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India Week Ahead - 18th - 24th Oct 2010

|Includes: EEM, India Fund (IFN)

The Indian markets were down 0.6 % last week on profit booking, the FII inflows continue to come but the pace slowed a little and they turned sellers for the first time after September 7th. The Indian markets went up real fast in the last 6 weeks and needed a breather; India has been underperforming the global markets in the last 2 weeks. The Coal India IPO next week may be a trigger for some sell off, the Rs 15000 Cr. Offering will be the highest IPO in the Indian market. Retail too will participate in full flow. The Infosys results came better than expected and the markets gave thumbs down to the muted guidance. So we are seeing the ‘Sell the News Syndrome’ on all stocks announcing results. We had the same happening to Axis bank, Mastek etc. The inflation is not coming down in a hurry as yet. This may trigger increasing interest rates in the Nov. 2nd RBI policy.  The result season in the US too kicked off well with Google, Intel, GE, Alcoa, JPM announcing good results. The $ has depreciated 13 % in the last 7 weeks, the results must be seen with that in mind too.

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. Technically Markets in India has given a reversal signal, we need follow up selling to confirm.

The derivatives position for the week stands at ` 183600 Crs in OI; the PCR is at 1.28 the option IVs for Calls at 20 % & Puts at 21 %. We must see a sideways trend with a – ve bias in the market.

Nifty on 15st Oct: 6062

Nifty trading ideas for the week: Short Nifty around the 6120 levels for a target of 5980. Stop loss: 6140

Accumulate: Zee Entertainment @ Rs 260 levels for a target of Rs 320 in 2 Months.

Happy Trading!