20 December,2010 07:15 AM IST | | Alex K Mathews
The markets showed continuity to the uptrend that we saw towards the end of last week. Major reasons are the economic data which came out last week and the rally seen in commodity prices.
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The better than expected decline in inflation number which fell to 7.48% in November when compared to 8.58% in the October.u00a0
RBI has eased the SLR of scheduled commercial banks from 25% of net demand and time liabilities to 24%.
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It also announced that it will conduct OMO auctions for purchase of government securities for an aggregate amount of Rs 48000 crore in the next one month.
u00a0In the middle of the week the rising crude prices made the oil marketing companies to increase the fuel price and this brought selling pressure in auto, metal, logistics etc.u00a0
This rise in fuel price is expected to pump the fuel price index once again adding more to the expenditure side of manufacturing companies.
The rise in commodity prices didn't last long. Further the markets were waiting for the Q3 advance tax numbers with auto sales number falling this quarter, the last time leaders are not expected to perform better this time.u00a0 OMC counters like BPCL, HPCL and IOC can be bought at every decline.
The Chinese Producers Price Index fell to 0.2% from an expected 0.1% while the Japanese Industrial Production fell to -2% as against -1.8% previously.
Later in the week we saw the Tankan Large Manufacturers Index at 5 against an expected 3 while the Tertiary Industry Activity Index rose to 0.5% against -0.8% previously.
The European space was not different with French CPI down 0.1% from 0.2% and British CPI rising to 3.3% against 3.2% , while the European Industrial Production wasu00a0 down 0.7% against an estimated 1.3%.
The German ZEW Economic Sentiment rose to 4.3 against 1.8 previously. In the US front, the core retail sales rose to 1.2% against 0.8%, while the retail sales rose to 0.8% against an estimated 0.5%.u00a0
There are concerns that Moody may downgrade Spain's sovereign rating, and concerns of contagion to the other EU countries will have negative impact on European stock market and on the Euro.
On the domestic front the CBI raids has put the stock market on high volatility.u00a0 Even though the Indices show the resilience to the shock waves of raids, the individual stocks face carnage.u00a0
It is prudent to reduce positions, especially long positions because majority of the mid cap and small cap stocks are trading below its 200 daily simple moving average and can cause major fall.u00a0
Counters like SKS Microfinance, LIC housing, Voltas and Jet Air are few counters which are trading well below its support levels.
Sugar stocks were in good demand after Farm ministry allowed to export 500,000 tonnes of sugar under the open general license, sugar producer Bajaj Hindusthan moved up on reports that the UP governments has signed agreements for setting up power generation projects.u00a0One can buy Renuka Sugar, Bajaj Hindusthan, Sakthi sugar etc for a medium term perspective.
On the precious metal side both gold and silver are trading slightly lower due to firm dollar index and year end profit booking by the institutional investors.u00a0
Demands from the domestic investors are low because of the end of the wedding season.u00a0 Gold will have strong support at $ 1360 levels.u00a0
Silver too may likely to correct and price can cool down towards $28.60 -28.20 levels.u00a0 On the agri-commodity side natural rubber and black pepper offers good opportunity for buyers.
For the Nifty 5750 - 6057 is the short term range, a break below or above give future course of movement.u00a0 Investors who are familiar with Nifty options can write 6000 call option and 5800 put option together.
IT stocks which were in the front line may face profit booking most probably today due to over bought situation, fresh buying at these sector stocks can be made only after correction.
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).
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever.
All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.
Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.
