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India week ahead - 5th - 11th July 2010

|Includes: EEM, India Fund (IFN)

 

The global markets were hammered this week with a cut of 5 – 7 %, but Indian market showed some resilience with just a 0.7 % cut. The Indian market survived the global fall due to two reasons, 1. The expectation of high growth continuing and a prudent fiscal management Vs the developed world, 2. The traders short selling all the up moves. The Chinese growth stuttering and the Spain collapse were the reasons cited to pull down the markets. It comes to the classic point of greed & fear, fear gets overdone and last week in the short term may be one such case (Am no discounting the fact that the world will have to see major pains going forward due to the folly of the developed world). The optimist think, the EU & US will print their way to avoid a crisis, but slowly the global economic shift moving to emerging markets is a fact most of them may be playing down just now. The Chinese may wait till the $ & Euro weaken before they act on their currency decisively, so will be India. Indian market had its share of excitement last week with the roadmap to deregulation of petroleum products, the 25 basis point increase by RBI on Repo & reverse repo,  merger of Reliance power with RNRL & Fortis running up to acquire parkway in Singapore. It will not be a far call when the Indian co’s will go shopping aggressively to the developed world in the next few years. Who knows a BP may be acquired by Reliance! The Indian government is making smart moves to contain the fiscal deficit & boosting growth. It helps to have an economist PM to run a country like India.

This week the Indian markets will look up to the global cues, which is oversold and a relief rally is due all over, Indian markets will continue its out performance to the rest of the world. The Result seasons kicks off with Infosys results starting on 13th July. The expectations on the Indian economy can push up the market till the result season start and then the start of the selling.

The derivatives position for the week stands at Rs 127081 Crs in OI; the PCR is at 1.30 the option IVs for Calls at 17 % & Puts at 21 %. People are paying higher premium for their out of the money puts, markets have the uncanny ability of going against the mob. So all these confirm a short term & final rally is due before we start to get the fall.

Nifty on 2nd July: 5237

For the week: Buy Nifty on a fall to 5200 for a Target of 5400. Stop Loss : 5175

Stock trading Ideas: Buy Bajaj Hindustan @ Rs 116 for a target of Rs 121. SL @ Rs 114

 

Happy Trading!