Mktviews Weekly Techno-Funda Analysis (18/06/2012 - 22/06/2012)

Markets have continued its northward journey on the back of further short-covering in increasing anticipation of a rate-cut by RBI following bleak IIP data, selective buying support at lower levels & stability in global markets on account of bailout of Spain by ECB for 100 Billion Euros. 

Key benchmark indices Nifty & Sensex rose each by 1.4% for the week while BSE Small-Cap & Mid-Cap index under performed the Sensex as the former rose by 0.4% & the latter sliding by 0.5% respectively. 

Sector-Wise FMCG, IT, Metal & Banking gained considerably while Power, pharma as well as Realty lost grounds between 1-2% each. 

Ratings Agency S&P has warned that India may be the 1st of the BRIC nations that could lose its Investment Grade rating & be downgraded to Junk status on account of worsening growth & policy inaction. 

For the cumming week, Market Participants would focus on RBI's mid-quarter policy for possible rate-cut on 18th June 2012. 

April IIP nos announced on Monday grew merely by 0.1% against expectations of 1-1.7%. 

Inflation data announced on Wednesday came in at 7.55% YoY against 7.23% YoY last month. Also March 2012 WPI nos were revised upwards by 80 basis points at 7.69%. 

Also INR sustaining around 55-56 levels depreciating nearly around 17% in last 1 year has resulted in increasing the upside risk to inflation. 

Thus, looking at the falling trajectory of GDP growth i.e 5.3% lowest since last 9 years, weak IIP data & Inflation sustaining above 7%, it seems that RBI may not go all out & cut CRR as well as Repo by 50 bps each. Instead, it may choose to cut the CRR by 50 bps & may tinker around with Repo by 25 bps. 

Also RBI Governor Dr Subbarao has recently stated that Inflation cannot be contained without sacrificing growth, which can be taken as an indirect hint w.r.t RBI's helplessness in cutting rates aggressively. 

Continuous Depreciation of INR has mitigated the positive effect of the falling prices of crude. But if crude prices continue to be on a falling trend or even stay stable at current level, pressure on subsidy burden on the Government will ease to a greater extent & its effect would even be visible on the Fiscal deficit front. 

Also on Global front, Investors would keenly focus on key developments unfolding in Eurozone w.r.t to its outcome of Greek election results. Post election results, if Greece chooses to exit the Eurozone, it can cause turmoil in Global markets. 

Major focus will be on the G-20 developing nations summit which will be held in Mexico on 18th & 19th June 2012. 

Thus, We are in for an eventful week ahead with important events such as Greek elections, RBI Policy meet, FOMC meet & G-20 Summit. 

Nifty PCR OI has increased from 1.46 to 1.51 levels with highest OI built-up witnessed in 5200 CE & 4900-5000 Puts suggesting a near-term range of 5015-5265. 

We feel that 50 Bps cut in CRR & 25 Bps cut in Repo has been largely factored in by the markets & unless RBI surprises with a bigger cut then expected, Further upside seems capped. 

Further pullback in Nifty Futures upto 5350/5420 would be witnessed only incase 5248-5264 is crossed & sustained.  

In case it fails to cross & close above 5264, will be in the trading range 5015-5264. 

Strong support lies @ 5015-5027. 

Once Nifty Futures breaks & closes below 5015, it could drift to lower levels of 4937/4850. 

 

 

Regards,
Team Market View Investments. 
Mo : 9987750901. 
Visit www.mktviews-nifty50.blogspot.com
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