MARKET VIEW FOR 3RD MAY 2011 & CREDIT POLICY BY RBI

THERE WAS CASH BASED SELLING AND SHORTING IN BANKS AHEAD OF RBI MEET ON RATE HIKE. THERE IS FEAR IN THE MARKET THAT THIS TIME RBI WILL TAKE SOME STERN STEP AND MAY HIKE MORE THAN 25 bps IN REPO & REVERSE REPO. ALSO INTEREST RATE DE-REGULATION IN SAVINGS A/C WILL SHRINK THE BANKS' MARGIN LEADING TO TOUGH COMPETITION. ALSO THERE LOOMS THE FEAR OF RISING FUEL PRICES DOMESTICALLY AND ANY TIME SOON DIESEL RATE MAY ALSO BE DE-REGULATED WHICH MAY LEAD TO HIGHER INFLATION. NOW IN THIS SCENARIO THERE COULD BE MORE HIKES IN THE OFFING AND THE INTEREST RATE CYCLE COULDN'T BE PEAKED OUT ANY TIME IN NEAR FUTURE. HENCE KEEPING THE CLOSE EYE ON THE RBI STANCE IN DEALING WITH THE INFLATION, FIIs KEPT ON SELLING/SHORTING, THOUGH THE VOLUMES WERE VERY LOW.  


AFTER FOUR UNSUCCESSFUL ATTEMPTS IN CROSSING 5900-5950 RESISTANCE MARKET IS GRINDING DOWN DUE TO WORRIES ON VARIOUS MACRO HEADWINDS & THE MICRO HEADWIND LIKE CORPORATE EARNINGS ALSO FAILED TO BOOST THE SENTIMENTS. 


NOW IF THERE IS 25bps INCREASE IN THE RATES THEN THE MARKET MAY DIGEST AND SHOW SOME RELIEF FOR BULLS AS THE BANKS AND INDICES HAVE PRICED IN THE HIKE. ANY THING MORE THAN 25bps SAY IF 50bps THEN THE MARKET WILL TAKE IT NEGATIVE FOR THE GROWTH AND MAY TAKE A SHARP CUT TO 5550-5500 BY NEXT FEW DAYS, ON THE CONTRARY IF 5700 IS HELD OUT THEN THERE COULD BE SHARP RISE ND RECOVERY IN BANK STOCKS ALSO.  ITS IMPORTANT TO NOTE THE LANGUAGE OF RBI, WHICH MAY BE HAWKISH TO DEAL WITH THE UNCERTAINTY AND RISING INFLATION. ANALYST EXPECT 25bps HIKE AS RBI IS ALSO CONCERNED ABOUT THE GROWTH IN THE ECONOMY.


NOW IF NIFTY IS ABLE TO SUSTAIN 5700-5680 AND BOUNCES BACK AFTER THE CREDIT POLICY, THEN IT WILL BE CONSIDERED THAT MARKET IS CONSOLIDATING IN THE RANGE 5680-5950 WITH A STRONG SUPPORT AT 5700 AND BREAK OF HIGHER LIMIT 5950 WILL LEAD NIFTY TO TEST 6040-6100. HOWEVER FUNDAMENTALLY THE MACRO AND MICRO HEADWINDS WILL ACT AS MAJOR RESISTANCE  AND NIFTY WILL BE IN THE RANGE AND BUY ON DIPS WILL BE THE BEST STRATEGY FOR BUILDING LONG AS WELL AS MEDIUM TERM PORTFOLIO.


IF NIFTY SUSTAINS AND BOUNCES BACK ABOVE 5750 AFTER THE CREDIT POLICY THEN BUY THE SCRIPTS WHICH HAVE BEEN RECOMMENDED SEVERAL TIMES IN THE PAST.


FOR SAKE OF UPDATION THE FOLLOWING STOCKS LOOKS GOOD TO BUY ON DIP(As has been mentioned in the earlier posts):


SKUMAR NATION
ARVIND 
ALOK INDUSTRIES
TIMKEN
PIRAMAL GLASS
CAMLIN
INGERSOLL RAND
ORCHID
CANFIN HOME
LIC HOUSING FIN
OBEROI REALITY
SURAJ DIAMOND



Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.Nothing in this article is, or should be construed as, investment advice.

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