Weekly Update 23rd – 27th August 2010

The buying continued in the Indian markets and helped broader indices to surge to two and a half year highs. While negative sentiments in the global markets led to profit booking with major markets closing in the negative on weekly basis. The Federal Reserve Bank of Philadelphia’s general economic index dropped to the lowest reading since July 2009 to minus 7.7 this month, signaling contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.


The unemployment claims unexpectedly shot up by 12,000 to 500,000 last week more than the economist estimates. U.S. recovery is fading and European governments would struggle to reduce their deficits are the worrisome factors that are lingering on in the investors mind. The producer price index in U.S. increased 0.2 percent following a 0.5 percent drop in June.


Excluding food and energy costs it climbed 0.3 percent signaling that world’s largest economy may not face deflation moving with slower growth. China, the Emerging Market frontier that saw an unparallel growth in the past is facing threats of faltering demand for exports as U.S. and European consumers are cutting spending, rising wages and the risk of bad loans from record lending by banks in the past. Japan Economy saw an expansion of an annualized 0.4 percent in the quarter ending June pushing it into third place behind the U.S. and China.


In India, with good monsoon season the prospects of harvest have improved and now it is widely believed that inflation would come down by the end of this quarter. The primary articles index rose 14.85% in the year to 7 August 2010, lower than previous week’s annual rise of 15.66%. The food price index rose 10.35%, lower than previous week’s annual rise of 11.4%, as prices of vegetables, potatoes and onions fell.


Going forward the domestic market is expected to remain firm with the support of foreign investment.


However, investors will continuously monitor the global developments after some of the recent disappointing data coming from U.S.markets. Trend of Indian Stock Markets is up though other world markets are coming under pressure especially the European and US markets. Dollar index is showing some strength which is giving jitters to commodities. But till the trend of our stock markets is up, one should be playing on the long side with a cautious approach. Nifty has support between 5400-5350 and Sensex between 18000-17800 levels.


Gold has benefited from last few weeks as investors are escalating the insurance like metals in their portfolio. However, gold silver ratio is rising once again as silver is moving in a range due to falling base metals. With the looming weakness in various economies, gold may invite bulls further. After touching many week highs, base metals washed off their previous gain on unexpected drop in Philadelphia Fed survey and bad employment data. Now the pulse of base metals is likely to be guided by the outcome of housing and durable goods data of US this week. Weakness in equity market, swelling inventories, slow recovery may weigh on the crude prices further, which already hit six week low last week. Dollar gain against euro is dampening the commodities demand, compelling CRB index to trade range bound with bearish bias.


Nevertheless, lower level buying cannot be denied in between.


OUR Websites:  http://www.smcindiaonline.com,http://www.smccapitals.com,



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