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India Week ahead - 16th - 21st Nov 2009

|Includes: EEM, HDB, IBN, India Fund (IFN), INFY, WIT

The past week the markets moved up on a good IIP data & the disinvestment story, the IIP data came @ 9.1 % way above expectations. The inflation is raising its head once again; the loose money policy is set to drive it sharply. The food inflation is @ 13.6 %, so are we out of the woods? The answer would be NO. The macro story of food inflation is also to do with the cultivable land is shrinking in the face of industrialization across the country. So we will only see this worsening going forward. The NREG scheme is driving rural income and thereby rural growth & consumption, the price of food is set to go up further. So agriculture commodity is a place to invest and get to farming in India.

This week markets will take global cues and move accordingly, Obama is on a 10 day Asian trip, this is the first time an American President is spending so much time at a stretch in Asia, this confirms the seriousness US is attaching to the growth markets in Asia. If the US plays it smart and gets to reduce cost and start to export to markets in Asia, they can get off the recession mode sooner. The Indian market will be looking forward to the RIL AGM, already there are expectations getting built on settlement announcement & large global acquisitions etc. So markets are already discounting all these. I will be surprised if any major announcement would be made by RIL. The FII’s continue to pour in cheap $ into commodities & stocks.

The derivative series has seen some good accumulation last week, the derivatives positions for the week stand at Rs 113000 Crs OI, the PCR is at 1.56 the option IVs for Calls at 25 % & Puts at 30%. The derivative indicators suggest there is huge hedging happening. On the technical side, we are trading at very strong resistance levels around the 5050 – 5100 levels. So watch for any pull back. There are huge shorts in the market that is cushioning the falls.

Traders can look @ Shorting in the range of 5050 – 5100 levels for a final Target of 4850 levels.