An eventful week ended on a steady note. RBI’s 50 bps rate
hike stunned one and all. The central bank policymakers also
maintained a hawkish tone. So, more tightening is likely in the
coming months, especially if infl ation remains stubborn.
A raft of results also kept market players busy. Some hit the
bull’s eye others missed the target. FII fl ows have turned choppy
and monsoon too is erratic. The US debt issue dominated world
markets and will be in focus early next week.
For India all eyes will be on the monsoon session of parliament. The
Government has promised to table a spate of key bills. It remains
to be seen how many of them are cleared by the parliament. A few
companies are yet to come out with their earnings.
Being the fi rst week of the month, Indian markets will also react to
auto sales, trade data and PMI reports. Lots of global data points
will also be on investors’ radar aside from policy meeting of central
banks in Japan, UK, EU and Australia.
TECHNICAL VIEW
Nifty this week reversed from its 200-DMA as well as from its
falling resistance line on the daily chart. Currently, Nifty has strong
support around a 61.8% retracement level at 5,435 on the weekly
chart. A move below the same can result into further downside
with a potential to drag the index down to 5,300 over the medium
term. Nifty needs to cement its position above 5,500 levels with
formation of higher top and higher bottom on the daily chart, before
confi rming any reversal signals.
F&O View
Banks,Infra and Metals have seen huge short rollovers amounting
to almost 35-40% of Market wide OI. Though 5300-5400 seems
to be the level where previously Nifty has bounced this will hold
crucial for this month as well. With IVs low at around 16-17% and
VIX hovering more or less around its 200 DMA of 20.98 we feel
August will be more depended on Global cues. We feel Nifty can
trade with negative bias with a range of around 5300 to 5600 for
the short term.
Base metals
MCX Base metals complex, barring lead traded moderately higher
this week, supported by weaker US dollar. However, impasse
regarding US debt ceiling talks has limited the upside in base
metals complex. Copper prices were categorically supported
by supply issues. Chile's Escondida copper mine, has declared
force majeure on copper concentrate sales amid a six-day strike.
Aluminium prices traded higher, supported by narrowing global
surplus. World demand grew at 4.8% during Jan-May 2011, as
compared with the same period last year, while supply grew at
3.1% on yoy basis. Nickel prices top performed the complex,
underpinned by due to healthy growth in world stainless steel
output and Chinese demand. Zinc prices remained suppressed,
weighed down by global supply glut. Lead prices declined due to
weakening demand in China from the automobile battery sector.
Chinese government has enforced a clampdown on various
battery manufacturing units on environmental grounds.
We remain skeptical regarding prevalent high base metal
prices, barring Aluminium and Nickel, considering that global
economic backdrop still remains gloomy. Global economic
recovery precedes spiraling commodity prices and not the
other way round. Moreover, relatively high energy prices
augment infl ationary pressures, effectively derailing the
global economic recovery. We reiterate with our view and
categorically advocate not chasing highs.
Precious metals
Precious metals continued to trade fi rm, supported by the impasse
in talks to raise the U.S. debt ceiling. Debt negotiations have moved
in a deadlock, conveying signs of a possible default. Democrats
and Republicans in Congress have wide range of differences over
plans to cut the U.S. defi cit by an estimated $915 billion over 10
years, a necessary move before the debt ceiling can be raised.
Many Republicans have opposed the bill, and all Democrats in the
House are also reported to be against it. The White House has to
reach a deal on raising the US$14.3 trillion debt ceiling and cut
spending before the August 2nd deadline or risk a default.
We continue to remain bullish on precious metals, as
uncertainty looms regarding global economic growth and debt
issues in US. Debt woes in Europe have not been resolved
yet, with a higher probability of the contagion spreading in
the region, with countries like Spain & Italy not ruled out.
Bailout to Greece has not served the purpose, with several
credit rating agencies further downgrading the country’s
junk status. Poor macroeconomic indicators across various
geographies still convey a gloomy scenario. Global economic
uncertainty affi rms that gold prices are poised to register new
highs during this calendar year.
hike stunned one and all. The central bank policymakers also
maintained a hawkish tone. So, more tightening is likely in the
coming months, especially if infl ation remains stubborn.
A raft of results also kept market players busy. Some hit the
bull’s eye others missed the target. FII fl ows have turned choppy
and monsoon too is erratic. The US debt issue dominated world
markets and will be in focus early next week.
For India all eyes will be on the monsoon session of parliament. The
Government has promised to table a spate of key bills. It remains
to be seen how many of them are cleared by the parliament. A few
companies are yet to come out with their earnings.
Being the fi rst week of the month, Indian markets will also react to
auto sales, trade data and PMI reports. Lots of global data points
will also be on investors’ radar aside from policy meeting of central
banks in Japan, UK, EU and Australia.
TECHNICAL VIEW
Nifty this week reversed from its 200-DMA as well as from its
falling resistance line on the daily chart. Currently, Nifty has strong
support around a 61.8% retracement level at 5,435 on the weekly
chart. A move below the same can result into further downside
with a potential to drag the index down to 5,300 over the medium
term. Nifty needs to cement its position above 5,500 levels with
formation of higher top and higher bottom on the daily chart, before
confi rming any reversal signals.
F&O View
Banks,Infra and Metals have seen huge short rollovers amounting
to almost 35-40% of Market wide OI. Though 5300-5400 seems
to be the level where previously Nifty has bounced this will hold
crucial for this month as well. With IVs low at around 16-17% and
VIX hovering more or less around its 200 DMA of 20.98 we feel
August will be more depended on Global cues. We feel Nifty can
trade with negative bias with a range of around 5300 to 5600 for
the short term.
Base metals
MCX Base metals complex, barring lead traded moderately higher
this week, supported by weaker US dollar. However, impasse
regarding US debt ceiling talks has limited the upside in base
metals complex. Copper prices were categorically supported
by supply issues. Chile's Escondida copper mine, has declared
force majeure on copper concentrate sales amid a six-day strike.
Aluminium prices traded higher, supported by narrowing global
surplus. World demand grew at 4.8% during Jan-May 2011, as
compared with the same period last year, while supply grew at
3.1% on yoy basis. Nickel prices top performed the complex,
underpinned by due to healthy growth in world stainless steel
output and Chinese demand. Zinc prices remained suppressed,
weighed down by global supply glut. Lead prices declined due to
weakening demand in China from the automobile battery sector.
Chinese government has enforced a clampdown on various
battery manufacturing units on environmental grounds.
We remain skeptical regarding prevalent high base metal
prices, barring Aluminium and Nickel, considering that global
economic backdrop still remains gloomy. Global economic
recovery precedes spiraling commodity prices and not the
other way round. Moreover, relatively high energy prices
augment infl ationary pressures, effectively derailing the
global economic recovery. We reiterate with our view and
categorically advocate not chasing highs.
Precious metals
Precious metals continued to trade fi rm, supported by the impasse
in talks to raise the U.S. debt ceiling. Debt negotiations have moved
in a deadlock, conveying signs of a possible default. Democrats
and Republicans in Congress have wide range of differences over
plans to cut the U.S. defi cit by an estimated $915 billion over 10
years, a necessary move before the debt ceiling can be raised.
Many Republicans have opposed the bill, and all Democrats in the
House are also reported to be against it. The White House has to
reach a deal on raising the US$14.3 trillion debt ceiling and cut
spending before the August 2nd deadline or risk a default.
We continue to remain bullish on precious metals, as
uncertainty looms regarding global economic growth and debt
issues in US. Debt woes in Europe have not been resolved
yet, with a higher probability of the contagion spreading in
the region, with countries like Spain & Italy not ruled out.
Bailout to Greece has not served the purpose, with several
credit rating agencies further downgrading the country’s
junk status. Poor macroeconomic indicators across various
geographies still convey a gloomy scenario. Global economic
uncertainty affi rms that gold prices are poised to register new
highs during this calendar year.
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