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India - week ahead - 12th - 18th July 2010

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

The global markets shined last week with a 5+% up move, this came post a bad week in global markets. The Indian markets did not go into a euphoric mode and moved up 2 %. So the talk across is, are we on a new up move globally or is it a dead cat bounce? I wish the markets had the octopus or a parrot to decipher thisJ. As a trader, would think the latter, for the following reasons 1. All the governments have started the ‘pull out from stimulus’ to avoid runaway inflation (This may be good from a macro economic model, but in a developed market where growth is still stuttering, will cause a ripple effect downwards). 2.  The loose money which created growth in the last 18 months may not be there to support a global up move. The Indian market in the meantime has been reflecting on the good news from monsoons and an expectation of a good earnings season. Last week also saw the biggest IPO of Agri Bank of China ($22.1billion) going through without any issues. So there is ample liquidity to support good issues and themes in emerging markets. The IMF also raised the India GDP estimate to 9.5 %, the developed world will want to give all their money to India sooner. India as a power house will be seen by all in this generation, we are at a state where US was post 1970 or Japan in the 1980’s. I was reading an article recently which said, retail ownership in blue chips has reduced this year, this is a classic case that Retail investors will not believe in India till after many years and when they join it, that is when the bubble will form. History is always so.

This week the Indian markets will look up to the IIP nos & the result season. The results seem to be discounted in the price, so we may not get an up move that all are betting on and instead will get a correction to the mean. Last week India underperformed the global markets, so it is India’s time in the short term to do so. The prominent results this week are from Infosys, TCS, HDFC, Hotel leela. On global arena, results from Alcoa, Google, Citibank & Intel will be watched closely for cues. The China GDP nos. too will give a feel of the demand situation. Mind you markets look ahead, so a great result does not mean an up move. Need to watch out for what will happen in the future.

The derivatives position for the week stands at Rs 140571 Crs in OI; the PCR is at 1.31 the option IVs for Calls at 16 % & Puts at 20 %. We are hitting the IV at the lower band and the PCR is suggesting, we must start the fall soon.

Nifty on 9th July: 5352

For the week: Sell Nifty on a move to 5400 for a Target of 5180. Stop Loss: 5420

Stock trading Ideas: Sell Tata Steel @ Rs 510 for a target of Rs 480. SL @ Rs 516 

Happy Trading!