27 December,2010 07:24 AM IST | | Alex K Mathews
The overall weekly market outlook was sideways to positive even though concerns from Korea and rising fuel prices in the domestic arena were active.
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The beginning of last week was subdued on the back of news that European debt is spreading and that South Korea will proceed with another fire drill near the border of North Korea, which was feared to attract retaliation.
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The Prime Minister comments about his expectation of inflation falling 5.5 per cent by the end of March 2011 brought some positivity.
Before the end of the December futures market may test 6078 -6100 levels, but caution should be taken at higher levels. Day traders can buy 6100 December call option of Nifty.
Crude
Rising crude prices were a major concern for the authorities and they expect the inflation number to ease in the coming months.
But given the fact that crude prices are ruling above $91 and are poised to move above $100, and also the government's move to raise the diesel and LPG prices, cut in subsidy burden of oil companies will definitely pose a hindrance to bring down headline inflation.
Further, rising inflation will compel the Reserve Bank of India (RBI) to step in again and implement more measures to control it.
The markets witnessed less volume with FIIs too showing less interest in trading, as they seem to be in Christmas holiday mood. Food price index rose 12.13 per cent against 9.46 per cent in the previous week, while the fuel price index rose to 10.74 per cent.
This rise in food price index is evident from the recent rise in onion and tomato prices in the country, which made the government ban onion exports and abolish onion import duty.
Flat
In the US space, economic data kept the markets flat to positive. The US GDP rose to 2.6 per cent from 2.5 per cent previously, while the US existing home sales rose to 4.68 million against an estimated 4.75 million.
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Durable goods orders fell to -1.3 per cent from -3.1 per cent, the Michigan Consumer Sentiment Index was at 74.5 against an estimated 75 and the new home sales rose to 290000 against an estimated 303000.
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The major US economic data, jobless claims data fell to 420000 from an estimated 424000.u00a0
Tension
Commodity prices were in top gear on the back of Korean tension and European debt crisis worries. Precious metals and base metals continued to move in the early days of the week.
Gold prices rose as ETP holdings rose to a record supported by the falling dollar, while copper gained considerably on rising Chinese imports and concerns over the supply disruption in Chile.
Later, metals prices slipped with copper gains being drained away as rising metal price discouraged more buying by China, but later towards the end of the week, recovery was seen in metal prices.
Boost
Along with that, crude prices remained positive as cold weather boosted demand for heating fuels in Europe and US. Gold is likely to test $ 1376 and $1361 levels; investors with long-term perspective can buy the commodity at declines.
Crude on the other hand is ready for a correction and may test $ 92, but bull liquidation is expected.u00a0 Copper price may remain firm and stocks like Sterlite and Hindusthan Copper can be bought at declines.
Demand
In case of agri-commodities, it is expected that demand for farm output from major consumers will increase next year, which brought buying in some of the related stocks.
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Also, the comments by the Pakistan Farm Minister that the country may import around 700000 metric tons of sugar and four million bales of cotton to ease shortages and rising prices brought buying interest in domestic sugar and cotton manufacturers.
Buying interest can continue in front line sugar stocks, which include Renuka Sugar, Bajaj Hindusthan and Dhampur Sugar.
Futures
Areva T&D, Venkey's India and Tata Steel are likely to move up further.u00a0 Fresh long positions can be created in Oriental Bank of Commerce and Dr.
Reddy in the futures segment. Both these stocks have completed their downward correction. Value investing can be created in Chambal Fertilizer, which is likely to test Rs 96 in the short term.
Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill.
He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd.
The author may have a vested interest in investments he has recommended. E-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
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