==>> Inflation a big concern for emerging markets.

So here we all are...... Nifty below 4440 and Sensex below 14700. Nifty tried to take support at 4440 but due to lack of buyers and great selling by FII's. Nifty made a new low of 4333 and Sensex at 14520. Nifty closed at 4354 and Sensex at 14590.

Inflation was at 13 yr high at 11%. as compared to 8.8% last week. I expect RBI to hike policy rates , may be CRR hike.

FII’s have net-sold $6 billion of stocks in the last 6 months. On Friday, they sold another Rs.1000 crore, which they will convert into dollars. Within Asia, rupee is the weakest currency. Rupee is expected to touch Rs.47 per dollar by the end of this fiscal. RBI sold nearly a billion dollars worth on Friday to support the rupee. India’s forex reserves are down by $5 billion this week. The rupee should get strengthen to control inflation. Governments around the world are more worried about the raising inflation than global terrorism. Inflation is expected to go up from here. At 17 times India is more expensive than most peers in the emerging markets. Higher inflation rates would lead to further tightening monetary measures including t CRR hike, repo rate hike and along with this the public sector and public sector banks may hike the interest rate to cope with the RBI moves. All this would lead to costlier loans. A stage is set for compression in price earnings ratios. Remember the biggest single day rise in the oil prices of $ 11 to cross $ 139 on June 6th. The spike has not been factored in to the latest inflation data. Expect inflation to rise above 13%.

China and the Indian markets have already made new low against the low that was made in the month of March. Dow is close to make a new low. If the global markets take some rest at the current levels, then we would be able to see some pull back, which is likely not possible as rest of the world is also effected by the raising inflation rates.

Nifty has already closed below the 4440 levels. In the last 2 weeks Nifty had made new low below 4440, but somehow managed to close above the same. But this time the trend has been changed. Nifty may touch 4200 very soon. If the close is below 4200, expect it to fall further till 4050 levels. On June 6th I have clearly mentioned that the Nifty will face resistance at 4680, nifty made a high of 4679.75 and tumbled down till 4637 levels. It will not be easy to overcome this carnage. On June 13th I have mentioned that it’s a buy time with the SL of Nifty close below 4440.