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India week ahead - 23rd - 28th May 2011

|Includes: EEM, EPI, India Fund (IFN)
This week Indian markets fell by 1.1 % as expected, we were one of the worst performing markets globally. The inflation & higher interest rates seem to be pinching growth. This week saw SBI declaring results and the NPA’s seem to be increasing across banks. The lopsided policy of the government towards the PSU oil marketing co’s seem to be taking a toll on them, ONGC fell to lows post the subsidy sharing model. On the global markets, the US seem to be running from one bad news to other, the US debt limit of $ 14.7 T has been hit, the republicans & democrats are divided over increasing the limit. If history is any benchmark, we will have them come to a truce and the limit will be increased driving more cheap money. The cheap money formula seems to be driving asset bubble rather than genuine economy progress. This is a scary scenario for the global economy. The Greece & Portugal debt issue seem to be getting to center stage yet again.
This week the Indian markets will be driven by global cues and the derivative settlement compulsions. May traditionally has been low on volumes due to vacation and post results syndrome. The $ strength, will see money getting out of commodities and stock markets. The FII’s have been net sellers during May and may continue. Technically Markets are moving in a range.
The derivatives position for the week stands at Rs 153657 Crs in OI; the PCR is at 0.85 the option IVs for Calls at 19 % & Puts at 20 %. The Nifty Future is trading at a discount of 7 points to spot. We must see the fall continuing.
Nifty on 20th May: 5486
Nifty trading ideas for the week: Sell nifty on Up moves to 5480 – 5520 – Target: 5380 SL : 5540
Stock ideas for the Week: Sell Sterlite around Rs 170 – Target: Rs 160 SL: Rs 174