Weekly Update 7th – 11th June

Unlike developed economies market that closed in red, our market closed in the positive on the back of robust GDP growth of 7.4% in the year ending March 2010 driven by solid rebound in manufacturing activity.


Auto & Cement sales numbers also joyed the markets. Good monsoon which is likely to be in range of 98% of the long term average will help in entailing inflation and will boost rural economy, a major factor for the overall growth of the economy kept the markets on a strong foot in the week gone by.


On the contrary, bad news continued from the rest of the world. Export led recovery is losing momentum in Japan. Manufactures are planning to increase production at a slower pace in the coming months in view of the cut in European government expenditures that may damp sales of Japanese goods over time. Unemployment is increasing and job prospects are worsening together with cuts in household spending.


Euorpean region economy which is struggling to gather strength after the debt crisis and has sought to cut expenditure got another jolt after Hungary said its economy is in a “very grave” situation, reigniting concern the region’s debt crisis is spreading. Hungary Prime Minister said that talk of a default is “not an exaggeration” because a previous administration “manipulated” figures.


The country was bailed out with a 20 billion-euro ($24 billion) aid package from the European Union and International Monetary Fund in 2008. U.S. markets saw Indices dropping to four months low after the lower than forecast payroll numbers for the month of May. However the positive news in the payroll survey was in earnings, the workweek, and production hours. Wage inflation picked up with a 0.3 percent rise in May, following a 0.1 percent advance the month before.


The average workweek for all workers edged up to 34.2 hours from 34.1 hours in April. The gain point out to future hirings and suggests increase in industrial production for the month.


Overall trend of world stock markets is still down though the markets tried to take a recovery intra week but the US and European markets spoiled the party.


Base metal commodities did not bounce even slightly which went to show that stock markets tried a recovery without participation of industrial commodities.


Nifty faces resistance between 5150-5180 levels and Sensex between 17200-17400 levels.


Sentiments are still very fragile and investors are very watchful in commodity.


Technically, base metals and energy appear oversold; hence they may generate some lower level buying. However, one should not judge it as a major one sided rally in these commodities as fears on European economy is still hovering. Even, negative outcome of economic data’s from various economies is further indicating slowdown in economic activities. If mercury goes high further and we see further decline in crude and other inventories in US, then it will stimulate buying in crude oil. Natural gas has already seen good short covering in the prices in past few weeks, can witness more buying for the same reason.

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