NEXT WEEK PANORAMA Going forward the market trends may remain range bound with the kick start of the result session in the coming week. IT bellwether Infosys will announce its results on Jan 13. Corporates are expected to show robust growth, and investors would be watching for management comments on outlook for direction. WEEKLY REPORT January 10, 2011 HEDGE EQUITIES Invest with an edge Last Week Round up The Indian equity indices concluded a turbulent week of trade after being battered in four out of the five trading sessions, leading to substantial losses of almost four percent. The thrashing on the last trading day of the week proved very costly for the benchmark indices which are now on their longest losing streak in six weeks. Investors were trapped amid a pandemonium as the frontline indices continued to lose traction for four consecutive days to pummel the BSE's 30- share sensitive index, Sensex and the NSE's 50-share broadly followed index, Nifty to the crucial levels of 19,700 and 5,900 respectively. The local bourses managed to kick-off off 2011 on a strong note largely on the optimistic sentiments as manufacturing in the United States and Europe accelerated in December, while that in China slowed to more sustainable levels as China's efforts to cool its economy worked to some extent. However, the frontline indices could not gathered any momentum thereafter as the New Year cheer turned pale prompting investors to take the profits off the table. And what followed through the week subsequently was lack of conviction and pessimistic sentiments. The local stock markets turned tumultuous in the ab- sence of any supportive global as well as domestic cues. Selling picked up pace amid fears of a sharp hike in interest rates due to elevated inflation numbers released by the ministry of com- merce and industry on Thursday . The Bombay Stock Exchange (BSE) Sensex tumbled 817.28 points or 3.98% to 19,691.81 during the week ended January 7, 2011. S&P CNX Nifty declined 229.90 points or 3.75% to 5,904.60 Sector wise Review All the sectoral indices on the BSE were in the negative terrain; Auto was down 748.94 points or 7.32% to 9,486.47, Realty was down 190.62 points or 6.67% to 2,665.60, Banking was down 867.55 points or 6.48% to 12,512.18, Capital Goods (CG) was down 733.40 points or 4.76% to 14,681.68 and Consumer Durables (CD) was down by 245.34 points or 3.86% to 6,111.63 were the major losers on the index. . On the National Stock Exchange (NSE), Bank Nifty was down 738.10 points or 6.26% to 11,053.35, CNX Nifty Junior was down 590.05 points or 4.82% to 11,642.00, CNX Mid-cap was down 387.60 points or 4.37% to 8,487.60 and CNX IT was down by 157.30 points or 2.10% to 7,333.80. INDEX POINT Chg. (%) NIFTY 5,904.6 -1.8 SENSEX 19,691.8 -1.9 Hangseng 23,643.8 3.5 NIKKEI 10,541.0 1.9 US DJIA 11,674.8 0.9 NASDAQ 2,703.1 1.4 DAX 6,947.8 -1.6 FTSE 5,984.3 -0.4 INSTITUTIONAL ACTIVITY PRECIOUS METALS FII (Rs. Cr) -607.94 DII (Rs. Cr) +60.45 GOLD Rs.20200 SILVER Rs. 44248 BASE METALS NICKEL Rs. 1103.5 COPPER Rs. 431.9 COMMODITIES CRUDE OIL Rs. 4130 NAT. GAS Rs.201.5 RUBBER Rs . 22780 PEPPER Rs .21406
Transcript
1
NEXT WEEK PANORAMA Going forward the market trends may remain range bound with the kick start of the result session in the coming week. IT bellwether Infosys will announce its results on Jan 13. Corporates are expected to show robust growth, and investors would be watching for management comments on outlook for direction.
WEEKLY REPORT January 10, 2011
HEDGE
EQUITIES
Invest with an edge
Last Week Round up
The Indian equity indices concluded a turbulent week of trade after being battered in four out
of the five trading sessions, leading to substantial losses of almost four percent. The thrashing
on the last trading day of the week proved very costly for the benchmark indices which are now
on their longest losing streak in six weeks. Investors were trapped amid a pandemonium as the
frontline indices continued to lose traction for four consecutive days to pummel the BSE's 30-
share sensitive index, Sensex and the NSE's 50-share broadly followed index, Nifty to the crucial
levels of 19,700 and 5,900 respectively. The local bourses managed to kick-off off 2011 on a
strong note largely on the optimistic sentiments as manufacturing in the United States and
Europe accelerated in December, while that in China slowed to more sustainable levels as
China's efforts to cool its economy worked to some extent. However, the frontline indices could
not gathered any momentum thereafter as the New Year cheer turned pale prompting investors
to take the profits off the table. And what followed through the week subsequently was lack of
conviction and pessimistic sentiments. The local stock markets turned tumultuous in the ab-
sence of any supportive global as well as domestic cues. Selling picked up pace amid fears of a
sharp hike in interest rates due to elevated inflation numbers released by the ministry of com-
merce and industry on Thursday . The Bombay Stock Exchange (BSE) Sensex tumbled 817.28
points or 3.98% to 19,691.81 during the week ended January 7, 2011. S&P CNX Nifty declined
229.90 points or 3.75% to 5,904.60
Sector wise Review
All the sectoral indices on the BSE were in the negative terrain; Auto was down 748.94 points or
7.32% to 9,486.47, Realty was down 190.62 points or 6.67% to 2,665.60, Banking was down
867.55 points or 6.48% to 12,512.18, Capital Goods (CG) was down 733.40 points or 4.76% to
14,681.68 and Consumer Durables (CD) was down by 245.34 points or 3.86% to 6,111.63 were
the major losers on the index. . On the National Stock Exchange (NSE), Bank Nifty was down
738.10 points or 6.26% to 11,053.35, CNX Nifty Junior was down 590.05 points or 4.82% to
11,642.00, CNX Mid-cap was down 387.60 points or 4.37% to 8,487.60 and CNX IT was down by
157.30 points or 2.10% to 7,333.80.
INDEX POINT Chg.
(%)
NIFTY 5,904.6 -1.8
SENSEX 19,691.8 -1.9
Hangseng
23,643.8 3.5
NIKKEI 10,541.0 1.9
US DJIA 11,674.8 0.9
NASDAQ 2,703.1 1.4
DAX 6,947.8 -1.6
FTSE 5,984.3 -0.4
INSTITUTIONAL ACTIVITY
PRECIOUS METALS
FII (Rs. Cr) -607.94
DII (Rs. Cr) +60.45
GOLD Rs.20200
SILVER Rs. 44248
BASE METALS
NICKEL Rs. 1103.5
COPPER Rs. 431.9
COMMODITIES
CRUDE OIL Rs. 4130
NAT. GAS Rs.201.5
RUBBER Rs . 22780
PEPPER Rs .21406
2
Scrip wise Review
GAIL (India) was one of the top gainers of the week, gaining 2.30%. The company has signed a cooperation pact with ONGC. As per
the contract, GAIL will get the first right on all gas that ONGC will produce from any of its fields in future. But in case GAIL is unable
to get a 'good' price within 30 days, ONGC will take back the marketing right. GAIL will also market some of the chemicals to be
produced from the Dahej petrochemical complex being set up by ONGC Petro-additions (OPaL), a subsidiary of ONGC. GAIL has
19% stake in OPaL. Cairn India gained 2.22% over the week. The company's parent company -- Cairn Energy has secured two rigs
for its controversial drilling programme in Greenland. Cairn intends to drill up to four wells this year - subject to the approval of
the Greenland government - and the securing of two state of the art drilling vessels is a big step forward, given competition for
such equipment. On the other hand, Bajaj Auto was one of the worst performers during the week, down by 14.56%. As interest
rates are on the rise, auto stocks have come on a correction mode because higher interest rates would mean that it costs more for
consumers to borrow money for buying a vehicle. Meanwhile, the company has reported a growth of about 10% in its monthly
sales for December 2010, lower than street expectation. Ambuja Cement down by 10.02% was the other top loser. The company
along with other cement stocks, during the week, declined as global rating agency, Fitch downgraded the cement sector outlook
to 'negative to stable' for the current calendar year in wake of continued margin pressures and potential over capacity staring at
the industry.
Inflation
Food inflation in the country is again on the rise after having declined to single digits by end of November and has increased very
rapidly over the last several weeks. According to the data released by the ministry of commerce and industry, India's food price
index rose 18.32% on annual basis during week-ended Dec 25, substantially faster compared with 14.14% in the week-ended Dec
11. The pace of rising food prices now is once again close to year-ago levels of around 20%.
US market
The US markets started the week and the year 2011 with a rally on getting good set of economic data. Manufacturing activity and
construction spending both rose more than what analysts were predicting. The Institute of Supply Management's index of manu-
facturing activity rose in December for the 17th straight month. On the same time the Commerce Department reported that the
construction spending rose 0.4 percent in November. The construction spending increased to an annual rate of $810.2 billion, the
highest level since June, after rising by an unrevised 0.7 percent in October. November's increase in construction outlays marked
the third straight month of gains .The Commerce Department said that total Factory orders increased 0.7 percent in November.
That follows a 0.7 percent drop in October. The overall figure was pulled down by a drop in volatile transportation orders. Though
there was some profit booking too in the latter part of the week with markets consolidating in final days despite the continuation
of good economic data .
European market
The European shares started the new year with gain of 1 percent and with a broad-based rally led by construction and industrial
shares as softer-than-expected factory inflation data from China eased concerns of a tightening in monetary policy there. Shares
rose throughout Europe in the first part of the week after a report showed that manufacturing in countries that use the euro ex-
panded faster than analysts had forecast. Though in the later part some cautiousness appeared ahead of Portuguese treasury bill
auctions. The market has already been fretting about Portugal's public finances, the sustainability of its large debt burden and
prospects of the Iberian country becoming the next euro zone member to seek a bailout after Ireland and Greece.
Asian Market
The Asian markets made a mixed show in the first week of the year 2011, while the last weekend data , showed China's factory
inflation cooled in December as manufacturers expanded more slowly after a strong run in growth giving some solace to the com-
modities stock in the region. Accelerating inflation and record house prices have led China's central bank to signal time and again
in recent months that the country needs 'prudent' monetary policy to curb price pressures and prevent asset bubbles. On the
same time firmer dollar, lifted Japanese stocks, a weaker yen makes Japanese exports more competitive abroad. Japan's Nikkei
stock average surged to its eight months high, led by resource companies, as oil and commodity prices rose on the stronger eco-
nomic growth outlook this year. The strength in dollar against yen added to the market gains .
3
TECHNICAL DIARY January 10, 2011
Hedge Equities Ltd
A Week Ago
Week Ahead
A breakout rally has witnessed after a tight range for last few
weeks in the market. Last trading week of the year ended with
positive bias. The Nifty has witnessed a positive rally to test
the week high of 6147 level and entire week remains a low
volatility trades. All sectoral indices closed with green except
Oil & Gas; leaders are FMCG, Consumer Durables & Health
Care. Index has closed at 6134 vs. 6011 ( 123 pts gained) and
finally the year ended with optimistic mode.
A continuous Opening White Marubozu candle pattern has
formed in the daily chart of Nifty which shows a continuation
of past rally. The 13 days EMA has closed above the 34 days
EMA which indicates the very short-term view remains positive
bias. RSI has witnessed a positive divergence momentum
trade. MACD has closed with positive convergence momentum
trade and also trading above the centerline both remains a
positive trend. The other oscillators like William %R is trading
in the overbought zone which indicates a sudden drop may
expect due to profit booking. Volatility index closed at 16.56
vs. 17.65 (wow) and Money Flow Index has witnessed in the
overbought zone both which suggests the investors are in the
positive mode. As per the Elliott Wave Theory (EWT) upside
movement to resist at 6176 and intermediate support at 5814.
Overall, the week start with positive view but a profit booking
may expect 6176—6200 range and high swing trade may ex-
pect to drive the market in coming week. R1 6176 R2 6222 R3 6257
A Opening White Marubozu candle has formed along with Bullish Engulfing pattern has formed in the daily chart both suggest a positive reversal sign. RSI has witnessed a positive divergence which indicates a strong BUY signal. (this Scrip has been carried forward to next week)
Bharat Forge Ltd (BHARATFORG) CMP– 379.10
A Triangle pattern has formed which indicates a breakout rally ahead. A piercing Line candle pat-tern has formed which indicates a reversal rally ahead and a BUY signal between price band levels.
(this Scrip has been carried forwarded to next week)
Asian Paints Ltd (ASIANPAINT) CMP-2878.70
A Flag pattern has formed in the daily chart followed by flag breakout has witnessed which confirm
the positive rally ahead and Opening White Marubozu candle has formed which indicates a con-
tinuation of positive trend and a BUY Signal.
Hindustan Unilever Ltd (HINDUNILVR) CMP– 312.90
Hind Unilever has trading above the 13 days EMA which indicates the short-term trend positive bias. RSI has showed Positive divergence momentum trade and a strong BUY signal.
tools remain a reversal rally ahead and a BUY signal.
Lupin Ltd (LUPIN) CMP– 482.45
Lupin has closed above the middle band of Bollinger band which indicates a positive bias . The Price Roc has crossover the zero base line which indicates a positive rally ahead and a BUY signal.
Price Band Target Stop Loss
138 — 140.50 153 133
Price Band Target Stop Loss
366 — 370 388 361
Price Band Target Stop Loss
2857 – 2878 3083 2790
Price Band Target Stop Loss
297 – 303 330 290
Price Band Target Stop Loss
450– 459 500 444
WEEKLY PICKS
Hedge Equities Ltd
NTPC Ltd (NTPC) CMP– 197.05
NTPC has closed above the 50 days SMA which indicates a positive rally remains in this scrip. RSI is trading in 51.63 value which shows a positive note and a strong BUY signal.
Ranbaxy Laboratories Ltd (RANBAXY) CMP– 589.40
Ranbaxy has trading above the middle band of Bollinger which remains a positive note and middle band shows a support. MACD remains in the positive convergence and trading above the center-line both remains a bullish trend ahead and a BUY signal between price band levels.
Reliance Industries Ltd (RELIANCE) CMP-1065.40
Reliance has closed above the 55 days EMA which indicates a positive rally remains in this scrip.
RSI has witnessed appositive divergence momentum trade which suggest a positive bias and a BUY
Signal.
Hindustan Unilever Ltd (HINDUNILVR) CMP– 313.05
Hind Unilever has trading above the 13 days EMA which indicates the short-term trend positive bias. RSI has showed Positive divergence momentum trade and a strong BUY signal.
Lupin Ltd (LUPIN) CMP– 473.70
Lupin has closed above the middle band of Bollinger band which indicates a positive bias . The Price Roc has crossover the zero base line which indicates a positive rally ahead and a BUY signal.
Price Band Target Stop Loss
182.50 — 186 205 177
Price Band Target Stop Loss
564 — 574 610 555
Price Band Target Stop Loss
1008 – 1026 1090 980
Price Band Target Stop Loss
300 – 306 330 292
Price Band Target Stop Loss
445– 455 500 430
5
FUTURES & OPTIONS January 10, 2011
Hedge Equities Ltd
Futures Market: Last week saw the expiry of the December futures, which closed with light volatility and low volume due to the holiday season. Rollover was positive although lower than last months. Nifty January future closed the week on Friday 1.62% up at 6162.55, with an OI increase of 183.86%. Premiums for the January series stood at 28.05 a slight decrease from the previous days premiums of 28.95 which still suggests that market is slightly weak and a correction may be seen. The current futures trades slightly below its fair value which supports the weakness expected in the market. We see that February futures ended the day at 6189.95 and saw an increase of 0.56% in the price and an 14.72% increase in the OI, we see that there has been an increase in the price and that the OI has been also been increasing which may suggest a slight bullish expectation by the market investors for the month to come.
Options Market: Nifty 3 month Put-Call Ratio (PCR) increased to 1.5 from the previous 1.42. This increase is mainly due to the in-crease in the activity of calls. The most active January options for calls were at 6100-6200 levels and 6000-6100 level for puts; Calls were more active and this could suggest that there is immediate positivity in the market. Current market support stands at 6010 and resistance at 6300 still suggesting a tight trading range. India VIX decreased further to 16.56 from 17.02, a further de-crease of –2.7%. The VIX is trading at one of its lowest points and may suggest that the market may see a correction.
SCRIP (JAN) INITIATE PRICE TARGET LVL STOP LOSS
VOLTAS ABOVE 220 227-233 214
YESBANK ABOVE 316 326-331 309
ACC BELOW 1065 1044-1029 1092
RENUKA BELOW 96 92.5-91 99
Weekly Future Recommendations
SCRIP RESULT
DLF TIMED OUT
IBREALEST TARGETS ACHIEVED
ABAN SL
SL ASHOKLEY
Last Week Performance
Futures Market: Nifty Futures were weak on Friday ending the week –4.11% down and closing at 5914.15. Weekly Open Interest (OI) for the series increased by 5.21%, which coupled with the decrease in price suggests short buildup in the market. Premiums for the series has decreased to 9.55 from 24; and the trend over the last week supports the weakness seen in the markets. The actual future price trades below the fair price (5929.55) suggesting an increase in the market weakness. The February futures closed at 5943.45 with a weekly OI increase of 30% and price decrease of –3.98%, this indicates that there is short buildup in the markets and a negative trend in the market.
Options Market: Nifty Option 3-month Put-Call Ratio (PCR) stood at 0.98 a decrease from the previous 1.25. This decrease in the PCR is mainly due to the increase in the activity of calls. We see that calls are weak and that there is short buildup in them, espe-cially at 6100-6200 levels indicating limited to low upside opportunities. Puts are strengthening and long buildup at 5900 and 5800 levels are seen which indicates that the market trend is negative and further downside is possible. Current market resistance stands at 6130 and support at 5800. The markets were volatile with the India VIX increasing to 20.82 from 18.2, which is an in-crease of 14.4%. This increase in the VIX suggests increased fear in the market; the next resistance for the VIX stands at 21.5.
SCRIP (JAN) INITIATE PRICE TARGET LVL STOP LOSS
PATNI Above 465 476-490 457
UNIONBANK Above 322 330-340 313
NAGARCONST Below 132 125-120 140
RANBAXY Below 587 577.5-552 610
Weekly Future Recommendations
SCRIP RESULT
VOLTAS TARGET
YESBANK SL
ACC TARGET
PROFIT BOOKED RENUKA
Last Week Performance
6
COMMODITIES
Hedge Commodities Ltd
GOLD
Gold prices ended the week as well as year with a 10th consecutive annual gain of 29.7% this year,
the largest in three years. Most actively traded contract for February delivery, settled up 1.1% at
$1421.40 per ounce on Friday in Comex. Main reasons for the rise of gold prices were the weaker
dollar and the global uncertainty .Forecast: Gold prices continue to rally in 2011 on strong funda-
mentals, including inflationary pressure in China and India, and concerns about the dollar.
SILVER
Silver spot this year swept higher for an 83% gain, as investors opted for white metal as alternative
for gold. The white metal on Friday closed at $30.92 an ounce, its best level in three decades. Price
was mainly due to record levels of sovereign debt and pressure on the US dollar. Holdings of is-
hare Silver Trust, the world’s largest silver-backed exchange traded fund, were steady at 10,903.34
tonne. Forecast: Silver will continue to rise in next year as the sovereign debt crisis problem still
pertains and concerns of dollar weakness.
CRUDE OIL
Crude Oil prices hit a 26-month high over $92 a barrel on Friday, closing the year up 15 % at $91.38
taking cues from economic recovery and cold climate prevailing in some parts of Europe and
United states. Global output jumped 2.2 million barrels per day (bpd), according to a Reuter’s poll,
the biggest increase since 2004.Forecast: Strong growth from Asia, especially China, and a rebound
in demand from developed economies will drive the growth.
Resistance - 4238 Support - 3940
COPPER
Copper prices ended 2010 at an all time high record at $4.4470 a pound in Comex. Red metal
locked in gains of 33% this year alone taking cues from falling inventories and increasing demand
from china and other markets. Inventories have fallen by 26% to 370950 tons this year alone,
which brings the inventories to the lowest level in six years. Forecast: As the supply concerns re-
mains for the copper, we can expect the prices to be on positive side. Few ETF’s have started by
backing the physical copper which further increases the demand for the metal.
RUBBER Last year rubber has witnessed a bullish trend due to the supply concerns in the international
heavy rain has badly affected the supply of natural rubber from the main rubber producing coun-
tries like Malaysia , Thailand and Vietnam. Rising crude oil price also fueled the price hike in natural
rubber. As long as the international prices remain in high we can see a firm price for rubber in the
domestic markets also. And this may drive the price to newer highs. According to technical’s resis-
tance for the week comes at 22540, support comes at 20225 and 19720.
COMMODITIES Jan 10, 2011
Hedge Commodities Ltd
GOLD
Gold spot prices last week closed at $1369 on Friday, the biggest weekly decline since May. Gold prices have lost nearly 4% this week on cues of strong economic recovery seen in US markets. Em-ployment data on Friday gave some sort of support to gold as the number of people being em-ployed has been less than the expectation in the month of December. Forecast: US dollar is gaining strength on strong economic data releasing and further strengthening would pressure gold prices. Dollar index will pave the way for further direction of Gold prices.
Resistance— 21000 Support— 20090
SILVER
Silver prices after trading at recent highs at $31 an ounce, failed to sustain those levels and fell back to $28 levels last week. Silver prices in Mcx India fell around 4% which is the biggest decline in recent times. Positive economic data released last week boosted the US dollar and silver prices continue to fall. Forecast: After a big decline last week, we can expect some sort of consolidation, if the US dollar supports the white metal prices.
Resistance - 47000 Support - 42800
CRUDE OIL
Crude oil prices last week lost 3.7%, the biggest decline since November. Crude oil started the year on strong note but failed to sustain it as the dollar raised on strong economic reports releasing. Climatic conditions are better now as per reports and so the demand for crude oil is reducing. Port-folio reallocations are another factor weighing on crude oil prices. Forecast: Inventory data next week will be the major factor and the US dollar will decide the price movements.
Resistance - 4245 Support - 3900
COPPER
Copper prices last week fell as the inventories build up were seen and highest in last two months. This build up is seen because the companies are selling their excess inventories after prices rose nearly 33% last year. In LME copper for 3 month delivery closed at $9425 a tonne. Forecast: At the start of the year, there will be rebalancing of Index which will add pressure to the copper. China’s preliminary December trade data due to be released on Monday is another major factor.
Resistance - 455 Support— 425
RUBBER
Both in the domestic and the international markets natural rubber is touching record highs. Spot rubber prices in the domestic markets rising due to all-time high prices in overseas markets and as supply were tight after sellers withheld stocks. In international markets buyers have accumulated rubber before Thailand halts tapping activities during low-production season. Growers in Thailand, the largest exporter, will cut tapping from February to April during the so-called wintering period. The seasonal drop in output may worsen a supply shortage as global demand keeps rising, led by car sales in China and India.
7
CURRENCY
January 10, 2011
Hedge Equities Ltd
DOLLAR : The U.S. dollar ended a volatile year on Friday a bit firmer than where it began with in-vestors gearing up for gains in early 2011 on expectations the U.S. economic recovery was gaining momentum. Much of the dollar's losses this week was due to thin volume and year-end positioning, with many investors taking profits on extended bets against the euro that have built up over recent months as fears of a euro zone debt crisis grew.Despite signs of stronger U.S. growth, the Federal Reserve has given no indication that it plans to curtail a $600 billion bond-buying program that began in November. Also a deal to extend U.S. tax cuts for all earners could put additional pressure on a stretched budget. The United States will release December employment data next Friday with an expectation to see a private sector jobs gain of 140,000 and a decline in the jobless rate to 9.7 percent. Expectations of above-forecast jobs growth have grown after data last week showed the four-week average of new jobless claims -- a measure of underlying labor market trends -- fell to its lowest level since July 2008.The numbers coming out of the United States over the last two months have been on the stronger side and that is probably going to continue next week.That will continue to put upward pressure on yields and therefore the dollar will remain on the stronger side against the euro, yen and sterling.A key risk for the dollar next week, could come from Federal Reserve Chairman Ben Bernanke's testimony to the Senate budget panel on Friday.The greater risk is that he reinforces the Fed's commitment to keep rates low and any hint that further quan-titative easing beyond the $600 billion may be an option will see the U.S. dollar weaker.For the year, the dollar was up 1.5 percent against a basket of six curren-cies .DXY, but it fell about 13 percent against the yen .
EURO :
The Euro rose on Friday for the third consecutive day and ended the week with the big-gest weekly gain since late September but ended below the price EUR/USD had a year ago.The euro, which had its worst year against the dollar since 2005, is likely to stay un-der pressure as the market focuses on Portugal, Spain and other euro zone countries struggling to address debt and banking problems.The euro finished the year down 6.7 percent against the dollar, its biggest annual slide since 2005, hurt by a debt crisis that engulfed Greece and Ireland, rattled Portugal and Spain and even sowed doubts about the euro's future. The euro may remain under pressure early in 2011 as an estimated 150 billion to 200 billion euros in euro zone sovereign bonds come to market, and some investors worry demand may be weak.For the week ahead, we will still have to deal with the distortions of turnover associated with ending one trading year and moving on to the next. There is a good chance that a meaningful trend can develop through some of the more significant underlying trends (the EU’s financial crisis, growth concerns, gen-eral risk appetite, etc); but in the absence of a definitive move, it will be worthwhile to keep track of short-tem volatility on scheduled event risk. It isn’t difficult to identify the importance of all the economic releases on the docket; but a few will certainly stand out. The first notable is German employment data. As the region’s power source, the German consumer will have to saddle a lot more of the region’s burden to lift the entire EU out of its troubles. The same day, the Euro Zone CPI figures are expected to put in-terest rate concerns ack on the board. Finally, the range of sentiment surveys should give a well-rounded assessment of what is expected from the most important aspects of the region’s health.
USD/INR DAILY CHART
DOLLAR INDEX CHART
EURO/INR DAILY CHART
CURRENCY
Hedge Equities Ltd
DOLLAR : The dollar had its biggest weekly gain since August against the currencies of major trad-ing partners as evidence of a U.S. economic recovery spurred demand for assets de-nominated in the greenback. The dollar rallied last week as reports showed services in-dustries expanded in December at the fastest pace in four years and employers added jobs for a third month. Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro and yen, increased 2.7 percent to 81.136 . The gauge of the greenback rose for five consecutive days, increasing 0.4 per-cent. The index’s weekly rally is the biggest since an advance of 3.2 percent during the five days ended Aug. 13. That week the Federal Reserve said the economic recovery will be “more modest,” spurring demand for the dollar’s safety. Nonfarm payrolls rose by 103,000 in December after a revised increase of 71,000 in the previous month, the Labor Department reported on Friday. The median forecast of 78 economists in a Bloomberg News survey was for a gain of 150,000. The unemployment rate slid to 9.4 percent from 9.8 percent. Fed Chairman Ben S. Bernanke said in prepared testimony before the Senate Budget Committee that the decline in the unemployment rate is likely to be slow even with a pickup in U.S. growth this year, signaling no change in the central bank’s monetary stimulus. The tone for the dollar should be stronger as most of the data has been coming in on the stronger side and funding problems still weigh on euro.
EURO :
It has so far been a rough 2011 for the euro and a respite next week will likely not occur
given an avalanche of euro zone bond sales set to test the market's resolve. The euro
fell 3.3 percent against the dollar this past week, its worst weekly loss since mid-August.
A total gross funding amount of 20-22 billion Euros of issuance by Germany, the Nether-
lands, Italy, Spain and Portugal will most probably hit the primary market next week.
This amount should feature the first real test of how peripheral EGB (European govern-
ment bond) supply will be digested by the market in 2011.In terms of peripheral bond
issuance, next week will reveal Portugal's funding capabilities at the capital market on
Wednesday, while Spain and Italy will make their primary EGB market debut for 2011 on
Thursday. The level of yields offered on the peripheral bond sales next week should play
a pivotal role in the direction of the euro. Higher funding costs should put added pres-
sure on their already weak economies and heighten concerns about their ability to re-
pay debt. Barring negative U.S. data next week, the euro seems poised to drop. Foreign
exchange market participants will also be keeping a watchful eye on the European Cen-
tral Bank's monthly meeting on Thursday.
USD/INR DAILY CHART
DOLLAR INDEX CHART
EURO/INR DAILY CHART
8
RESEARCH ASSISTANCE January 10, 2011
Hedge Equities Ltd.
RESEARCHED AND PRESENTED BY:
Head of Research: Krishnan Thampi K
Sr. Fundamental Analyst: Amar Chandramohan
Jr. Fundamental Analyst: Muhammed Aslam E
Sr. Equity Technical Analyst: Anish Chandran C V
Sr. Commodity & Equity Technical Analyst: Kesavamoorthy B
Jr. Technical Analyst: James George
Futures & Options Analyst: Yunus Ismail
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