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India Week ahead - 1st - 6th Nov 2010

|Includes: EEM, India Fund (IFN), SPY

The Indian markets were down 0.7 % last week; the markets were volatile in the run up to the derivative settlement. The result season too added to the volatility. India has been underperforming the global markets in October after having a fantastic performance in September. The FII flow has been the major reason for the rally in all emerging markets. The retail owners ship of stocks has been coming down and the FII owner ship is going up, the wealth is surely coming into markets like India where the growth is 8 % + added to that is a strong currency and Interest rate. Last week saw the G20 nations announcing measures not to compete in devaluing their respective currency to stay competitive and have given the mandate to IMF to supervise the same. Hope we can see some moves to cool down currency wars in the near future. The markets in the US are expecting another round of stimulus QE 2, there is a debate what this will do? Going by basic economics, this is sure to put pressure on the currency, there will be flooding of emerging markets with Risk money and may not drive demand. Keeping with the IMF mandate on currency, I would personally feel the Fed may not come with a huge stimulus as markets are expecting.

This week the Indian markets will watch all the heavy news flows from the RBI monetary policy, the Fed policy, the US election, the run up to Obama’s visit etc. We are sure to have a volatile week. The Q2 results have been a mixed bag, the margins seem to be under pressure across sectors.

The derivatives position for the week stands at ` 134000 Crs in OI; the PCR is at 1.20 the option IVs for Calls at 19 % & Puts at 21 %. We must see a sideways trend with a +ve bias in the market.

Nifty on 29th Oct: 6017

Nifty trading ideas for the week: Buy Nifty around the 6000 levels for a target of 6140. Stop loss: 5940

Happy Trading!

Happy Diwali.