The usual June 1st week fireworks were missing on the Indian stock market during the week. As expected the news seem to all been discounted ahead of time and markets hitting key resistance @ 4620 – 50 levels. The Indian Stock market is trading @ 21 times PE, which surely is on the top end of the range. The Auto nos coming @ 9 % , cement nos coming at 11 % & manufacturing index for April at 4.3 % were all good, the only bad news seem to be the – Ve Exports growth @ - 33 % and the credit growth slowing to 15.6 %, but markets seem to have discounted them ahead and let the market go flat. This may be an early indication that good news is not pushing the markets ahead. So be ready to face a pause in the next 2 weeks.
On the derivatives indicators, we are at Rs 80K Open Interest and the PCR is at 1.1 times. The indicators are neutral and technical indicators show some level of overbought conditions. So we may see some sideways movement with small correction.
The emerging markets like Brazil, Russia, China were all up this week thanks to the weak $ driving commodity prices. Looking at the $, we will see a quick strengthening in the next 2 week, so the commodity stocks and emerging markets will be under pressure too.
We had the president address the parliament and set out the broad outline of what the new Govt. will push forward, so we will have reforms across PSU’s and huge investments in electricity, infra and rural. Can the Govt. manage this with keeping the deficit low? I doubt it.
So be ready to play the week back again on a sideways move with a – Ve bias, we must see levels of 4650 – 4450 and then 4350. At the lower end when markets get oversold, you can buy the budget expectation rally.