The past week the markets exhibited a sideways move with a +ve bias and moved up 1 %. The markets continue to defy gravity with the loose $ regime, despite the $ strengthening a bit, markets continue its march, looks like there are too many hedged positions in the stock & commodity markets. In India, there was news on Food inflation touching 14.6 %, this is extremely high and the government is trying but will find it difficult. The pressure on the cane price was seen with the farmers taking over Delhi and the Lok sabha came to a stand still, the government is under pressure to increase prices and also manage the Sugar prices which is going up by the day. The Sugar co’s will pay the price and make them unprofitable. The sugar co. stocks were battered with an average of 8 – 10 % drop in price. The other news was on the government indicating there would be mergers in the PSU banks and they plan to have 10 PSU banks. This is a smart move from the government side. The consolidation will help manage the Basel II norms. Reliance has set its sight on a large acquisition and is seriously bidding for Lyondell. Lyondell is a $ 50 B company.
This week markets will take global cues and move accordingly, the $ seem to be having a technical pull back and all eyes are in the green back moving up, so the much awaited correction in the global stock markets can happen. The derivative settlement will also play up in the markets. The Indian PM is visiting the US and eyes will be on his 4 days there and the statements he will be making.
The derivative series has seen some good accumulation last week, the derivatives positions for the week stand at Rs 118000 Crs OI, the PCR is at 1.57 the option IVs for Calls at 23 % & Puts at 28%. 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.