Sep 18th:

The Industrial production for the month of July was way below expectations at 3.3% growth y-o-y compared to a growth of 8.8% in the month of June. The July industrial data indicates that the tight monetary policy by the RBI has started impacting growth. This is the weakest growth recorded in the last 24 months. The Industrial Output for the period of April-July 2011 expanded by 5.8%. The Output was recorded at 7.8% for the fiscal year ending March'11 compared to 10.5% in the year 2009-10.

The Inflation figures for the month of August will be released on the 14th of September. Inflation has been around the double digits for the Indian Economy and which still indicates that RBI may hike the rates by 25 bps in the upcoming policy review.

The Rupee continued to slip down against the dollar, touching its 2 month low of 47.93 on Wednesday. Its good news for the IT and the Export companies but this could deepen the import of the Oil from the other countries. Depreciating Rupee can be biggest concerns for the real economy in the country’s rising oil import bill.

The crisis in the Euro zone has again flared up. This could definitely affect the rest of the world. Greece is close to default. Yield on 10-year Greece note rises to 24% as the country searches for funds to pay of its own Debts.

RBI raised the benchmark interest rates by Quarter of a percent point on Friday and kept Cash Reserve Ratio rate unchanged. The Repo Rate now stands at 8.25% while the reserve ratio gets adjusted to 7.25%. The CRR remains unchanged at 6%. The hike was in the line of the expectation. The rate has been hiked due to the growing demand for the food to the commodity sector. Inflation seems to be the talk of the town, so rate hike was expected. But looking at the IIP and GDP data more rate hike in the near future is not expected. We may be at the peak of the rate hike journey.

After sharp fall in the last week from 5163, we had a gap down opening in Nifty. Nifty made a low of 4911 on Monday. Since Tuesday again nifty inched back to make a high of 5143 on the last day of the week. Markets have been very volatile on back of RBI meet. Traders were very active on the banking stocks. Nifty have taken good support at its 23.6% retracement levels. If we take the Fibonacci levels from 5700 to 4720 levels. On the last day of the trading week nifty closed above its 38.2% levels. Nifty may again inch higher and try to close above the 5170 mark, if that is done then we might see nifty making new recent high and move within the two parallel lines. This could be higher bottom and higher top formation.

But if the Nifty corrects and fails to close above 5170 levels then we might see some more correction and Nifty may slip below 4910 levels. And then it could the lower bottom and lower top formation.

Calls for the week

Sell Asian Paint below 3130 SL 3145.

Sell Bhel below 1680 SL 1695.

Sell Container Corp SL 895.

Buy Corporation bank above 456.

Sell Hero corp below 2193. SL 2205.

Buy Hdil above 111.50 SL 110.

Buy Maruti above 1117 SL 1106.