My friend and I was discussing about the markets on last Sunday. I showed him my last article that I had written in the Informed Investor and he was really surprised to now that the markets were actually surging ahead on the rumors that the Ambani brothers may reunite. Then I explained him that it is not the only reason for which the Indian markets were flourishing. Global markets too faired pretty well in the last week that gave some support to our markets.

Finally the RIL agreed to supply gas to RNRL 8mmscmd/day for 17 years at USD 4.20/mmBtu. It is also learnt that pact entails gas for 8400 MW for power. He asked me a very simple question as in why did RNRL agreed to buy gas from RIL now on the said price, when few months back they did not??? I did not have any answer for the same. He pointed out on the various block deal happened in RIL few months back or else this is just the beginning of the reunion session between the Ambani brothers. My friend told me “ Its better we don’t talk on this complicated matter as of now. Tell me about the future of the market and why did it bounced back in the last week.”

I started my conversation with a big sign of relief as actually talking on the topic of the A’ brothers were very complicated. I told Yeah its better we shift our focus on something else as this matter “God only knows or they themselves”. As we all know that the EU countries are facing the problem and everything is been discounted by now. Global markets bounced back in the last market so did ours. There has been no slowdown in the Indian markets now. Expect the Rupee depreciating there is no other issues in the Indian markets. He paused and asked me “Don’t u think the depreciated rupee will effect the Indian markets?” Yes surely, but still the markets are not looking that bad to me.

He asked “What do u think about the Inflation in India?” I said “That is the 2^nd most talked matter about. Headline Inflation measured by the WPI, has entered the double-digit zone, raising the possibilities of further tightening by the RBI. The numbers released estimated inflation at 10.16 per cent for May, compared with 1.38 percent in the year-ago period, driven by higher fuel and primary article prices. In April, inflation was estimated at 9.59 per cent.

He said now the inflation will surely sky rocket now. I was confused and asked him why are u saying that? He said the deregulation in the fuel price will surely hit the inflation now. On Friday Government decided to free petroleum products. petrol got costly by Rs 3.50 per litre, diesel by Rs 2 per litre, kerosene by Rs 3 per litre while LPG will be hiked to Rs 35 per cylinder.

Rise in the Petroleum product prices will take the inflation rate soaring. I said “As the rising inflation is known by almost everyone and that the Rate hike is also on the cards now, as mentioned in my earlier articles”.

My friend was very keen about how will the Indian markets trade technically in the coming week. Last week Indian markets faired pretty well but this week markets corrected few points. On the opening day of the week markets rallied and closed in green. Nifty after making a high of 5367 closed in red for the week. I showed him my last weeks article that mentioned that the Nifty will rally and will be in the new range of 5325-5375 levels and will face resistance at 5375 levels. This journey will not be so easy. I showed him the technical chart of Nifty. And showed him that the road between the 5200-5400 is rough. Sellers become active in this range. We have seen profit booking happening in this range. I told him we might see some correction even in the next month. Except the global problems, we do not see any issues in the India markets, so we might not feel the heat as the global markets are feeling.

In the chart we can clearly see that the Nifty fell down from the levels mentioned in the last article. Nifty may continue to fall till the time it reaches the trendline below. Break below that levels may spoil the chart pattern and we might see some more correction. That will be only technical correction. Otherwise the Markets are good. RSI had bounced back from the low from the over trading zone to the over bought zone. But in the weekly patter the Nifty had made a small Doji pattern that might call for some correction.

I showed him the Nifty movement from the month of June 2009 to June 2010, which is trading in a Island pattern. Breakout either side will call for very fast movement. The range is 4800-5400. Currently the nifty closed at 5268 after making a high of 5368 levels.

My Friend thanked me for sharing all this information with him. He seemed to be really interested in the topic but his face showed that he was little confused.

Call for the week.

Sell Sesa goa below 365.

BUY Sesa goa only above 385.

Sell ICICI bank with SL of 866.