Weekly Market Analysis (28 June - 2 July)

Dear All,
Benchmark Indices Nifty & Sensex both closed absolutely flat on a WoW basis last week in what was a eventful week. Markets witnessed a range-bound movement throughout the week admist choppy movements.

Globally,

Earlier Last week, contrary to world expectation, China unlocked the value of Yuan & announced a Flexible Yuan policy thereby allowing it to appreciate in value. This bought about a buoyant mood in the world market at the beginning of the week.

Fed policy makers left the overnight interbank lending rate target unchanged in a range of zero to 0.25 percent. Fed echoed that low inflation, stable price expectations and high unemployment “are likely to
warrant exceptionally low levels of the federal funds rate for an extended period.”

For the week ended 25th June 2010,

Change in Global Markets:
US markets: 3-4 % down
European Markets: FTSE down 3.8%, CAC down 4.54% & DAX down 2.35%.
Asian Markets: HangSeng up 2.1%, Shanghai up 2%, Nikkei down 2.58%, Kospi up 1%.

In our Markets Last Week,
Sectors such as Oil & Gas, Realty & FMCG outperformed the indices while IT & Banking sector witnessed deep cuts.
OMC stocks gained anywhere between 10-15% on Friday itself. Stocks such as ONGC & Sun-Pharma gained approx 5-6%. While RCom, HUL & Maruti gained 3-5% on an weekly basis. IT majors faced selling pressure & were down between 3-4% each. Banking Stocks were the hardest hit with SBI & HDFC Bank facing cuts between 2-4%.
Much awaited OMC policy was announced by Government on Friday. It caused the Oil & Gas sector to outperform all the other indices by leaps & bounds. Public sector oil marketing companies (OMC) surged the most after petrol prices were increased by Rs 3.50 a litre and diesel price by Rs 2 a litre, as part of a plan to move towards a market-determined fuel price regime. OMC stocks may even see an earnings upgrade by 20-25% based on the policy itself. Under-recoveries of oil marketing companies for the financial year without this decision were estimated at Rs 72,000 crore . This decision will help bring it down by about Rs 21,000 crore to Rs 53,000 crore. This (Rs 53,000 crore) will be borne by the government and upstream oil companies.
Fundamentally, Automobile & Banking Sector will be the hardest hit sectors as Rising Fuel prices may dampen Sales demand & Rise in Inflation due to rise in fuel prices may prompt the RBI to take some action on the Interest Rate front. Fuel Price rise may have an approx impact of 90-100 bps on WPI index. This policy may also put pressure on the Bond Markets.
Automobile & Cement Stocks would see some action as companies will announce June Sales volume data in early July 2010. Even Progress of the monsoon will also be closely watched.

Last Week,
Nifty opened positive on the back of Positive opening of its Asian peers due to Chinese flexible Yuan Policy news. But ended the week near its weekly low on the back of profit-booking post OMC policy announcements.

Nifty Future Analysis :
PCR is 1.49 indicating mild bearish sentiment. Options Concentration for the week has shifted to 5200 Strike Put option & 5400 Strike Call option indicationg the possible range of 5200-5400 for Nifty.
Nifty Fut has immediate support at 5244. If breaches & sustains below it, will fall upto 5176 & 5129.
On the other hand, Nifty Future faces critical resistance in the zone of 5339-5359. Above which levels of 5398/5435 are achievable

Regards,
Team Market View Investments.