Archive for May 17th, 2010

Weeekly Update 17th – 21st May

Global markets saw a sigh of relief with the start of new week after the European Union unveiled a 750 billion-euro ($949 billion) financial assistance program backed by European Central Bank bond purchases aimed to prevent a broader sovereign-debt crisis in the region. But thereafter could not build onto the gains as it was felt that the rescue plan may not help in averting a slowdown in the region. The concerns from developed nations to developing nations like china continued to cast a dark shadow on the investors mind. Chinese market went into a bear market on the concerns that the government will make borrowing dearer to check spiraling inflation & growth.

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With the fallout of European crisis it is widely believed that the central banks may not adopt tighter monetary policies with the fragile recovery. Chief of Indian central bank said that he plans to raise interest rates in a calibrated way given the risks to global growth. The belief led to a rally in the interest rate sensitive’s like Realty, auto & consumer durables in the domestic markets.

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Whereas the growth concerns continued to punish sectors like metal & oil.

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However safe heavens like gold & bond markets continued to see money coming in with investors seeking for safe shelters.

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Continued double digit growth i.e. 13.5% in march in Industrial production for the sixth consecutive month has mirrored one clear thing that India per se is on strong footing if compared to any part of world. Planning commission chief Montek singh ahluwalia saying that government is working out a 500 billion rupee fund to improve the infrastructure, is making our belief strong that infrastructure sector will see a robust growth in India over the long period.

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Trend of all world stock markets is still down and even a strong rally of Monday could not bring much relief as the markets gave up the rally in later part of the week on the back of weaking Euro and uncertainity in Europe. Neither the base metal commodities nor Crude is able to rally which shows lack of strength in the rally in stock markets. Nifty faces resistance between 5100-5200 levels and Sensex between 17000-17500 levels.

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The underlying unease over health of EU economy has room for more buying in bullions. At the same time bullions are paying no attention to dollar index the way they used to in general. Inflation in China, which is on 18 months highs, is indicating further monetary tightening, which may weigh on commodity prices in future. Overall trend of base metals and energy may remain weak, however, lower level buying cannot be denied in between. Important data from Japanese economy front may also give further direction to base metals and energy. On agro commodities front, they may remain volatile before expiry.