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India Week ahead - 31st Jan - 6th Feb 2011

|Includes: India Fund (IFN)
The Indian market turned volatile and shed 3.2 % last week, we had expected so. The RBI rate hike and inflation added to the woes, the FII’s have been selling and running for the exit. We are so dependent on the FII flow to keep the markets moving. This confirms the fact that our markets are shallow with just 3 % of the population investing in the markets. RBI did say that the government must look at the supply side of food to ensure the inflation comes down to single digits, high growth and high inflation will kill the economy. There are 10 countries > 10 % Inflation and the frustration in certain economies are increasing. Egypt is an example of distress based revolt. Hope this does not spread to countries like India. Corruption, High inflation & un employment are concoctions for a revolt. On Friday US gave up 1.5 % in one of the biggest fall from a 27 month high, this is just the start to a much bigger fall soon.
This week the Indian markets will continue to look to the result season, we have BPCL, NTPC etc announcing results. The derivative carry over has been very weak. This confirms bearishness in the market. The world will look up to what is happening in Egypt too. Technically the Nifty breaking the 200 day moving average is bad, so any up move > 5740 is needed to have the bulls excited.
The technical position and the derivative cues confirm more downside going forward. We may get a sharp up move followed by a fall.
The derivatives position for the week stands at Rs 109414 Crs in OI; the PCR is at 1.31 the option IVs for Calls at 19 % & Puts at 22 %. The Nifty Future is trading at a premium of 32 points to spot. Traders are hedging positions. Based on the positions, we may get an upmove to 5640 – 80 levels, where shorts can be created.
Nifty on 28th Jan: 5512
Nifty trading ideas for the week: Sell on Up move to 5620 – 5640 for a Target of 5450 Stop loss: 5740
Stock ideas for the Week: Sell Tata steel @ Rs 645 for a Target of 610, Stop loss : 655