BOAML India: Will Get Worse Before It Gets Better!

Sell year-end rally; tough markets over next six months; expect index to correct to 14,500

India has been the worst-performing market this year, falling a third in US$ terms. Peaking inflation and a consequent pause in RBI rates are a positive which will likely help the traditional December rally. However, we continue to expect a tough market over the next six months and expect a correction of the Sensex to 14,500 as growth concerns take center-stage:

1.

GDP growth to slow; downgrades likely: We expect FY13 GDP to slow to 6.8% and consensus to cut GDP forecasts over the next few months. GDP growth in the next few quarters is likely to come even lower at around 6.5%. A slower GDP will be led by: (a) a slowing global economy, (b) impact of high rates and (c) slowing investment spend.

2. Earnings downgrades to continue: We continue to expect earnings downgrades, led by slowing sales and sustained margin pressure from rising labor and interest costs. We expect the bottom-up Sensex EPS of Rs1,275 to be downgraded to Rs1,200 (growth of under 10% vs. expectations of nearly 15%).

3. Valuations will see slight de-rating: Based on analysts’ forecasts, markets at 13x one-year forward PE are at a slight discount to long-term averages. Slow down in GDP and earnings growth as well as falling RoEs will likely lead markets to trade lower.

Secondly, on a relative basis, India trades at a 27% PE premium to GEM markets, higher than a 10-year average of 17%.

Markets stop panicking when policymakers start panicking; year-end index 19,000

The good news is that we could get some positive returns in 2012 if policymakers take steps to reverse the economic slowdown. like a) aggressive rate cuts by RBI: we expect rate cuts from April 2012 (though slow given stick inflation); markets typically rally 3-6 months after the rate-cut cycle starts, and (b) policy reform by the Government.

Sector overweights: Pharma, autos and banks

We play a mix of defensives (through pharma rather than staples) and consumer-related rate sensitives through autos and private sector banks.

Market Report- Middle East-Unrest.

Last week was not so good for our markets.Heavyweights like Reliance had hit 52 week lows.In the past 10 trading sessions FIIs were seen selling to the tune of about 3000 crores.World Markets rallied for the week with thin volumes.Volumes this week may be low as well.With good set of economic data coming from US, the markets across the globe are rallying and we are left out.
  With fiscal deficit widening and the decline in forex reserve by 93000 Crores in the past 7 weeks added fuel to the fire.Inflation for the week ended December 10th fell sharply giving room for RBI to cut rates in the next policy meet.The Rupee is still hovering around 53 mark and the OMCs are planning to raise the petrol prices soon will again have a negative impact.
 Since November I have been writing about a possible attack on Iran which may send the crude prices to sky rocket(Analysts were talking about 175$ per barrel and even some were arguing about a possible 250$ per barrel),as Iran threatens to block the Strait of Hormuz through which 40% of the total world's oil trade takes place.Israel was planning an attack around Christmas time and the plan was delayed when the US drone was captured.The good news is that if the Hormuz strait is closed, the oil prices moving northward will be contained as the pipeline construction from Abu Dhabi's largest oil fields to Fujairah is complete.With this pipeline under operation the trade through Hormuz strait can be bypassed.The pipeline will be tested next month and it is a breakthrough for UAE's oil exports.
  Tension between Syria and Turkey are escalating as US Defense secretary visited Turkey a week back and the Vice President of Syria visited Russia.
  Kindly hedge your overnight long positions as a fully blown out war may send the equities down the drain and the commodity prices to sky rocket.As we have already witnessed the attack on Libya and Egypt this year, I strongly feel that the attack on Iran which is suspected to be equipped with Nuclear weapons and the attack on Syria equipped with Russian missiles will have worse impact than the former attacks.

 The later part of the article is to throw some light on the events which may happen early next year and to equip our readers with the necessary prowess to tackle, if such a situation arises.

 Enjoy the last week of this year.Volumes may be thin.Avoid leveraged positions.

Have a happy week ahead!!


Alex sir's Nifty(spot) view for the Day.
 Supports for the day are at 4690, 4674, 4715. Resistances are at 4745,4771,4785

Market Report

Yesterday, Nifty opened negative for the day and drifted to test lower levels and bounced back from the lower levels after the European indices opened positive.Finally it seems that the Santa Claus rally is materializing.Much awaited inflation figures for the week ended December 10th came at lower levels and food inflation fell sharply.The Banking stocks rallied for the day expecting a rate cut from the central bank as the inflationary pressure is easing.

To reduce the budget deficit, India plans to borrow 50,000 crores by pledging the shares it holds in the corporates.
Fitch ratings said in its 2012 outlook that the Indian economic growth to rebound to 7.5 in FY12-13 from 7% in current fiscal.It adds that after taking no steps for sometime the Government has taken initiatives on SEZs and increasing the foreign participation in debt market.These moves are likely to have a positive impact.


Telecom stocks faced selling pressure as DoT said 3G mobile roaming services are illegal.IT stocks fell as the Oracle's(Third largest Software Company) earnings fell short of street expectation in the US.

US GDP is revised to 1.8% for the third quarter and the analysts predicted it to be unchanged from the previous estimates of 2%. Continuing the trend for past few weeks, US jobless claims fell to April 2008 lows.US indices ended up by more than half a percent.

Japanese Markets are shut for the day as the country celebrates Emperor's Birthday.Rest of Asia is trading positive.

European indices rallied as the UK Q3 GDP is revised higher.Though the indices advanced, the volumes were thin ahead of the holiday season.

I expect our markets to open positive tracking the global peers.Stay cautious at higher levels.European indices are set to open positive for the day.

We wish you all a Merry Christmas!!

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Market Report

With the rally in global indices and the Moody's giving stable outlook on Indian Government bond ratings at Baa3(For more, refer to the P.S)made our indices to rally by more than 3%. Rupee gained to 52.5 as the markets rallied.Reliance Industries rallied by almost 5%.Reliance inds invested in Terra Power LLC through one of its subsidiaries.Terra Power LLC is into ultra modern nuclear power generation.

Top IT companies are planning to reduce the onsite work by 5% to avoid stringent visa regulations and to cut the costs.This comes at a time when the the US House of Representatives have tabled the bipartisan bill, popularly called the Call Center Bill.

Inflation for the week ending December 10th to be announced today.After a fall to 4.35% the previous week, it would be interesting to watch whether the inflation continues to ease.Analysts expect food inflation to ease to 3% by first week of January.


To avoid a credit crunch in EU , the ECB injected 489 Billion Euro into the EU banking system.This move aims at increasing the liquidity of the EU banking system and averting a crisis in the near term.


Expect our markets to open flat to negative tracking the global cues and the inflation data will decide the direction for the day.


(India's foreign currency bond ceiling is unchanged at Baa2, and the foreign currency bank deposit ceiling is now Baa3. The local currency bond and bank deposit ceilings are unified at A1. In addition, the Indian government's local currency short-term rating has been changed to P-3, from NP)

Market Report-Santa Claus Rally

Indian Indices fell for the fifth straight day in a row.I am sure the macro economic factors have started affecting us in a big way.Today,we may see a gap up opening tracking the rally of the US and European indices.Asian indices are trading positive for the day.Stay cautious at higher levels and retail intra-day traders, kindly have a stop-loss.


Italy’s Q3 GDP is set to be released today. As the country is reeling under pressure to plug the deficit hole am sure the GDP numbers would negatively surprise.But as this is widely expected I don't expect a Knee jerk reaction by the markets.Keep an eye on the same.


Europe's VStoxx -the volatility Index or the Fear Index is at the lowest level in 4 1/2 months.

Existing home sales in the US will be announced today and it is expected to gather momentum.

Back home, Winter session of the Parliament is extended till December 29th.If measures are not taken to control the fiscal deficit we are in for a deep trouble,as the FIIs have pushed the panic button and is evident from the fact that most of the Nifty 50 stocks making yearly lows and CLSA downgraded India to Neutral from Over-weight.

On 7th of December Nifty futures made a high of 5134.65 and we made a low of 4538 yesterday.A fall of about 12% within 2 weeks.With most of the Nifty 50 stocks hitting yearly lows , the heavy weight Reliance Inds hit 52 week low in yesterday's trade.Since December 1st, the interesting thing about our markets is, everyday we made a low which was much lower than the previous close.

Let us hope that the policy makers fix the policy deficit, it would do more good in bringing down the fiscal deficit.Traders around the world have started talking about the Santa Claus rally and it seems to be materializing.I hope we catch that virus.

Market Report

For four days in a row, our markets ended in negative.Realty,Banking and Auto stocks lead the fall for the day.Reliance Industries ended up by almost 2% for the day.SBI,ICICI,TataSteel,

Sterlite ind,Maruti,L&T,BHEL are the stocks which had hit 52 week's lows for the day.Asian markets ended lower for the day as the North Korean Premier passed away and the Armies of South Korea and Japan were put on high alert.

Parliament on Monday cleared the Digital cable TV bill.Information and Broadcast Minister said, her ministry is in talks with Set top box manufacturers to make them available at around Rs.1000-1200.TRAI is expected to impose tariff capping for channel subscription and the users need not subscribe to a whole bouquet of channels.This move could eat into the revenues of the companies which are into DTH business.Keep on eye on DTH companies like Dish TV,RelianceBig,Bharti,SunTv,TataSky and Videocon.

Australian and New Zealand Dollar strengthens against the major currencies in early trades today while Yen declines.

CLSA had pulled out its investments from ICICI and HDFC recently and for the first time since 2002 , it had cut the weightage of India to 6% from the earlier 11% in the Long only Asia-Ex Japan portfolio.

Expect our markets to open positive tracking the Asian peers and it may edge higher for the day.Avoid shorting for the day.

Alex sir's view on Nifty(spot).
Supports for Nifty are at 4601,4562,4487. Resistances are at 4628,4648,4683.

Market Report-Hope is not a strategy.

Hope is not a Strategy.Once you complete reading this article, you will understand why I have written about hope.The last policy meet of RBI for the year is happening today.And there is lot of speculation and rumors doing the rounds about the rate cuts,unchanged rates or even a rate hike.

Let us consider different scenarios.(Kindly read all the scenarios before taking a trading decision).

A rate cut.

Should a rate cut be announced? Yes.There is liquidity crunch in the system and the Banking system needs a adrenalin shot in the near term.What would be the after effects? There would be more cash flow, more loan disbursements as the rates are less.More Auto sales,more real estate sales.With the Central Bank taking all the necessary measures to bring fiscal deficit to the desired levels,it may announce a rate cut.

Unchanged Rates.

Should the rates be unchanged? Yes.Except China, countries like Australia,New Zealand, South Korea,Indonesia left their rates unchanged in the last policy meet.This is the last policy meet of the RBI in this year.So RBI may pause for the moment and shift to a wait and watch mode to see how things are shaping up and then take a decision in the next policy meet.

A rate hike.

Should the rates be hiked? Yes.With Rupee weakening to all time lows sending the cost of imports to the roof and with September's inflation revised to double digits and the November inflation still above the 9% mark(there are chances that it can be revised to double digits too). Normally inflation drops during the Winter season.But this is not the case this year.With the RBI curbing Rupee forward trades yesterday and it takes into effect immediately both for the domestic and Foreign traders, it indicates the fiscal deficit is blown out of proportion.Adding fuel to the fire is the 9 Billion Dollar error in the export data.So RBI even may take a hawkish stance and hike the rates.

Hawkish or Dovish, the strategy for the day is to wait and watch.Don't hope for any of the above scenarios according to your convenience and take huge leveraged positions.Why?? Yeah.You know it.Hope is not a strategy.

Market Report

Yesterday,Sensex ended below 16000 mark for the day as higher than expected inflation data dampened the sentiment.European indices opened lower for the day and a fall in international commodities prices pushed the metal stocks lower for the day.Banking and the Auto stocks fell after the inflation data was announced.Rupee scaled new lows against the dollar for the day.

European indices ended down almost by 2% and US indices ended down by almost a percent and a half. USD gained against all the currencies sending the commodity prices to crash.

Hang seng opened negative today and is down by 2% for the day.Almost all the Asian indices are trading negative for the day.The only good news for the day is HSBC Chinese manufacturing PMI came at 49 compared to 47.7. Still it is trading below the 50 mark.Anything lesser than 50 is contraction.

Dollar index trades above the 80 mark.

Third Advance tax numbers to be announced for the day.



Alex sir's Nifty(spot) levels.
Support for the day is at 4693 and 4650. Resistances for the day is 4785 and 4820.

Market Report

It was a very volatile session yesterday and finally we managed to close at 4800 on Nifty spot.Nifty futures ended with a 36 points premium as the Markets rallied in the last 30 minutes of trade.Index heavy weight Reliance almost touched August 2011 lows and finally managed to close at 742,up by 2%. After the retail and 4G wireless services, there is a news that, Reliance is in talks to start a fast food restaurant chain like McDonald's and Domino's with a standardized menu and express delivery service.It is expected to take shape in the first quarter of 2012-2013.And the company has plans to scale up its investments in US shale gas sector.

Inflation data for the month of November 2011 is to be released today.Analysts expect it to ease to 9%.(October Inflation was at 9.73% and September 9.72%). Markets may give thumbs-up to a lower inflation number.I expect the inflation to come lesser than 8.56%(Strictly my personal view based on my own research).

Rupee had hit all time lows of 53.52 against the USD and closed at 53.22.Yen falls to 9 day lows against the USD in early trades,today.

In US, the last FED meeting for the year 2011 took place yesterday and it was Ben Bernanke's Birthday yesterday.I did not expect any stimulus out of the last meet of the year.But the Markets reacted sharply and erased its initial gains as no stimulus was announced.

Asian Markets have opened negative tracking the US cues and Nikkei hits 2 week's lows in early trade.Keep an eye on inflation data for the day.

Alex sir's view on Nifty(spot) for the day.

4828, 4872 are the Resistances for the day and 4780, 4744 & 4721 are the supports for the day.

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Market Report

From high growth to slow growth to low growth and finally No Growth now.Industrial Output contracted in the month of October 2011.With Diwali in the month of October and the IIP contracted, am sure November data would surprise negatively too.Rupee had hit all time lows against the US Dollar and ended at 52.84. In the past 3 trading sessions, our indices are almost down by 6%. Stocks like ICICIBANK,TataPower,SAIL,

Sterlite Ind,NMDC, Hind.Copper have hit 52 week lows.TCS, WIPRO ,HCLTECH and INFY ended up in green for the day as Rupee weakened against the USD.

Global indices fell yesterday as the rating agencies announced that the Friday meet by EU leaders did not come out with a concrete solution and rate cuts are imminent. Expect another round of sell-off, if France and Germany lose their AAA rating.

Asian markets are trading lower for the day and the SGX Nifty futures is trading at 4716 at 7 AM IST.

There is a huge OI increase in 4700 put. Keep an eye on 4700 levels on Nifty.If 4700 holds, we may see a bounce back.But if 4700 is breached we may see further sell-off.

Alex sir's Nifty(Spot) levels.

Support for the Day are at 4728,4693,4643. Resistances are at 4786, 4820.

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Market Report

Last week was very volatile and we ended negative for the week.EU meeting on Friday was the highlight.Most of the EU leaders agreed to a more credible plan to end the crisis and the European and the US indices rallied on Friday.The Asian indices have opened positive and almost they are up by a percent and a half.Expect our markets to open positively , tracking the optimism of the Global indices. I would advise to stay cautious as the IIP data is released for the day. Expect IIP data to come at lower levels for the Month of October.

Data to watch for the Week

IIP data Today.

Inflation data for the Month of November 2011 on Wednesday.

Third Advance tax numbers on Thursday.

RBI's Monetary policy review on Friday.

Short Indian Rupee for the day at the open and add more short positions if the IIP data comes lower than the September's data. Keep an eye on Capital goods stocks and the Banking Stocks.They may react sharply to a bad set of IIP numbers.Traders may go long if Nifty Futures crosses 4935 after the IIP data is announced.

Alex Sir's Nifty(Spot) levels

Support for Nifty for the day 4837-4822-4794.Resistance for Nifty for the day 4920-4950.

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Market Report

Yesterday, almost every sector ended in deep red in our markets.It was bad news one after the other.In another blow to the new reforms, Parliamentary committee rejected the proposal to increase the foreign investment cap in insurance from 26% to 49%. And in another twist the Parliamentary standing committee rejected the UID Authority bill in the present form and has asked the Government to redraft the bill.Though the inflation numbers were decent, it went unnoticed by the markets.

Expect our markets to open negative following the fall in US markets yesterday and initial weakness of Asian peers.ECB said it would not increase Government bond purchases and called the bond purchases program is not eternal. This sent the world markets into deep red.And as expected ECB reduced the rates by 25 bps.

IIP data for the month of October will be released on Monday,December 12th.Be prepared to expect some negative surprises.Keep an eye on the outcome of the EU leaders meet.

Alex Sir's view on Markets.

The PCR(Put-Call ratio) is well below the 1.2 cut off mark which indicates there are no sufficient put option at the lower levels.In a bearish scenario, this is extremely negative.The IV(Implied Volatility) of the options are LIKELY go up from the current levels , from 24 to 32 for calls and from 29 to 36 for puts.

Expect huge volatility in the near future.The Banking,capital goods and metal sector will show further weakness.

The better strategy which would fit in, in this volatile condition is a LONG STRANGLE.

BUY 4600 PUT and BUY 5000 CALL.

Nifty has support at 4873 , 4750 and 4650. Resistance at 4988 and 5108.

Have a happy weekend!!


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Market Report

It was a volatile session yesterday. Nifty(spot) almost touched 5100 and then drifted lower to end at 5062.Entire focus of the market is shifted to the EU crisis.EU stocks opened positive for the day and drifted lower when a senior German official said, ESM and EFSF cannot be run simultaneously and Eurobonds would intensify the crisis and not solve it.A poll by Reuters showed that France would lose its AAA rating within 3 months.

If on Tuesday it was Germany's factory orders which surprised the markets,yesterday it was Industrial production for the month of October.It came at 0.8% compared to the -2.7% decline in September. Bank of England and ECB meet today for the rate announcement and there is an expectation that ECB would cut rates by 25 bps.

India's Inflation data to be announced during the day.I expect it to be lower compared to the previous announcement.The drop is attributed to the roll back of fuel price hikes by the Oil marketing companies.Expect our markets to open negative tracking the Asian peers and a fall below 5040 on Nifty future will trigger further weakness.I don't think the inflation data will have any impact today on the markets.The interest decisions of both ECB and BoE will be announced after our market hours.I would advise avoiding overnight position for the day.

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Market Report

As the Markets around the World are expecting the EU leaders to deliver on December 9th, let me remind you of something from the past, On July 21st, the EU announced that the Crisis is almost solved,On October 26th, they announced the crisis is over, and here comes December 9th. I am not very optimistic about the December 9th meet. Any bad outcome from the meet means, S&P's downgrade.If Germany and France comes out with a credible solution by risking their fiscal situation, again there is a possibility of a downgrade. I would say, EU nations have stepped on a landmine and they expect a miracle to happen.

As Samuelson on his book on ,"Economics", says Recession usually lasts for 6-12months.So can we assume that we are already into recession or shall we call it a depression as some of you may argue that this down trend continues since 2008. Whatever you call it, the situation is not all rosy.Though the Italian 10 year yield had fallen below 6% yesterday and the German Factory output surprised everyone, I am more worried about the domestic problems we have.

Few days back, our own bonds, the 10 year ones, have touched 9% mark.Am sure our Government will find it very difficult to meet the fiscal target of 4.6% of GDP for 2011-12(FM admitted the same). The rupee is weakening at a rapid pace and I don't think RBI intervention is going to help.In the month of November , RBI intervened ,still the currency fell down by 7% in the same period and the reserves dropped by almost 80,000 crores.

With slow growth and higher inflation,it would be interesting to see, if RBI cuts the rates in its next meet on 16th December.If the rates are cut, it would trigger higher inflation again.And if the rupee continues to hover around the 52 mark against USD, the oil marketing companies would be forced to hike the fuel prices(BPCL said, it will hike the prices anytime soon). Adding fuel to the fire is the Iran tension which is sending the crude prices higher.So we may be forced to live with high inflation and slow growth-stagflation.This is worse than the 2008 situation for India.

Coming back to our markets, it is better to be a trader in this markets.I don't see any optimism in the near future, either from the global front or from the domestic front.Expect some of our companies to give a blow in the form of forex losses in the quarterly results.

There is a saying,"The great thing about the stock market is you always have a second chance to get better and learn from your mistakes".

So to get a second chance, you need to have a strict stop loss in place.

Have a Happy trading day!!

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World Markets

Dow futures up by 77 points.

FTSE futures up by 7 points.

DAX futures down by 4 points.

CAC futures up by 14 points.

Italy's PM Monti will be presenting 30 Billion dollar worth austerity measures.

Nikkei is up by 37 points.

Hang Seng up by 75 points.

Market Report

On Friday, Nifty and sensex ended up by more than 2% and a weekly gain of more than 7.3 % ,biggest weekly gains since July 2009. All the Banking stocks rallied as S&P assigns stable outlook to 10 Indian Banks.European stocks rallied on Friday expecting the EU leaders to come out with a more credible plan to come out of the financial crisis.US stocks ended almost flat amidst a decrease in jobless claims.Treasuries and US dollar rose indicating concern about this week's EU meet.

Keep an eye on the European developments, as on Friday morning the Asian markets and the European and Dow futures were flat to negative till 12 PM.But after the speech by the German Chancellor, the DAX and the CAC index futures were up by 1.5% which lead to a rally in our markets. US markets rallied on the EU optimism and with a good set of jobless claims,I expected it to close in the positive zone.But finally the markets ended almost flat as the dollar and treasuries rose.

As the volatility is moving up in recent trading days, have a strict stop loss and be prepared to experience the roller coaster ride.We rallied on the day, when our GDP came at lower levels compared to the same period the previous year.And US markets erased the gains on Friday when the jobless claims were better than expected.Be prepared for such gravity defying stunts.

Yesterday,around midnight Iran announced it had downed an Unmanned US spy drone and this came at a time when the tension is escalating between Iran and the European nations.Keep an eye on Oil prices.

Tomorrow is a trading holiday on account of Muharram.Avoid carrying over-night positions.

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Humor- European Debt Crisis

Alex sir's views.

Nifty has support at 4910 -4861

Resistance at 4972 and 5017.


Profit booking by noon is expected.

Market Report

All the global indices rallied for the day(US and European markets rallied on Wednesday) as China had announced a 50 BPS cut in its rates and the Central banks(FED,BoE,BoJ,ECB, Bank of Canada and the Swiss National Bank) announcement to contain the EU crisis. Our markets opened with a gap and could not sustain at higher levels.Among the sensex stocks, Bharti Airtel, Bhel, ONGC, Sun Pharma and HUL ended negative for the day.


For the past 6 months, KFA defaulted on payments to Mumbai Airport(MIAL) and it owes 90 crores to MIAL.MIAL plans to put KFA on a cash and carry basis from tomorrow.KFA said, it will not affect the flights in and out of Mumbai and the company will operate filghts as per the revised schedule announced recently.

Rupee strengthened against the dollar(Dollar fell against major world currencies). A move below 51 in Rupee may trigger sell-off in IT stocks. Though the Rupee is currently trading around 52 levels, expect inflation to be lower in the coming weeks due to base effect.The fuel price reduction is yet to be priced in. As long as the Rupee hovers around 52 levels, don't expect further price reduction in fuel prices as it means higher import costs for the Oil companies.


JPMorgan expects Australia's RBA To Cut Rates by 25 Bps in this month.

Eurozone's November PMI came at 46.4 lowest since June 2009. European indices ended in red for the day.

I would advise caution to the retail investors.Don't get carried away by rallies like this.If you remember, on October 27, S&P rallied 4 % on a new European plan but the gains did not sustain.Including Wednesday's rally, S&P rallied 9 times since 2008 by 4% and had fallen by 4%, 10 times in the same period.Trade with a strict stop loss.

Have a great weekend!!

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Alert- Chinese Markets are down by more than 3%

Chinese markets are down by more than 3 % . Chinese manufacturing data for November is set to be released tomorrow and the last week's data showed that the Industrial activity shrank the most in 32 months.

Markets were expecting policy easing by the Government.But the comments from the Chinese central Banker was not optimistic.This lead to the fall in Chinese Markets.

Market turnover is also unexpectedly higher.

European and US futures.

DAX futures down by 1.48%

FTSE futures down by 0.9%

CAC futures down by 1.14%

Dow futures down by 90 points.

Market Report

It was a very volatile session yesterday and our markets were down by almost a percentage.FMCG shares ended in green for the day.Organized retail stocks fell as the dead-lock over FDI continues.Reliance Industries was down by around 2 percent and it had shut 4 wells in the KG-D6 and reported a drop in output.Expect more selling pressure in the stock for the day(Kindly note, it had issued an arbitration notice to the Oil Min-read my yesterday's article for the same)..In the past 10 trading sessions FIIs sold almost 7500 crores in Indian equities.And Rupee closed above 52 for the day.

Q3 GDP numbers will be announced today.Higher inflation and RBI's rate hikes(RBI hiked rates in all the recent policy meetings) would have taken a toll and I expect the numbers to be lesser than the previous quarter's numbers(7.7%).

After rallying for 2 days in a row, Nikkei and Hang Seng are trading negative by three-fourth of a percentage at 0730 hrs IST.

SGX is trading at 4790 at 0730 hrs IST.

I expect the markets to open negative following the Asian Indices.In the domestic front,keep an eye on Reliance industries and the Q3 GDP numbers.These two factors will set the tone for the day.

In the International front, S&P downgrades 37 large Banks/Fin.Institutions after the market hours in the US. Goldman Sachs, Bank of America, Citigroup, Morgan Stanley, BNY Mellon are the major ones in the US. Barclays, HSBC Holdings, Lloyds Banking Group and The Royal Bank of Scotland are the major ones in the UK.

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Market Report

Hope everyone of you enjoyed the rally yesterday.It all started with a rumor published in an Italian newspaper that IMF may finance Italy's debts, the Asian markets rallied and the markets were in no mood to shed the gains when IMF came out with an announcement saying it was all rumors. The rally was so significant as if the markets were looking out for an excuse for a rally. Considering the 9 straight day fall in FTSE, and 7 day losing streak in the US markets, this rally is justifiable.

In our markets Hero Motocorp was down as the falling rupee means more royalty payments and the other index stock which was down is BajajAuto.Among the index heavy weights RELIANCE lead the rally as the company had issued an arbitration notice to the Oil Ministry's move to disallow some of the investments of the company in KG-D6.

Japanese biggest Mutual fund,Kokusai asset Management said, it had sold all its holdings in Italian, Spanish and Belgian bonds.If you remember, they have sold all their Greek Bond holdings exactly 2 years back.

Asian Markets(Japan,Hong Kong) are trading almost a percentage up at 0715 hours IST. Japan's jobless data came at 4.5% above the estimates(Nikkei may erase its initial gains,currently 1% up).

Moody's says Indian Economy slowing more than expected and no wonder ,SGX Nifty is marginally down at 4866 at 0715 hours IST.(while the other Asian indices are up).


Markets may open flat and I expect the markets to drift lower for the day.Keep an eye on the European developments.EU banks to face selling pressure today.The chances are more for our markets to move lower once the Europe market opens.

Market Report

As I have written in my Friday's article, we have drifted lower after the European markets opened.Hope it helped you to take informed decisions.And finally we closed at 2 year lows.After the Cabinet's proposal to allow FDI in retail news is announced , the retail stocks rose and the aviation stocks rose too expecting similar move by the cabinet in the aviation sector.After a strong criticism from the opposition on allowing FDI in retail and the problems with already sinking airlines like AI and KFA, it would be interesting to watch the Government's move on FDI in retail.


I expect our markets to open positively tracking the Asian peers and hitting 4800 today is more likely.Though,in the International front, no bad news is expected for the day(US October new home sales will be announced at 2030 hours IST- Expected to dip>>Avoid carrying longs for Tomorrow), keep an eye on Indian Rupee.

Alex sir's views:- Support for the day is at 4684 and the resistances are at 4858 ,4865 and 4876.
Though we may see a bounce back for the day, the overall outlook is negative.

Market Report

After a slight drop in inflation data,the markets rebounded in the later part of the day.This data is for the week ended November 12th 2011.Next week's data can be expected to be lesser than this, as the Oil marketing companies reduced the prices.SBI, L&T, and BHEL hit 52 week's low. Retail stocks rose amidst news that 51% FDI in Multi-brand retail will be proposed by the cabinet. Finally the cabinet cleared the 50% FDI in multi-brand retail and 100% in single brand retail.

US markets are closed on account of thanks giving day.Today, US markets are opened for half day(Will be closed at 1 PM US time). Almost all the European indices closed in red after erasing the initial gains.

SGX nifty is trading at 4725 at 0730 hours IST.

Today is the first day of December series and expect huge premium in the Nifty futures to the spot.I expect the markets to open lower for the day, tracking Asian peers and we are likely to move lower.I don't expect a bounce back in the later part of the day as the News from Europe is not optimistic.We shall trend lower after the Europe opens for the day.


Alex sir's Views:-
Resistance for Nifty is at 4765 and 4805 -4844.

Support is at 4725,4700 and 4639

What to do for the day?

Positive news for the day - The Asian markets have erased the early losses.,HangSeng in the Green now.Nikkei trading off the lows.Dow is closed for the day(Thanksgiving holiday).

Negative news for the day- FNO expiry,Inflation data,No policy measures from the Govt., as the parliament is not allowed to function by the opposition.RBI's desperate attempts to arrest the fall of Rupee seems not to work(Rupee opens at 52.36).Heard from the FII circle that an ETF fund on Indian Markets is exiting India and they are the ones who sold heavily yesterday.

UK retail sales is expected to be lower.

My advise is to stay on the sidelines for the day.

Market Report

With a turnover of around 2.3 Lakh crores we closed below 2 year lows.With weekly inflation data set to release today and the FNO settlement expect a huge volatility.FIIs continuing to withdraw funds from Indian equities and the fall in rupee are seen as culprits for the fall in the domestic front.In International front it is the Euro Zone crisis and the revision of US GDP to 2% from the earlier 2.5% and the poor Chinese factory output hitting 32 month lows.

In the past 6 trading sessions FIIs had sold around Rs.3200 crores of Indian equities.While am writing this Nikkei hits new 2011 lows and is down by 1.7%(Nikkei was shut yesterday).

US markets are closed today on account of Thanksgiving day.S&P and NASDAQ are down for the 6th day in a row.FTSE is down for the 8th straight day and is down by 405 points since 11th of November '11.

Alex sir says ,support for the Nifty for the day is at 4640 and 4594 and the resistances are at 4737 and 4750.

SGX Nifty is seen trading at 4676 at 07.45 AM IST.

Expect huge volatility in our markets for the day.Keep an eye on Inflation data.

Market Report

Yesterday,it was a volatile session with a positive bias and finally we closed in green after 8 long trading days.First day of winter session of parliament is adjourned.And Rupee had hit new lows against the dollar.Yesterday, RBI allowed foreign investors to buy local or foreign currency bonds issued by Infrastructure debt funds.The foreign investors should stay invested for 3 years(3 year lock-in period).

In EU the consumer confidence dropped to a 2 year low, as the employers are cutting down jobs and the economy is struggling.The European indices ended negative yesterday amid huge volatility.In US GDP is revised to 2% compared to the previously reported 2.5%. I expected it to be unchanged(In my previous article). I was wrong.The revision was due to the corporates cutting down on inventories more than the expectation. DOW and S&P ended down by half a percentage and Nasdaq was down marginally. Dubai's financial markets fell to its lowest levels since 2004.

Japan markets are closed today on account of Labor Thanksgiving Day.

Our markets may open flat and I expect our markets to be volatile ahead of FNO expiry with a negative bias.I don't expect a bounce back today.


SGX Nifty is trading at 4780 down by half a percentage at 07.30 AM IST.


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Thomas cook

Thomas cook shares were down by 50% in Europe as they are in talks with their banks to buy more money and have announced that they would delay the announcement of its Results.

Some selling pressure may be seen in the stock of Thomas Cook listed in our Markets.

Currently it is trading at 43 Rs in NSE at 14.04 IST.

Why the Rupee depreciation means losses to FIIs?

Rupee is down by 14% and the markets are down by 35% YTD.



Let us say, Johnny is a Foreign Investor, who had invested 100 Dollars in our Markets when 1 dollar was equivalent to Rs.45.
Which means he can buy shares worth Rs.4500.

Now let us say, the stock prices remained the same (theoretically).

But only the Rupee has depreciated.So now a Dollar equals 52 Rs.

Which means if he sells his holdings worth Rs.4500 and converts that to Dollars, he gets 86.54 Dollars.(Loss of 13.46 %)

His investment was 100 Dollars and now his investments are worth just 86.54 Dollars (Theoretically we have assumed that the stock price remained the same).
But in real, the stock prices had fallen too, adding to more losses for Johnny.

Let us say the stock prices had fallen down by 35% (Our markets are down by 35% YTD)

Which means the stocks worth 4500 Rs when he had purchased would be trading now at Rs.2925.

That amounts to 56.25 Dollars.A whopping 50% loss to Johnny.(Initial investment is 100$)

This is the reason for the FIIs to take money out of the secondary markets.In the past 5 trading sessions they have sold stocks worth Rs.2500 Crores.

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Market Report

Indian markets are down by 35% YTD and we fell below the 16000 mark in Sensex. The falling rupee is the main culprit for the fall.Rising input costs,higher interest rates , higher import costs(Read ,Crude) and Forex losses for the corporates added fuel to the fire.Higher import costs will be passed on to the consumers , which means higher inflation rates. The rupee is down by 14% YTD and it has breached the 52 mark for the first time since March 2009.Alex sir expects Rupee to touch 52.48 in the short term.Rupee is down by 14% and the markets are down by 35% YTD , which means huge losses for the FIIs.No wonder, they have taken out 2700 crores from the secondary markets in the last five trading sessions.Alex sir feels,in this holiday season, the falling rupee means less foreign trips by the Indians and in-turn the domestic tourism will see a boost and the beneficiary is Mahindra holidays and Resorts.


Yesterday,after the Europe Markets opened, the fall was steep.Moody's warned France for a possible downgrade, sending all the European indices down by more than 2%.And the Japanese asset management Company,Kokusai sells its holding of Spanish and Belgian Government bonds to reduce the risk arising out of EU crisis.Almost all the European and American indices were down by more than 2%. Fitch says the supercommittee failure means revision of outlook to negative in US.S&P says US ratings are unaffected by the failure of the supercommittee.



Events to watch for the day- Q3 GDP of US(Second print) to be released today.The expectation is a no change from the previous one(2.5%).

EU consumer confidence.

Monsoon session of the Parliament begins today in India.


I expect our markets to open flat,and the mood from the FII desk shows no optimism in the near term.That is the key point to note and the opposition parties are planning for an adjournment motion in the parliament on Black Money(BJP) ,price rise(CPI and expected to be supported by NDA) and Telengana (TRS and expected to be supported by BSP).

Keep an eye on the Rupee.

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Europe and DOw futures

Dow futures is down by 52 points.

The FTSE Futures Down by 44 points.

The DAX Futures is down by 48 points.


The CAC 40 Futures is down by 28 points.

Market Report

Our Markets were down by 5% in the past week and we are seeing red for the 7th day in a row.And all indicators are pointing towards a 8th day fall too.Rupee is weak against the dollar for the last few weeks and the weakness continues to give nightmares to our economy and policy makers.We are one of the worst performing markets in the world.Rising rupee means rising interest rates on foreign loans and more pressure for the promoters who have pledged their shares.More than 165000 Crores worth of shares are pledged by the promoters.Rising inflation means rising input costs for the companies and markets are desperately looking out for fresh boost in terms of policy measures in the Winter session of the parliament.

Nikkei opened negative as Japan's exports fell in the month of October.The super committee in US is set announce that they have failed to reach an agreement to reduce the deficit by 1.2 Trillion Dollars.No wonder the US futures and European futures are trading down by almost a percentage.In Spain, the opposition wins the election.

Remember in my last week's article, I wrote that the EFSF was forced to buy its own Bonds from the auction for a 3 Billion Euro Bond issue.And none of the G20 nation is a fan of funding EFSF.So the only way is to print Euros by the ECB and if that happens,Germany would walk out of the EU.That would signal a disaster.The situation is grim and I would advise you to stay cautious with your highly leveraged trades and in my humble opinion this is not the right time to accumulate or bottom fishing.Though my friends who are into technical analysis are of the view that we can expect a bounce back before expiry, I feel that, today is not the day.

Sources suggest that there are more than hundreds of North Korean Nuclear and Missile experts seen meeting with their counterparts in Iran.This endorses the long time suspicion that North Korea was helping Iran with its Nuclear and Missile programs.

Let me finish this article with a good news.There is a news that Government has asked LIC to consider buying 10% stake in the troubled KingFisher Airlines.The final decision would be taken by LIC.

Have a nice, profitable week ahead!!!!

My views

Asian markets are down, picking the cues from the European and US indices.Australian S&P/ASX 200 hits a new 2 week lows.Nikkei hits April 2009 lows.

In Europe, SPanish treasury issued bonds at a higher rate since 1997 and Spain goes into election this Sunday.I expect huge volatility in the financial markets ahead of this.

And there are no EFSF plans for aid to Italy.

I don't advise to short at these levels (Nifty spot-4838 while am writing this). Though lot of technical analysts are expecting a bounce back, I advise you not to carry any longs over the weekend.

European indices are poised for a weak open considering the Futures data.

Have a nice weekend.

Alex sir's view on Indian and Global Markets

Nifty is in the over-sold territory and looking weak.Nifty spot's move below 4900 will trigger further weakness and it may test 4882 and 4861.

Intra-day bounce can be used to exit long positions.

Stocks like Titan,Bank of Baroda,Talwalkars,Gravita are looking weak and may show further weakness in today's trade.


Dow was seen trading below 11975(200 DMA) yesterday and tested 100 DMA at 11673.

Any further movement below this level can cause further sell-off and it can test 11507 (50DMA) in the short term.

CAC 40 is trading below 3069 and is very weak. More selling is expected and it may test 2965 in the short term.


www.alexmathewsblog.blogspot.com

Market Report

No prizes for guessing which market is the worst performer in the Asian region.We had an extremely volatile session in the morning and then after the European markets were opened, the markets were uni directional.No respect to the supports.A free fall from 5030 levels.And we finally closed at 4934 down by almost 2 %. Front line stocks like Reliance Industries,Grasim,Dr.Reddy,Maruti were hammered down.Just 4 trading days in the week and we are down by more than 4 %. I would attribute the trigger to yesterday's fall to Spanish Bond yields.But the magnitude of the fall was very huge compared to the fall in European indices. And the surprising numbers of UK retail sales had gone unnoticed by the bears.Other Asian markets ended almost flat.

Alex sir feels that, technically markets are in a over sold territory but there is no optimism due to the lack of positive news from the domestic as well the international front.In the short term Nifty is weak and may further test lower levels.In the Options front the Nifty Put call ratio is around 0.9 and it indicates a weak outlook.A move below 4900 would trigger further sell-off in the indices.Since January 2011 FIIs have pulled out around 3300 Crores from the Equity market.

Dow Jones closed in the red by more than a percentage and Nasdaq was down by more than 2 %. All the asian indices are trading in the negative territory indicating a weak opening for our markets.

FTSE futures is trading down by 48 points at 8 AM IST

DOW futures is trading almost flat at 8 AM IST.

SGX Nifty futures is trading at 4884 at 8 AM IST.

Europe and Dow futures.

UK's FTSE is set to open down by 30 points.(Retail sales data in UK will be announced today.I expect it to be down).

Germany's DAX and France's CAC futures are down by around 0.6% (French and Spanish Bond auction to take place today.If the yields move up, we may see a sharp downturn in the indices)

Dow Futures is trading 35 points up.( US Jobless data to be released later today.Considering the recent economic data, I expect it to be better).


Alex sir feels that Wipro may face selling pressure.

World Markets

In Europe, Mario Monti sworn in as Italian PM and he forms a cabinet of technocrats.FTSE showed huge volatility as Vodafone was trading Ex-Dividend and was pulling the index down.Though the UK unemployment rate rose again in October , the index was down merely by 8 points showing resilience.In Greece, Papademos wins the confidence vote.Greek finance minister says the new Government has to do everything needed to receive 6th tranche, and wages and pensions will be fully paid.French and Spanish yields were trading higher, yesterday. Spanish and French bond auctions to happen today.Spain's Treasury to issue up to €4Bn in new 10year bond.This is going to be keenly watched in the Europe.I expect the yield to surge and eventually it would drag the European indices further down.

Industrial production in US advanced more than the analyst expectation.It came at 0.7 % compared to a 0.1% drop(revised) in September.All the good news from the US indicates that the economy is improving.And the rating agency FITCH announced , the Euro Zone contagion poses threat to the US banking outlook.This pushed the markets down and all the indices were down by more than a percent and a half.

Singapore Dollar may trade lower for the day as the October exports were down by 16.2% compared to the expectation of ten Economists in a DJ poll.(Expected drop-8.1%)


Oil price hits $100, first time since July.And our sources from Europe say that , Israel may launch an attack on IRAN(With the support of UK,Italy,Germany and the logistical support from the US) anytime sooner before Christmas or Before the the New year.Two days back in my article I wrote that, France is not considering military action against Iran.If Iran is attacked, oil prices would spiral northwards.Oil traders are advised to stay cautious.

Events to Watch

UK retail sales- Analysts are expecting a slow down.

US Jobless claims - After a good set of economic data from the US in recent time, I expect a better number this time.

Spanish and French Bond Auction- If the yields surge, it may bring the markets down on its knees.


FTSE futures down by 60 points at 08.15AM IST

DOW futures down by 15 points at 08.15AM IST.

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Market Report

We had a very volatile session yesterday and the Nifty slipped below 5000 levels during the day as the investors are concerned about the falling Rupee and the corporates facing MTM losses on currency bets.The Banking stocks showed some resilience after a week of weakness.HDFC Bank has over taken SBI in market cap. Kindly note this is just the market cap and not in asset size.To boost liquidity in the Banking system ,RBI would be buying Government bonds.Considering this move by the RBI,I expect it to cut the rates in the next policy meet.

In the winter session of the parliament(Commences from Nov 22-Dec 21) the Government will introduce the Anti-corruption bill and lot of policy decisions are expected to be taken. Rajiv Kumar of FICCI feels that , the Government should finalize the policy on FDI in multi-brand retailing.After the KFA and Air India chaos,Government may rethink on FDI in aviation too.

India's weekly inflation data will be released today.And it may set the tone for the markets before the opening of European markets.

SGX Nifty is trading at 5012 at 08.00AM IST (Nifty futures closed with a 48 points premium)

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DOW and European Futures.

FTSE -1.01%, DAX -1.69%, CAC -0.84% DOW -1.1%

Euro zone Debt

Click on image for a clear view

Comparison between Berlusconi and Mario Monti

Click on image for a clear view

Market Report

The Oil Marketing Companies have reduced the price of petrol by Rs.1.85 per liter before VAT.This is a surprise as it comes at a time when Rupee hits 32 month low against the Dollar. Meanwhile the Oil companies hiked the jet fuel (ATF) prices by 2 per cent.These price changes comes into effect from today.The Italian 10 year bond yields moved up again above the critical 7% mark driving the European indices into deep red. FTSE was trading down by 1.5% at one point of time.The Spanish and French bond yields surged too.The Euro zone's Economy grew merely by 0.2%. According to a source, talks on 50% cuts in Greek bonds to begin at Frankfurt today. Greece Finance Minister says,new Government To Fully Implement Oct 27 Agreement.

As I had written in my previous article,US retail sales surprised the Markets positively.The retail sales came at 0.5%. Our sources attribute the increase in core retail sales to the recent launch of iphone.Wal-Mart's profits misses analyst's forecast.Net income dropped 2.9%.Dell's revenue falls in the third quarter and Autodesk posted a better than expected results.Finally the US markets ended in green.Dow ended flat, S&P ended half a percent up and NASDAQ was up by a percentage.

Australia's third quarter Manufacturing Index Falls To -0.9 Vs +0.2 in the second quarter.


IMF warns that the biggest Chinese commercial banks face systemic risks if a combination of credit, property, currency and yield curve shocks occur together

Events to Watch- Portuguese T-bill auction, China rates in focus today( Nomura's Chinese Economist says ,China will not cut the rates).In Italy, Monti to meet the President today at 1000 GMT,(around 3.30PM IST) .He is expected to announce a cabinet comprising mostly of technocrats.Chancellor Merkel speaks at 1300 GMT.Other events to watch , Euro Zone CPI , UK Labour Market data , US Industrial production.


SGX is trading at 5050 (07.35 AM IST). I expect a better UK Labour Market data and a decent US industrial production data.If the data comes better than the expectation, we may see a bounce back in Global indices.Avoid carrying Over-night short positions.


Market Facts- Have you ever thought why are Italy's funding costs higher than those of the UK?

The Answer is ,UK can print its own currency :)



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Europe Futures

FTSE -0.68%, DAX -1.47%, CAC -0.93%.

Market Report

Sunday, some of the traders in the Europe to whom I spoke with were of the view that Mario Monti's new role as the PM of Italy would go well with the markets and he would definitely restore the investor confidence. The European futures indicated a positive open and the markets opened positive too. Once the 10 year Bond yields were inching up again above the 6.5% mark, the markets erased all the gains across Europe and the US futures slipped into red as well.Italy managed to sell Euro 3 Billion worth of 5 year Bonds but at the rate of 6.29% ,the highest rate since June 1997.The demand for the same increased to 1.47 times the amount on offer compared to the last month's demand of 1.34 in the previous auction.The rates were almost a percentage higher than they paid at the last auction.

EU Industrial production data for September came at 2.0% vs. Expectation of 2.3%. It fell at the fastest rate in two and a half years.

ECB borrowings by the Spanish Banks rose to EUR 76 Billion in October from EUR 69.3 Billion in September.

Germany , France and Turkey joined the likes of Nations like Syria and China in objecting to a military action against Iran(Read my last week's article on the possible military attack on Iran). Though the US and EU plan to impose another dose of sanctions on Iran,it is not going to affect Iran much ,as China ,Russia and Gulf nations continue their regular trades with Iran.India has lot of trade interests with Iran too.(Wikipedia says-A highway between Zaranj and Delaram (Zaranj-Delaram Highway) is being built with financial support from India. The Chabahar port has also been jointly financed by Iran and India). And most importantly India objected to further American sanctions on Iran in 2010.

US indices declined in the morning trade following the decline in European markets.And finally the Dow ended down by 74 points and the S&P ended down by 12 points(around a percentage).

Our indices which were trading in a tight range till noon started drifting down as the results of M&M was out and the fall accelerated when the European indices erased all their gains.SBI continues its southward journey.First it was the Moody's downgrade, then it was the results and the NPAs,now the exposure to KFA.I am sure even if the European indices remained in the positive territory, we would have drifted lower,yesterday.And TataMotprs profits were down by 16%.The company attributes this to the higher raw material cost, foreign currency loss and slow down in passenger vehicle sales in the domestic market.

Cairn India announced that it struck natural gas in the Sri Lanka's Mannar basin and it would take some time for the company to check whether it will be commercially viable.


Events to watch today-Greek T-bill auction and US manufacturing data.

Bloomberg survey says US data may be around 0.4% twice as much in September.

FTSE Fut is trading down by 12 points at 7 AM IST.

DOW fut is trading up be 22 points at 7 AM IST.

Hang Seng trades down by a percentage at 7 AM IST.

I expect Nifty to drift down to lower levels in today's trade.Book profits in short positions around noon or wait till European markets to open.Greek T-Bill auction would set the tone for the European markets.
Avoid overnight short positions as the Bloomberg survey says , the Manufacturing data in US may surprise positively.And a set of biggies like Staples,Wall Mart Stores,Agilent technologies,Dell,Home Depot and Autodesk are announcing their results today.

Enjoy the Day !!!



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Europe and US futures.

FTSE +0.74%, DAX +1.35%, CAC +0.87%, S&P 500 +0.55%, DJIA +0.55%, NASDAQ +0.44%.

Market Report

The European markets and the US markets rallied on Friday on account of the news that the Italian PM would be stepping down,and the approval of the austerity measures by the Parliament.As expected the Italian PM stepped down on Saturday.The Italian 10 year bonds were trading at 6.48% well below the critical 7% levels.A couple of days(November 9th) back it was trading above 7.5% that would have pushed Italy into insolvency.After Silvio Berlusconi's announcement that he would resign once the austerity measures are passed,things seemed to settle down.The short selling ban which was supposed to expire on 11th November in Italy was extended till January 15th to limit the volatility in the market. FTSE MIB closed by almost 4% on Friday.

Economist Nouriel Roubini says, Italy's fiscal reforms will fail to borrow money from the markets at affordable rates which would increase the chance of a debt default and its exit from Euro zone. ECB Governing Council member Athanasios Orphanides said in an interview on Sunday,"A possible haircut of the Greek debt is unnecessary and it is harmful for Greece and for the euro area as a whole. I still hold this view."

After the 10 year bond yields of the world's third largest Bond Market(Italy) started trading above the 7% mark, the attention is shifted to Italy from Greece.The European Financial Stability Facility (EFSF) announced last week that it had sold €3bn 10-year bond to support Ireland.The shocking part of this bond sales is, to achieve the target the EFSF had spent more than € 100m to buy its own bonds.This comes at a time when the EFSF officials had spent weeks in traveling all over the world to persuade key investors(Read,China,Japan) to buy its bonds.This is going to set alarm bells ringing in the minds of the future buyers.

In our markets Sensex dropped 1% led by the dismal IIP numbers.KFA fell down by 9.63% on account of cancellation of flights led by the resignation of pilots in large numbers and the cash and carry method suggested by the oil marketing companies for the airliner at the airports.Top banks like ICICI and SBI which have over 5% stake in KFA , fell down by 3.99% and 3.52% respectively.

Events to watch today- Italian bond auction. EU Industrial production data for September.

As expected the Asian markets are trading in the positive territory today following the Friday's rally in US and European indices.

SGX Nifty is trading at 5260 at 07.05 AM IST.

FTSE futures is trading up by 15 pts at 07.05 AM IST.

Dow Futures is trading up by 53 pts at 07.05 AM IST.


Today is November 14th.Children's day.Buy chocolates for the kids in your neighborhood.And always remember,when you BUY something,have a STOP-LOSS.Ask the children to Brush(Stop loss-Read,Tooth decay) their teeth after having the chocolate.Have a meaningful day :)


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Market Report

We shall start the day with some good news.To have a clear understanding about today's article I advise you to read my previous article on Global Sell-off , before reading this.

Lucas Papademos(Former European Central Bank vice-president) has been named as Greece's new prime minister.He is not the member of the parliament and he would be heading an interim Government until the elections on February 2012.The formal swearing in ceremony to take place today.In Italy,Mario Monti is likely to replace Silvio Berlusconi.The effective interest rates in Italy came down below 7%(The reason for the big sell off on Wednesday was due to the Bond yields which was trading above 7%) after the expectations that Monti may replace the present PM. And in another good news, S&P says France's rating remains AAA with a stable outlook(On Monday, France announced an austerity package which would save €7 billion in 2012). Yesterday,Italy's bond auction successfully raised €5 billion.According to some traders from Europe,ECB was seen buying Italian bonds on 2 and 3 year maturities for significant amounts. Italian markets ended up by a percentage and all the European indices ended almost flat contrary to the Wednesday sell-off (Read my previous article on Global Sell-off).

In the US, jobless claims fell to a seven month's low and the DJIA ended up by almost a percentage.

Isle of Man loses S&P AAA rating.S&P in a statement said, "We consider external vulnerabilities and the lack of monetary flexibility as credit weaknesses for the Isle of Man".

China's foreign trade rose in October by 21.6% YoY but was 8.3% lower when compared to the month of September.And the exports rose by 15.9% in October YOY and was lower by 7.2% MoM. Daiwa Capital Markets Economist Kevin Lai on Bloomberg says, Hong Kong is already in recession.
Investment Veteran,Jim Rogers says, he is 100% sure the world will face another financial crash .He warned that ,"It was bad in 2002,was worse in 2008 and in 2012 or 2013 is going to be worse still-be careful."

And in a new survey by WSJ, Economists says, 66% Chance that the Euro Zone Will Fall Into Recession.Today the IMF's Deputy MD,David Lipton arrives in Rome to begin fiscal monitoring and € 2 Billion worth of Greek T-Bills mature today.As if this is not enough, a strong,shallow earth quake of Magnitude 5.2 hit Greece at 19.25 local time.A report suggests that the damages are minor.

Asian Markets are trading almost flat for the day.Bank of Korea leaves the base rate unchanged at 3.25%. The finance Ministry says they need a balance between growth and inflation.The Kospi is trading up by a percentage at 07:50 AM IST.

SGX Nifty is trading flat at 5166 at 07:50 AM IST.

FTSE futures is trading up by 30 pts and DOW futures is trading up by 13 pts at 07:50 AM IST.

Today, the European Indices may give a thumbs-up to the news of France retaining its AAA rating.


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Global Sell-off

Hope everyone is enjoying the holiday.Am I enjoying the day?No.Hold on.I am not holding any open positions to worry about.The reason why I am not enjoying the day is I am getting bored.The compulsive trader in me doesn't like me sit idle and do nothing.The global sell off is something to be worried about now.The European indices ended down by almost 2%. The Italian Index is down by 3.78% .The Italian Bond yield was trading above the 7% mark though the PM of Italy had offered to resign.The higher borrowing cost is something which doesn't go well with the markets and with the economy too.Adding fuel to the fire ,Clearing house LCH.Clearnet SA raised the initial margin requirements of Italian Bonds.The changes come into effect from today and it will affect the margin calls from tomorrow. With $2.6 trillion in Government debt , it is going to be very difficult for Italy in the near future.

In the US , the markets ended negative sending the S&P 500 to its biggest decline since August 2011.All the US indices were down by more than 3%. Nikkei is trading down by 2.7% at 11.25 AM IST.The Japanese machinery orders fell more than expected in September due to rising Yen and the global turmoil.The exporters are facing huge pressure as the Yen is trading near the post WORLD WAR II highs against the Dollar.And in the domestic front Rupee hits 52 week low of 50.25 against the dollar. As in my yesterday's article I have mentioned, the European crisis is a big negative for our nation.The rising inflation,falling rupee,increase in imports of coal,crude oil,decline in exports as the demand from European nations are falling, we are in for a tough time looking forward.The trade deficit is not going to narrow anytime sooner as the foreign inflows are getting dried up.

We have bad news from all the directions.Deutsche Bank's Michael Spencer says,"The possibility that European banks might reduce their exposure to Asia as part of their recapitalisation effort is something that has to be taken seriously". This will affect nations like Vietnam, South Korea, Indonesia and India.If the European Banks are forced to cut back lending(Europe's banks account for two-thirds of the foreign lending to global emerging markets) it is going to be a tough time for us.Morgan Stanley says there would be around $500 Billion drop in lending to emerging markets.And a report on foreign exchange reserves of the emerging economies indicates that the Chinese foreign-exchange reserves fell by almost $61 Billion and the Indian reserves fell by almost $11 Billion.

Overall we are in a worst situation now than we were in 2008.The American mortgage crisis did not affect the emerging economies much.But this European crisis is triggering a bigger global turmoil and some of the domestic sectors like aviation and real estate sectors are facing a huge cash crunch now.Let us discuss about that in detail in another article.
Nifty is expected to open below 5200 tomorrow and we may breach 5000 in the immediate future and will drift down to 4900.

Enjoy the day.Happy Guru Nanak Jayanti To All our readers.

Alex sir's view on Markets.

The support for Nifty is at 5259 and 5233.The resistance is at 5340 and 5370.It is extremely difficult for Nifty to cross 5370 today.

ABB posted a good set of numbers and further up-move is likely in the stock.

Stocks to Watch- KEC International and SBI. Expect huge volatility in SBI ahead of the results.

Market Report

A day of huge volatility in Indian markets and US markets.We made a low of 5270 and bounced back in the second half.In US the markets went from positive territory to negative when Italy's PM won the budget vote.The results show that the PM is losing his majority.Out of the 630 seat parliament, 308 voted in favor and 321 did not vote and there were no votes against the budget.The markets rallied again when the President of Italy announced that the PM will resign once the austerity measures are taken.

The most awaited IAEA report was out yesterday and it confirms that Iran is trying to build a nuclear weapon since 2003 but lying about the same to the International community.The experiments were carried out in a secret , protective chamber built for the testing purpose 30 kilometers from Tehran.It sent lot of shock waves among those in Israel.The Israel's PM's office said that they are studying the report and will issue a statement later.From the markets point of view, it is a very important news which needs to be watched meticulously.
As I have mentioned in a previous article, any attack on Iran will send the crude prices higher.

The Chinese CPI is announced today and as expected it is at 5.5% compared to the same period a year ago.(Read my yesterday's article).

In the domestic front SBI is set to announce the results.SBI rallied yesterday anticipating a good result.

The retail traders in our markets to whom I spoke with is of the view that ,why our markets need to worry for the European crisis.It should affect only the companies which have business interest in the Eurozone nations.The answer to their question lies in the report on India's trade deficit.India's trade deficit widens in the month of October.Main reason being the weakening of Indian Rupee, decline in exports and the import of Coal and Crude at a time when the foreign fund flows are in a decline.Commerce secretary Rahul Khullar says,it is something to be worried about and at this rate we will clearly breach the $ 150 Billion mark.This is attributed to the global turmoil (Read,Eurozone crisis) because of which the fund flows are getting dried up.

Keep an eye on the International Crude prices as the IAEA report may be seriously taken by Israel and the USA.


Our markets may open positive tracking the global cues and the Asian Markets.Stay cautious in the second part of the day as, we have a trading holiday tomorrow.

FTSE futures is trading up by 55 points at 07.45 AM IST.
Dow futures is trading down by 10 points at 07.45 AM IST.

Alex Sir's view on Stock Markets today.

In an exclusive Interview with Alex sir,he feels that Nifty's resistance for the day is 5337 and the support exists at 5264 and 5224.

The quarterly numbers of ONGC,Elder Pharma,Madras Cements are encouraging.

Market Report

After Greece,the attention is now focused on Italy.It was high drama yesterday in the European Markets.During market hours there were rumors that Italian PM would step down and the FTSE MIB which was down by 2% rallied to 3% within no time.And the PM did not step down and the Italian parliament today votes on a 2010 budget account.The interesting fact is that on October 12th the Government lost the parliamentary vote on the same.To pass the bill 316 votes are needed in its favor.It is going to be very difficult with the PM losing his popularity and some MPs are revolting against him.If the PM loses the vote he has to call in for a confidence vote.If he does not get enough support and lose the confidence vote he has to meet the President to dissolve the Parliament and form a new Government,It is going to be Italy, this week.Wear your seat belts.

Kindly look at the Euro Zone's debt in 2011.

It is estimated that Italy's external debt is 2.6 Trillion dollars while that of Greece is 500 Billion Dollars.(1000 Billion is a Trillion and 1 Billion is 100 crores.1 Dollar is 49.19 Rupees as per yesterday's data).

Eurozone retail sales fall 0.7% MoM in September.The expectation was 0.1% MoM.German Industrial Production for the month of September falls 2.7% VS estimated drop of 0.9%.Greece is set to announce its new PM at the cabinet meeting today.

After a roller-coaster ride US markets ended positive.Dow Jones was up by 0.7% and NASDAQ was up by 0.34%.

China's October CPI which is set to be released tomorrow is expected to fall to 5.5%. The downward trend in inflation is expected to continue since the CPI reached 3 year highs in July.

SGX Nifty is trading at 5317 at 7 AM.Expect a flat opening in our Markets and Our markets may show huge volatility in the second half of the trading session.Italy's vote is a key trigger.


FTSE fut is up by 36 points at 7 AM
Dow Fut is down by 26 points at 7 AM.

What to expect from Markets Next week.

Yesterday our markets were very volatile as expected.The World markets barring Japan and Hong Kong markets ended negative.(Japanese markets were closed on Thursday and Hang Seng closed down by 2.5% on Thursday when all the other markets rallied after the referendum in Greece was scrapped).

In Greece, Prime Minister George Papandreou won the vote of confidence.That is a good news as the immediate uncertainty of early elections is averted which would have caused a turmoil again in the Euro zone.

A report by the UN atomic watch dog which is expected to be released next week is keenly watched by US and Israel.If the report endorses the fact that Iran is building Nuclear warheads, this time an attack over the facilities may be carried out by the US and Israel on Iran.The news about the attack on Iran's nuclear facility is not a new one.There had been rumors every now and then about the same for several years.French President at the G20 summit said,If Israel's existence is threatened, then France would not stay idle and watch.If Iran is attacked, it would close the Strait of Hormuz.Almost 40% of the world's crude oil trades happen through this strait.This would lead to a spike in Crude oil prices and it would cause huge inflationary pressure for our country.The two digit inflation figures and the higher interest scenario is a dampener for our growing economy.Expect a huge volatility in the interest sensitive sectors and the oil marketing and the oil exploration companies.

Alex sir's View on Markets.

Nifty has got a good support at 5200 levels and it is going to be a herculean task to move above 5385/5400 in the near future.A move above 5400 may result in a break up rally and a move below 5167 will trigger huge selling pressure and we may test lower support levels.
Stay cautious about the rate sensitive sectors and start accumulating the mid-cap stocks(at lower levels) which had shown excellent growth quarter on quarter.