India week ahead - 9th - 13th May 2011

This week had a lot happening, we had the Osama killing, the RBI monetary tightening policy and commodity crash. The Indian market suffered a 3 % rout due to the tightening by RBI. The RBI is taking care of just the demand side to manage inflation, the supply side still suffers. The inflation continues to still rule at 9 % despite all the efforts. The GDP growth rate has been lowered too. The FII’s sold in droves last week due to the rate hikes and India becomes less attractive. Our Market lacks depth; the FII’s selling brings the market to its knees. The DII’s were net buyers last week. Last week also saw the OI build up on the derivative side, the traders don’t seem to be convinced with the fall and are not shorting as yet. The ECB has maintained the interest rates in Europe but have indicated they may tighten post June. The US purse loosening mode will come to an end by June too. Markets have this uncanny way to discount this ahead of time.

This week the Indian markets will watch the FII’s trades and also the global cues. The commodity market has been routed last week with deep cuts due to expectation of a global slowdown. This may be a start of the coming of the commodity & stock market crash. The $ has started to strengthen from the lows. The fall in markets will drive people to load up on cash from all asset class. Stocks that suffered from high commodity prices like aviation & automobile will be the beneficiaries. Then the old saying goes ‘when there is no money, everything looks attractive’.

The derivatives position for the week stands at Rs 123904 Crs in OI; the PCR is at 0.96 the option IVs for Calls at 19 % & Puts at 20 %. The Nifty Future is trading at a premium of 7 points to spot. We must see the fall continuing.

Nifty on 6^th May: 5551

Nifty trading ideas for the week: Sell nifty on Up moves to 5580 – 5620 – Target: 5450 SL : 5680

Stock ideas for the Week: Sell Hindalco around Rs 205 – Target: 180 SL: 210