Sleepless Nights

Crisis in the “Never sleeping Citibank” brought sleepless nights for the equity markets across the globe. There were speculations in the markets that Citibank was about to become bankrupt any time soon. Such speculations were not without reasons. Citibank announced that it would downsize its workforce by 53,000. Its share price crashed in US markets in the last week. Announcement by the US President elect Mr.Obama that the Head of Federal Reserve Bank of New York would be the Treasury Secretary of his cabinet brought some cheers in the market on the last day of the week.

Week that was

Our markets were showing negative trends throughout the last week except for the last day’s surge taking cues from Global markets. Major global markets were very much negative during the week and many of them hit fresh lows of the year. Official confirmation of recession in Japan and few other countries helped the bears to have a complete grip over the market.

In India, Rate cut talks and moderation of inflationary expectations did not help our markets much that closely tracked the global events. Prime Minister’s request to the corporate to cut the prices to revive the economy did not go well with the market. Even though crucial line of 8900 points was broken during the week, the last day’s last hour surge helped the Sensex to close above the line of 8900 points bringing in some hopes.

For the week, Sensex lost around 470 points (5.10%) and Nifty lost around 120 points (4.16%). Once again, the Realty sector was the worst hit followed by Banking and Metal sectors.

Crude Oil prices went below $50 during the week. CBOE Vix peaked at 80 during the week and then had a fall during the last trading session of the week.

FIIs continued to sell in Indian markets and our Forex Reserves further came down to $246 billion dollars. Inflation had fallen to 8.90% from the previous week level of 8.98%. Indian Rupee weakened further against US Dollar because of FII selling, surging import needs and NDF market arbitrage.

Week Ahead

Last day of the previous week witnessed a rise for the indices with a high F&O volume indicating that the short-term trend will be positive. Fall in CBOE Vix (US) also supports the view as the global volatility may come down in the immediate future. Even though there are fears of a possible Citibank bankruptcy, markets are now in an oversold zone and there may be short covering and bottom fishing at every lower level.

There are strong bets in our market on a possible rate cut by RBI, as there is a moderation of inflationary expectations, which may help our indices to stage a brief relief rally.

This week, Sensex may march towards 9400 levels breaking which to 9800 levels. In case of any bad news from US, the downside targets are 8400 and 7800 points.

Rupee may consolidate around 50 levels with a positive bias, as the immediate expectations on our equity markets are positive. Further direction will depend on the movements in NDF markets and Equity markets.

Investors may look into stocks of public sector banks, which may be benefited by the probable rate cut with a long-term view. Similarly, Oil Marketing Companies, which are going to be benefited by the fall in international crude prices, may also be good bets for long-term call.
Wishing you a happy week ahead.