN)

The Indian markets were down 1 % last week on profit booking, the FII inflows continue to come in Unabated with a weak $, the $ hit a 15 year low on Friday. The US markets are discounting a QE 2 of $ 1 Trillion soon, this may still not solve the problem the developed world is facing. It will only drive more money into Emerging markets and blow some of the biggest bubbles. Looks like bubbles are created to stabilize global markets. The Valuation in India has gone above average and there are two sides debating on the sustainability of the new 24+ PE valuations. In the long term with India’s strength we should be able to manage this. Healthy corrections are good for the markets. As we speak the IMF has been given the mandate to intervene to stabilize the currency wars that has just started and forcing emerging markets to strengthen their currency. This may see some new developments in the emerging markets, the $ may strengthen in the short term and we may see some correction in the global markets.

This week the Indian markets will see activity in a run up to the result season starting this week. Expectations have run up and we need huge +ve surprise to conquer the 21K levels. The global result season has started with Alcoa announcing better than expected results on a weak $, so we need to watch what the others come on with. The IIP nos. for August will be closely watched, also the RBI policy that may come out to control inflation.

The derivatives position for the week stands at ` 167000 Crs in OI; the PCR is at 1.30 the option IVs for Calls at 17 % & Puts at 20 %. We must see a sideways trend with a – ve bias in the market.

Nifty on 8st Oct: 6103

Nifty trading ideas for the week: Short Nifty around the 6140 levels for a target of 6020. Stop loss: 6220

Happy Trading!