Can Mr.Subbarao take the bull by the horns?

Global markets extended the recent rally with minor gains on Wednesday as Wall Street closed half percent. With no major news flow, equity markets across the globe are subdued with a positive bias. Japanese markets are exceptional due to Yen driven news. Indian markets are a different story alltogether.

Asia up on thursday

Asian markets are trading up thursday morning as Yen extends wednesday's slide on fears of further intervention by BOJ. Nikkei is up 0.7 pct while Australia is down 0.3 pct

RBI Policy meet

In what can be termed as the most significant event in the last 2 months, given the current euphoric situation RBI will be announcing the changes to the monetary policy (if any) in a mid-quarter review. Pranab's recent comments indicate that a rate hike is surely in the offing.

In case RBI gives the hike a miss, we are in for a bigger bubble. Bulls will go on a rampage if RBI fails to arrest the inflation. A 25 basis points hike would take its repo rate(the rate at which it lends to banks) to 6 per cent and the reverse repo rate(at which it borrows from banks) to 4.75 per cent.

Finally the D-day has arrived and it is ideal to stay mum for today instead of taking any positions with out proper interpretation. Risky traders can play the volatility. The positive buzz is getting too strong these days. We are still not clear on the direction of the market but continue to believe our old version of correction though the chances have slimmed down a lot.

Bulls hell-bent to step back, side counters to gain

Wall Street investors cheered Basel norms, resulting in a positive close for Dow Jones and Nasdaq on Monday. Basel-III, as it is popularly called will require banks to hold more capital than they did before the crisis. Banks will have time till 2019 to comply to these norms.

Bank stocks on Dalal Street had a feast yesterday partly due to Basel-III though India's banks see no significant impact at this point of time.

Asia trading mixed

After big gains yesterday, Asian markets are trading in red with Japan's Nikkei losing half percent. Meanwhile Australian shares moved up half percent.

More positive talk on the street

This is how things change overnight as far as equity markets are concerned. Analysts who are extremely bearish till yesterday started turning bullish. While Analysts at DStreet stick to the same analysis, momentum seems to be on the bullish side for the time being.

Dalal Street's valuations are getting expensive at least from FY 11 earnings perspective. The current up move will be more dangerous without meaningful correction. Having said this we are still invested 30-35 pct in our real-time portfolios.

Expect a choppy session today after a positive open. We expect the side counters to gain after missing out on yesterday's rally

Stocks look good for an intraday upmove in the descending order of priority

Tarapur Transformers
Arvind Ltd.
Balaji Telefilms Ltd.
Arvind Ltd.
Kingfisher Airlines Ltd

Positive cues every where, D-Street to gap up

Strong IIP data and higher inflation makes a strong case for rate hike

Come 16th September, Reserve Bank of India (RBI) chairman Subbarao will be under severe pressure to announce a rate hike. While the feelers from the Finance ministry clearly indicates that hike is imminent, the extent of the hike is unknown.

Market sources are undecided while we expect a 25 basis rate hike and anything above that will be a big negative. We do not see a case for more than 25 basis point rate cut though.

Global positives


US Markets closed the last 2 trading sessions in green on better than expected economic data. But overall the situation is very sketchy as far as global markets are concerned. On the other hand china's economy is showing flamboyance but inflation concerns still remain.

Asian markets are trading strong on Monday morning with Japan's Nikkei inching up 1 pct and South Korea's Kospi, up half percent.

Strong IIP data

India’s industrial output surged 13.76% in July from a year ago, a good 6 percentage points above the median analyst forecast and far higher than the June figure, downwardly revised to 5.76%. Capital goods stocks might be in the limelight today.

Economists expect IIP to come down to single digits in the next two to three months, also because of a “strong base effect”.

Inflation

Inflation data is due on September 14 might set another case for RBI. Inflation numbers above 10 pct might propel the central bank to go for a rate hike. Food inflation rose to 11.47 per cent during the last week of August.

According to Mr.Montek Singh, Deputy Chairman of Planning Commission the inflation numbers will come down drastically to the range of 5-6 percent. We believe this is tough to achieve given the macro economic conditions.

Markets ahead


We expect markets to trade positively today but as we approach the 16th deadline we remain extremely cautious as market might not take the news to heart. If correction gives this week a miss then we are in for a feast for the rest of the month

Nifty to have positive open

All eyes on RBI Policy

While the current momentum is driven by rush of funds from across the globe, there is an increasing voice on valuation theory.Foreign direct investment (FDI) into India dipped for the second consecutive month, by 49 per cent to $ 1.78 billion in July and FII Inflows in August too indicate a slow down.

Timing the correction is the toughest part and lets examine the probable events that might well trigger the correction. We expect RBI's policy meet on 16th September as the biggest trigger for correction in the extreme short term. The other possible event we can think of is European crisis which is showing legs in the last one week.

For today we expect markets to trade in a range with a positive bias with small stocks extending their run

Dalal Street to see a subdued start

We might not see any major reaction to global events today, just like the street responded over the last two months. But one should clearly note the current rally is purely
driven by cheap dollars. The depth of European crisis is not known while US economic data is mixed and clearly indicates a slide. Next week's RBI policy (16th Sept) meeting is the final hope for bears or this rally might have legs to run. Better safe than sorry.

Cement counters have witnessed huge momentum in yesterday's trade. Keep an eye on power and second run IT space to receive the baton from cement counters.

For today we do not see a major down move in Nifty with side counters doing well

Indian markets to consolidate

Indian markets are most likely to start the day flat after a big rally on Monday. Investors flocked to stocks and pressed the panic button but this time for buying

On Monday, 118 stocks breached their 52 week highs on Bombay Stock Exchange. Midcap and smallcap stocks are having the best of the times. With large caps leading the way with Reliance Industries Ltd. yet to participate in the rally, one can expect a big rally if Reliance participates.

Is cheap money leading India's rally?

Thanks to central banks around the world holding on the low interest regime, cheap dollars are finding their way to Indian markets. There is a gush of liquidity flowing into the markets at present. We believe this mad rush for participating in India's economic growth in the next 2 years will only spike up. But what makes us jittery is present day global economic situation coupled with the high momentum in speculative stocks. Inflation is alarming despite of RBI is taking right steps with intermittent rate hikes.

While investors tend to get carried away by moves like yesterday, we advice them to hold their nerve as the quality of stocks that are moving up was never good from the last one month. Investment positions are not to be disturbed but we would avoid long trading positions for the next 1-3 months. We stick to our short term bearish view though technicals predict a big move above 5600 (on a closing basis) for Nifty

Buying rush to continue in small and midcaps

Dalal Street is all set to open higher on positive global markets and better than expected jobs data in the US. Asian markets opened the day in green and are expected to close the day flat

Global markets are expected to trade the first half of the week in a range bound fashion. US Markets are closed for labour day week end on Monday. Global equity investors are on sticky turf whether to hang on with their investments or withdraw the same.

Indian Economy - Tough times ahead

Indian economy after witnessing best of the times courtesy government stimulus, increased consumer spending, is ready to hit a road block soon in the form of another rate hike, global market correction.

Weak economic data indicators are pointing to a slide in the US economy. DStreet US market analyst Satish Bhogadi adds "We do not expect a double dip but there will be a considerable correction in the US equity markets. There will be no betterment in the current situation for the next 4 months"

Indian equity markets have done reasonably well outperforming rest of the crowd in the last 6 months. But dissecting the FII data reveals that the inflows have started slowing and might see some outflows in the coming day too. Having said that there is no second thought about the state of Indian markets from a medium and longer term perspective.

We expect this to continue for a shorter phase (1-3 months) and this kind of short corrections will augur well for the long term health of the market.

We see another range bound session with minor volatilitly with small fish jumping in the pond