The Indian market cracked 3.3 % this week owing to high inflation and strengthening of the $. The FII have started pulling out from the Tuesday and got accelerated on Friday. This confirms the shallowness of the Indian market. The markets remained up on the Monday and then started the correction. The technical position also confirms, we may be in the start of the much needed correction. The emerging markets have started the correction, with India leading the way. The developed markets should start the correction starting this week and India will accelerate the fall in the weeks ahead. The result season to kick off this week, with Infosys announcing on 13th Jan. We also have the Nov IIP data coming on 11th Jan. Globally the Euro is taking a beat due the weakness, this by default will drive the $ up and there can be a huge sell off in commodities. The next 2 weeks, we must see a global sell off. Not a good time to buy assets. The Indian inflation touched 18.3 %, which is way beyond expectations and the government seems to be helpless. The politics of reforming the farm gate to plate model has been struck in controversies. Middle men are the beneficiaries of this. The way forward is community farming & an organized retailing in India.
This week the Indian markets will look to the result season and also the global cues. The technical position says the smart money has started pulling out of risk assets and will move to developed markets sooner. The Nov IIP data in India will be watch closely. So will the margins from Co’s announcing results. Looking at the bond yields, the European sovereign debt issue may come back to haunt the markets. The debt auction in the US comes to an end on 11th Jan and the new dates will be announced. So the free money to continue, the same is not helping drive markets incrementally. This is a huge red flag.
The derivatives position for the week stands at ` 133000 Crs in OI; the PCR is at 1.03 the option IVs for Calls at 18 % & Puts at 19 %. The Nifty Future is at a discount of 8 Points. The traders don’t seem to be convinced yet with the fall and are expecting a pull back. The participation is weak.
Nifty on 7th Jan: 5905
Nifty trading ideas for the week: Sell Nifty on a Pull back to around 6000 for a target of 5750. Stop Loss: 6030
Stock ideas for the Week: Sell Tisco around Rs 680-70 for a target of Rs 605 Stop Loss: Rs 685.