Archive for the ‘currency’ Category

GLOBAL BOARD OF TRADE (GBOT)

Adding another trading floor in the whole list of numerous exchanges around the world, Global Board of Trade (GBOT) ”the first international multi-asset exchange”  based out of Mauritius, was officially launched by that country’s Prime Minister Navinchandra Ramgoolam.

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GBOT is a wholly owned subsidiary of Financial Technologies (INDIA) Limited, a leading provider of trading technology solutions and a global leader in creating and operating transparent, efficient, and liquid tech-centric exchanges transacting a broad spectrum of asset classes, including equities, commodities, fixed income, and foreign currency instruments. GBOT is also a member of leading industry associations such as Association of Futures Markets (AFM), Futures and Options Association (FOA), Swiss Futures and Options Association (SFOA), and Defra EU Emissions Trading Scheme (EU ETS).

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In the Hands of………..

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GBOT has a very strong board comprising reputed names such as Mr. Venkat Chary (Chairman), Mr. Jignesh Shah (Vice- Chairman), Mr. Mohammad A. Vayid (Director), Mr. V. Hariharan (Director) , Mr. Joseph Hadrian Bosco (Managing Director and Chief Executive Officer).

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Trade Timings

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It is proposed that the normal market trading hours on Global Board of Trade for Currency and Commodity Derivatives Segments will be 09:30 Hrs Mauritian Time (05:30 Hrs GMT) till 23:30 Hrs Mauritian time ( 19:30 Hrs GMT). Any decision about revision of the trading hours, as and when it happens, will be informed to the market participants via trading circulars.

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Value Propositions

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  • The strategic location of Mauritius (i.e. GMT +4) with respect to the rest of the world will enable the investing community to hedge price risk movements vis-à-vis the asian, Europenn and American markets.

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  • Trades will be in the form of standardized contracts and participants will be anonymous , thus ensuring the price discovery  process will be free from the influence of any vested interest or non-market forces.

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  • The commodity market segment of GBOT will enable sellers and buyers of commodities to protect their business from the adverse effects of price volatility in the terrestrial markets. The price risk management will be through the time-tested process of ‘hedging’.

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  • The advantage of a moderate tax regime prevailing in Mauritius will be of immense benefit to investors and traders alike.

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  • GBOT would offer commodity as well as currency derivative products on its state-of-the-art electronic exchange platform with efficient clearing and settlement systems to ensure counter-party guarantee for all trades.

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  • For the first time worldwide, two African currency futures will be traded.

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Products:

Bullions: Gold, Silver

Currencies: EUR/USD, GBD/USD, JPY/USD, USD/MUR, ZAR/USD

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Weekly Update 18th – 22nd October 2010

Most of the world markets rallied in the week gone by on the buzz of further quantitative easing by U.S. Without giving details about the strategies on how the central bank will act its Nov. 2-3 meeting, Federal Reserve Chairman Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.

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Fed is considering ways for raising inflation expectations to encourage people to believe that prices will start rising at a faster pace so that they would spend more of their money now. Retail sales in U.S.climbed more than forecast as purchases rose 0.6 percent following a 0.7 percent gain in August and manufacturing in the New York region expanded in October at a faster pace than anticipated.

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China’s Shanghai Composite Index saw gains of 8.5 percent on the anticipation that China’s banks show strong earnings growth this quarter as the lending has beaten the forecast. Moreover the strong exports growth of 25.1 percent in September mirrors the strong underlying economic momentum. The country’s foreign-exchange reserves, the world’s largest, surged by a record to $2.65 trillion at the end of September.

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India’s wholesale price index rose to rose 8.62 percent in September from a year earlier after an 8.5 percent gain in August. Manufactured product inflation and Food price inflation rose by 0.3 percent and 1.6 percent respectively in September fromthe previous month. RBI Chief Subbarao said that inflation in India is being “quite stubborn,” a sign that controlling prices remains the central bank’s priority.

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Reserve Bank Deputy Governor Subir Gokarn signaled the central bank may intervene in the currency markets to shield exporters from the strengthening rupee. The capital account showed a surplus of $17.5 billion in the quarter to June 30, compared with a record shortfall of $13.7 billion in its current account.

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Foreign investors have so far poured approximately $23 billion in stocks and 10 billion indebt this year. Industrial production expanded by 5.6 percent in August after seeingan expansion of 15.2 percent in July.Going next week the main attraction for retail investors would be the primary market with Mega IPO of Coal India slated to open on 18th October. As Infosys has already rung the bell with positive surprise in terms of earning growth, the investors would now look forward to numbers of companies like L&T, HDFC, Bajaj Auto, etc that are scheduled to announce numbers next week.

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Nifty has support between5870-5950 and Sensex between 19200-19640 levels.With expecting second round of monetary easing, investors dumped dollar and endowed other investment avenues. Commodities extended a rally to the highest intwo years and CRB closed near the mark of 300. The dollar fell to its lowest in 10 months against a basket of currencies and breached the mark of 77. Five week continuous downfall enhanced metals and agricultural commodities.

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Gold gave heroic performance and made another life time high. It rose more than 25% in 2010.Silver is also trading near 30 year high. However, being prudent investors, one should book profit in gold and silver, considering safe trading. Base metals are expected to trade in a range. Crude oil should trade in range $80-85 in short run on mixed fundamental. OPEC has decided to keep the production quota unchanged in last meeting. Agro commodities should trade with high volatility ahead of expiry of October contract.

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Weekly Update 27th September – 1st October 2010

Indian Markets posted fourth weekly consecutive gains led by rising optimism of growth and portfolio investments. The run up in the market was phenomenal and beyond expectations of market participants. Global investors seems to be going more anxious about India consumption and growth, complemented by continued monetary accommodation by developed nations in  order to propel growth. Indian Government recently raised the cap of foreign investments by $ 5 billion in federal and corporate bonds with a residual maturity of over five years. The step is viewed very positively in the sense that the ease of limit in federal bonds will take out interest rate pressure from the banks. The ease in corporate bonds issued by companies in the infrastructure sector will fill the estimated financing requirement of $1 trillion in the five years to 2017.


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U.S. central bank kept its benchmark interest rate in the range of zero to 0.25 percent .The bank said that they are prepared to provide additional accommodation in the light of slower economic recovery. The statement raised the speculation that the bank may buy more treasuries down the year. Weaker growth has still kept the unemployment at above 9 percent levels and reflects that companies are still cautious. The U.S. markets surged to highest level since May as the orders for durable goods rose the double of market expectations.

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Another happening that market is keeping an eye on is the political pressure building on Obama administration to take a stance on the China’s currency policy. The yuan has appreciated about 2 percent against the dollar since the central bank said it would pursue a more flexible exchange. However U.S. wants to see more rapid and “significant” rise in the yuan’s value.

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With the visible positivity across the globe, Indian markets are maintaining up move and managed to close above the psychological mark of 6000 levels on the weekly basis. The weakness in the dollar index clearly strengthens the equity markets and lead to the fresh breakout especially in US and European counterparts.

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One should maintain the stance of buying on dips. The Midcap stock may provide handsome return in the near future. Nifty has support between 5900- 5810 and Sensex between 19640-19200 levels.

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It appears that bullion counter is taking advantage of every opportunity and making new highs now and then on rock solid fundamentals. Weaker than expected growth in manufacturing and services industries of euro zone, sovereign debt crisis in Ireland, plummeting dollar index amid some poor economic releases fuelled rally in bullions. Negative tone of global economy capped the upside of base metals and energy  counter, even fall in dollar index could not give much impact and they appeared shy to break the resistance. Local currency appreciation locked the movement of commodities. This week is full of event risk. GDP data of US and UK, consumer confidence data and employment data of US may give further direction to  commodities. Crude oil is witnessing lackluster trading and thus moving in range on ambiguity in the world economy. Energy counter needs big news for further direction. Spices should revive in this week.

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Weekly Update 20th – 24th September 2010

Global market rallied in the week gone by after Japan intervened in the currency market to weaken yen and Chinese and U.S. economic reports raised the confidence of global growth. Stocks rallied in Japan after it intervened in the currency market to stem the Yen appreciation. The yenweakened to 85.85 per dollar after climbing as high as 82.88 per dollar earlier inthe week, the strongest level since May 1995.

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Continuous reversal in Yen may leadto more investment in exporter companies in the region. The concerns overmoderate expansion in China got erased as the data showed that Industrial Production expanded 13.9 percent in August. The data gave optimism on global growth and led to rally in metals.

Consumer sentiment in U.S. fell to one year lowof 66.6 from 68.9 in August increasing the risk that consumer will cut back on theirpurchases.In India, RBI, in order to anchor inflationary expectations and as a step tocontinue the process of normalisation of the monetary policy instruments raisedborrowing costs for the fifth time this year.

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It raised Repurchase (repo) Rate to 6percent from 5.75 percent, and the reverse-repurchase rate to 5 percent from4.5 percent. It seems that for now, RBI has done enough to contain inflationarypressures and as the repo rate is the operative policy rate therefore thetransmission from policy rates to market rates has strengthened.

Going forward,we expect that RBI would give due weigh to the macro economic situation ratherthan only inflationary pressures before doing any adjustment in monetary policyinstruments.We expect the market to remain firm as even advance tax numbers were higherthan that of last year. Next week U.S. Federal Reserve is expected to give stimuluspackage in its meeting scheduled on 31st September seeing the worrisomesituation of high unemployment and weakness in construction activity asindicated by the latest Fed Beige book finding.

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With the positivity from the global front, we are steadily approaching near the alltime high zone and likely to extend the up move in the coming weeks withrequired consolidation for the sustainable move. Nifty has support between 5700-5550 and sensex between 19200-18800.Another round of quantitative easing by the fed amid falling dollar proved supportive to the bullions and once again lovable gold made life time high acrossthe bourses. Though it made life time high on MCX as well but upside was limiteddue to appreciation in local currency. Silver is also rocking on heavy investmentdemand. Even base metals recovered as many central banks maintained low borrowing cost but slow recovery is capping the upside of industrial metals. Evenfalling crude oil is indicating ambiguous trend. This week, bullions may see aconfident move further on fundamental and technical support.

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Nevertheless,appreciation in currency may lock the price movements to some extent on domestic bourses. FOMC meet regarding interest rate will provide further direction to commodities. Expect a volatile week for agro commodities as expiryof September contract is scheduled on Monday.

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Weekly Update 30th August – 3rd September 2010

The global equity markets fell in the week gone by after a record plunge in U.S. home sales and slowing export growth in Japan raised concerns that developed economies are losing momentum. However losses in the equity markets were recouped during the end of the week when Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank “will do all that it can” to safeguard the recovery and growth and stronger-than-forecast U.S. economic growth eased concern the world’s biggest economy will return to recession. According to the EPFR Global, risk aversion led global investors to put some $5.2 billion into bonds and withdrew a net $7.1 billion from equity funds worldwide.

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European Central Bank President Jean-Claude Trichet called for immediate fiscal austerity measures. He said that the lesson from past history is that dealing with the legacy of accumulated imbalances is not simply a duty to be fulfilled after the economic recovery, but rather an important precondition for sustaining a durable recovery.

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However he was skeptical of the argument that cutting back deficits now would risk derailing the recovery. Bank of Japan is expected to hold an emergency meeting next week to consider more monetary easing and Japan’s Prime Minister is expected to give economic stimulus package as strong appreciation in Yen to 15 year high against the dollar is threatening the export-led recovery.

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On the domestic front, RBI in its Annual Report said that the growth outlook for the current fiscal year is robust but inflation has emerged as a major concern. It said that it would remain committed to contain generalized inflationary pressures through its calibrated monetary policy based on careful assessment of risks to both inflation and growth.

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Going next week, investors will keep an eye over the GDP growth number for the first quarter of 2010-2011 to be released on 31st August. The expansion in the economy is expected to match up the growth of 8.6 percent seen in the last quarter of the fiscal 2009-2010. Stock specific activity, specifically in Auto and Cement stocks may not be ruled out as companies would be reporting monthly production numbers.

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In comparison to world indices, Indian markets are still in the better position as it fell marginally lower as comparised to global counterparts. On the weekly closing basis, dollar index is struggling around 83.50 levels which may trigger technical recovery across the board especially in the US and European markets. Accordingly, one should opt for staying long for the next week till our levels withhold. Nifty has support between 5350- 5300 and Sensex between 17800-17600 levels.

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Risk aversion in the financial markets may continue to keep the safe haven appeal of bullions intact. US GDP came slightly lower than previous figure but was better than expected. Fed comments to safe guard the US economy may extend some support to the base metals counter however the continued weakness in the housing and job sector may keep the upside capped. Fed commented that the central bank will act if “unexpected developments” cause the recovery to falter. Euro zone GDP and US housing data next week will guide the movement in crude oil and base metals pack in near term. Crude oil may trade choppy as marginal short covering can be witnessed in near term.

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In Agri pack bears may keep the selling pressure intact especially in spices complex. Oilseeds complex may witness an increased activity as the fundamental storyline in the global markets as well as in the domestic, have improved. India’s new business opportunity of soy meal export to Thailand & China’s strong export demand for U.S soybean crop coupled with strength in crude oil futures may provide psychological support to attract buying. Outflow of Potato stocks from UP cold storages and farmers eying the exports to Pakistan may provide some support to the prices.

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Weekly Update 9th – 13th August

The last week saw good amount of buying in U.S and other markets as the companies reported better numbers than the expectations in the result season. However the concerns remain over the U.S. recovery as the consumer spending, pending home sales and factory orders were all weaker than projected in June indicating moderation in the second half of the calendar year.

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In China, banking regulator has asked the lenders to conduct a stress test including worst case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively. The test highlights the government concern over the health of property market even after the regulator has tightened the real estate lending to crack down on speculation since mid April.

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Huge foreign money inflow, strong auto sales and manufacturing data together with good monsoon especially in the fortnight ending 4th August 2010 kept the markets on upbeat note. Life Insurance Corporation said that it plans to invest `2 trillion stocks and bonds in the current fiscal year. So far the Insurance major has invested 390 billion in the first quarter including 100 billion in equities.

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Approximately 2080 companies that have announced numbers have shown a mixed picture. The combined net profit of all companies fell 9.2% to 57,560 crore on 20.7% rise in sales to 7,07,925 crore in Q1 June 2010 over Q1 June 2009.

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Stock specific movement in market is likely to continue as some of the major companies like Bharti Airtel, State Bank, Reliance Communication, Suzlon, etc. are coming out with the results in the coming week.

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Pranab Mukherjee has already expressed concerns over the aggressive interest increase as it may moderate the economic growth. The Index of Industrial Production that saw some moderation in growth in May and also revised downward for the month of April is further expected to show some moderation in the month of June. Six core industries having weight of 26.68 percent in IIP have experienced a 3.4 percent expansion in June compared to 6.3 percent in the prior month. The data scheduled to be released on 12th August is likely to influence the markets and may help in gauging the central bank move in the coming months.

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Overall trend of world markets is up. Volatility indicators near lows are a sign of concern as it reflects that investors are not worried at all in taking positions. But till the trend of stock market is up, one should be playing on the long side only. US dollar index fall in last 3 months has also contributed to the rise of various asset classes. Nifty has support between 5350-5300 levels and Sensex between 17800-17600 levels.

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It appears that bulls are dominating bears in commodities. Market is looking very enthusiastic on the back of better results together with buoyant equity market. It is evident by the increased volume of commodity bourses across the globe. Noteworthy decline in dollar index has also supported buying in commodities.

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However, 80 is very good support for dollar index. The week is full of event risk. Traders may refrain to take large position in bullions before FOMC rate decision meeting. CPI and advance retail sales data of US will provide further direction to the base metals. Ongoing hurricane season is likely to keep crude oil in upper range. Severe drought and the decision to halt the export from 15th August to 31st December have stimulated fresh buying in grains and they are continuously moving up. Oil seeds and edible oil complex is looking promising and investors should utilized every dip as buying opportunity.

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News Round Up 2nd -6th August 2010

•India’s food ministry proposes to sell 2.74 million metric tonnes of food grain over the next six months from federal stocks in a bid to free-up warehouse space.

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•The government has allowed export of 3,00,000 tonnes of rice and wheat through diplomatic channels to Bangladesh and Nepal.

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•Soyabean Processors Association of India expects soybean production in the country at 85 lakh tonnes (lt), which is far below last year’s 95 lt.

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•Turmeric area in Andhra Pradesh stood at 0.53 lakh hectare against 0.41 lakh hectare, nearly 101 % of the normal area covered.

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•Water level in India’s main reservoirs was at 19 per cent of capacity on July 22, 2 per cent higher than the previous week’s level, government data showed.

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•Wholesale Price Index For food articles 9.67% on week ending 17 July against 12.47% previous week.

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•Commodity futures market regulator FMC may consider the creation of an appellate tribunal akin to that in stock markets for the resolution of disputes between clients and brokers.

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•Supply from the OPEC (except Iraq) has averaged 26.95 million barrels per day (bpd) this month, up from 26.75 million bpd in June, according to the survey of oil firms, OPEC officials and analysts.

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Commitment of Trader’s Report……. Cracking “Da – Futures – Code” Part 1 :)

Years passing by and with the increased vagaries of world economies whether it be Greece, Italy, Hungry in Euro zone or high jobless claims, lower housing starts in U.s, Currencies, other macro factors like monsoon , a typical speculative fever is getting over the commodities futures market these days and has become a ubiquitous headline.

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So, it is very important for an investor to know the market sentiment whether it is bullish, bearish or plain neutral. Understanding the same one can handle its position tactfully and also profit from it by simply looking at the bigger picture and not get drifted away. So, now the question is ” How do you gauge the market sentiment?”

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THE COMMON MAN’S LAW

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Before finding the answer to this question, let’s understand  the common thought that when prices go up, investors want to buy more contacts and producer want to sell more of what they are trading and vice versa.

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The traditional commercial consumer/ producer cares about the prices. A producer has a cost involved in production and if the price drops below that production cost, they are going to lose money. So they hedge around that production cost. An enterprise on the other hand obviously needs the commodity for their business; if prices move higher, they will increase their hedging to protect themselves. This is an important law of world we live in.

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TRACKING CHANGES

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Many commodities groups like oilseeds complex, base metals, bullions on the national bourse, etc. track the price movements on the international exchanges. The data provided by the exchange on daily basis daily includes lots of information as amount of future contracts outstanding, volumes traded, their strike price and date of maturity. This is useful as far as it goes, but the data sheet has its own limitations. As we all know that all futures contracts have two sides- a long and short. Now, this is where the The Commitment of  Traders (COT) report released weekly by the commodity futures trading commission (CFTC) in the US is useful because it tell us much about whether speculators are long or short..

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The C.O.T report is released weekly-every friday afternoon. The report has three categories of market-user: commercials, non commercials and non reportable.

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  • Commercial Hedgers: Traditionally, as the commercials”the big guys” (like farmers, miners, international businesses and processors) are seen as entities using the market for hedging business risks. They are generally believed to have the best fundamental supply and demand information on their markets, and thus position their trades accordingly. The high large-speculative position denotes a real commitment to the trend.

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  • Non- Commercials: The non-commercials are assumed to represent speculative interest. An example of a large speculative account might be a large commodity pool (a fund) that trades futures for speculative profit.

Stay Tuned for the final part 🙂

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YUAN …. “KNEE-JERK REACTION”

The Chinese New Year has only just started, and already trade tensions are ratcheting up. The strength of China’s Yuan gave the world a confidence to end the peg & acted as a cushion for reviving from the fears of the global financial crisis, especially with European debt worries in the background.

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China’s yuan soared at 6.7980, its highest level against the US dollar since its July 2005 revaluation after the central bank signaled it would allow the yuan to continue its rise.

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REVALUATION OR REVOLUTION???

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The yuan policy change signaled that the Chinese economy “the world’s third-biggest economy” is on a more solid footing. China has been under intense global pressure, especially from the US, to introduce more flexibility between the yuan and the dollar to encourage the cash-rich Chinese to buy more from the heavily indebted West.

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Needless to say, a stronger yuan would allow China to lower the cost of its imports, particularly commodities.

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Even a small rise in the yuan could shave billions off the cost while raising the volume of China’s commodity purchases. China’s economy is still in a cycle towards overheating.

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China’s inflation accelerated in May to 3.1%, the quickest pace in 19 months, highlighting overheating risks in the fastest-growing major economy. Inflationary pressures may convince China to allow its currency to appreciate. A stronger yuan is in China’s interest to satisfy its appetite for resources.

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Yuan appreciation should benefit China’s importers of bulk commodities like soybeans, cotton, copper and various mining products including iron ore and other metal ores as these commodities, priced in the dollar, will be cheaper. The appreciation will support commodities prices in dollar terms in global markets as China will be able to accept higher prices in the dollar terms.

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Following is a list of some likely winners and losers from any yuan appreciation.

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WINNERS

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·Foreign resource companies – On hopes China’s move would increase its resource imports.

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·Foreign heavy machinery makers – The U.S. sells billions of dollars worth of machinery and products to China each year.

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·Foreign automakers – Foreign automakers that sell cars in the world’s largest vehicle market, should also gain.

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·U.S. companies such as General Electric Co and Procter & Gamble Co are likely to make currency exchange gains when their China profits are converted into U.S.dollars.

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·Chinese airlines – China’s three top carriers, Air China China Eastern Airlines and China Southern which borrow in foreign currencies to pay for aircraft, but generate reveyuan, could benefit the most. Airlines also use dollars to buy fuel.

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·Foreign luxury firms – A firmer yuan would likely boost other Asian currencies as a strong yuan is seen by investors as a pledge of confidence for Asia’s growth. That should help luxury goods makers, whose imported products will be cheaper across the region, just as more Asians benefit from increased wealth.

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LOSERS

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·Foreign retailers- Companies signed earlier memorandum of understanding for projects to build, would have to spend more in U.S. dollars to fund investments.

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·Chinese commodity firms – Companies with dollar-linked prices for their output, but their costs are in yuan, would find their revenues falling while their costs remain steady, if yuan strengthens.

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In a nut shell, China is not shying away from commodity consumption any time soon.They still have roads to pave, factories to build, and cities to expand. China is thinking ahead in terms of commodity demand. The shift toward a stronger exchange rate may give more purchasing power to its people. Chinese consumers might buy more while their counterparts in the U.S. may have to pay more & cut back on their spending as the cost of goods imported into America rises. This move is a net plus for the world economy.

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Weekly Update 14th – 18th June

The global Markets reacted in a negative fashion with the onset of the week due to concerns arising from small increase in non-farm payrolls in U.S. & default risk from Hungarian Economy. The investors concerns subsided after Germany factory orders surged for a second consecutive month in April.

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European debt crisis which has pushed down Euro 20 percent against the dollar seems to be helping the industry as the demand for goods from emerging economies like China is encouraging companies to add workers. Bernanke statement that the recovery is moderate-paced in U.S. further helped the market in recouping the losses. Although he said that Unemployment may remain high for some time. He also said that “We have right now a very accommodative, very easy monetary policy”. “We can’t wait until unemployment is where we’d like it to be” or inflation gets “out of control” to tighten credit, giving signals that hike in interest rate may come sooner.

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IMF is of the view that the risk to the growth has risen significantly and policy makers around the globe are left with little or no room to provide support to the growth. China surprised the markets as the economy withstood the European crisis after showing that exports grew close to 50 percent in the month of May from a year earlier and new loans were 630 billion Yuan ($92 billion), beating the expectations.

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In the monetary policy, Bank of England remained committed to the record low interest rates to stave off the threat of contagion from the euro region’s sovereign debt crisis. Coming back home, India’s Index of Industrial Production showed a significant growth of 17.6% compared to a year before. The seventh consecutive double digit growth complemented by double digit growth in capital goods & consumer durables may tempt RBI to raise interest rates with the Inflation hovering close to double digits. High inflation & more likely pick up in credit offtake due to strong Industrial Production activity may induce RBI to give signals to banks to raise the interest rates by making an increase in policy rates.

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Trend of world stock markets is still down though all markets took a sharp counterrally from lower levels. If the rally sustains this week, then we can say that temporarily they have made a bottom. But the fear of Euro zone would still linger on in the back of our mind. Nifty faces resistance between 5150-5180 levels and Sensex between 17200-17400 levels

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At present there are lots of opportunities for traders to take advantage of volatility in the commodity prices, but this is also the fact that money may not be consistently made on only one side. Last week, we saw a smart recovery in metals and energy complex while bullions fell. However, the movement was not so confident that we can say that downside is overdone and now we can see rally from the current levels. However, one can expect a gradual recovery in base metals prices. In bullions, rally may get tired but buying is still intact and any bad news can stimulate buying with limited upside. If positive data comes further as last week then base metals may see further recovery and vice a versa.

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