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India Week Ahead - 26th - 31st October 2009

|Includes: EEM, HDFC Bank Limited (HDB), IBN, IFN, INFY, TTM, WIT

The week spanned out to a script, the Nifty closed at the lows of the day, falling by as much as 3.3 %, India was one of the worst performing markets this despite China & other Asia pacific markets moving up. There was a level of tiredness and skittishness at the top. The $ fall being arrested forced a lot of FII’s to sell this week. The Pe ratio is at 23 times, which is above the average, so some level of profit booking has happened. This week saw couple of good news in the form of NTPC disinvestment and some good nos. reported by companies, but all these seem to be well discounted.

This week we must continue the fall, we will also a volatile movement with the October derivative series coming to an end on 29th and also will have the credit policy announcement on the same day. The inflation has raised its head back again @ 1.2 % and we have industry bodies talking about a 10 % inflation by March 2010. These are not good news for the markets. We also have the credit growth at the lowest rate at < 10 %, this is one of the lowest since 1997. So are we just seeing rhetoric of a great revival or just loose liquidity driven economic activity? This week in the US, we have huge earnings season along with the $ 100B debt sales, all eyes will be on it to take cues. Is US printing more notes to buy their own debt? The levels of participation by foreign countries have drastically reduced in recent weeks. The $ is on a technical stop, and all indicators seem to say they will start strengthening for want of any safe haven for now! Very soon we may have more and more countries dumping $, The first such signs are here, the IMF SDR is being brought in a big way by the US govt. this is a sign that US does not believe in their own $.

The new derivative series has seen some good accumulation last week, the derivatives positions for the week stand at Rs 112356 Crs OI, the PCR is at 1.29 the option IVs for Calls at 23 % & Puts at 25%. The derivative indicators suggest that we must see unwinding of positions if we break the crucial 4980 levels, the PCR suggests there is a level of negative mood in the markets. The technical indicators suggest, we have started the the much needed fall.

Nifty idea of the week: Positional Trade. Positional Traders can look at going Short < 5050 for a target of 4840. Stop Loss: 5120