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India week ahead - 21st - 26th March 2011

|Includes: EEM, India Fund (IFN)
The Indian market dropped 1.6 % last week as expected, the market was exhibiting high level of volatility, the Indian markets performed better that the global markets in the early part of the week and did the opposite during the last 2 days of the week. Our markets seem to gyrate with the FII flows rather than global cues. On Thu & Fri, the FII’s were net sellers to the tune of Rs 1650 Crs. The Japan crisis kept the global markets on the edge; the Nikkei fell by 10.7 % last week. The global fall out is still not fully calculated, the G7 nations came in to the rescue of the Yen and helped cool off. Will Japan collapse with additional $ 350 billion being pushed? They have a runaway debt of 206 % to GDP. Can they sustain? Will it be another case of TBTF? Time will tell. The Indian markets saw some robust advance tax Nos., it was 24 % higher. The Inflation seems to be slowly moderating and is around 8.6 %. The RBI increased interest rates by 25 basis points in the mid quarter review. Technically the Indian markets are correcting keeping in mind the Inflation and lower growth going forward. The India equity premium will come down in the short term. The MENA crisis just got bigger with Libyan Government troops being bombed by the Western forces post the No – Fly zone, the Bahrain issue got worse with Saudi Arabia army called in to crush the anti government forces. (In this case the US wants it this way, so no West domination over the government). Yemen is on fire with 31 protesters shot at on Friday.
This week the Indian markets will look at technical positions and global cues for direction. As the financial year ending comes to a close, corporate and banks will move to Cash position to show a healthy balance sheet. We may see some pressure on liquidity forcing some more correction. The FII’s may continue to pull out money and move it to Japan to drive re construction. The US has data around housing & consumer durables coming in. Their credit expansion comes to an end in June, so markets will start discounting this ahead of time. So the markets are in for some uncertain days ahead.
The derivatives position for the week stands at Rs 142020 Crs in OI; the PCR is at 1.10 the option IVs for Calls at 23 % & Puts at 25 %. The Nifty Future is trading at a Premium of 10 points to spot. We will see the correction continuing into this week.
Nifty on 18th Mar: 5373
Nifty trading ideas for the week: Sell Nifty around 5420 – 5440 for a Target of 5260, SL @ 5480. Short term trading only.
Stock ideas for the Week: Sell Reliance Capital @ Rs 575 - 85 for a Target of Rs 560 SL. Rs 590