Arun Kejriwal
The market will rally
after the pounding last week . However, the worst is not yet over.
The severe erosion of the rupee threatens to fuel the current account deficit (CAD), and a recovery in the currency's value immediately appears difficult. One could always argue that it would benefit exports but global economies are struggling as well with the exception of the United States. Secondly, the pricing power for most of our exporters does not exist and the true benefit of rupee depreciation does not flow in.
This week will be volatile as well and have an upward bias at the beginning. The June series futures expire on Thursday. The previous expiry was at a level of 6,124 points, which is a good 7.45 per cent higher than the current level. With no pressure on bears to cover up, there could be some selling pressure on the expiry day.
One should use all rallies to exit long positions and wait for markets to stabilise before going long. Besides, action taken by for-eign institutional investors (FIIs) and the rupee's direction will be criti-cal. FIIs were big sellers and sold equity in excess of Rs 5,000 crore and debt Rs 7,000 crore. This week could be jittery due to the outflow of foreign funds. A withdrawal of stimulus by the US Federal Reserve may hit FII inflow in India.
Domestic mutual funds were neutral while Life Insurance Corporation bought equities worth Rs 2,500 crore. Key levels for the Sensex will be 18,375 and 19,100 while for the Nifty 5,530 and 5,825. Use ral-lies to exit.
The government would announce CAD figures for the January-March quarter this week. The rupee had a free fall last week touching almost 60. The Reserve Bank of India kept key rates unchanged in its review meet on expected lines. Markets after an initial setback rallied and closed strong. The next two days were sideways and Thursday was the big crash after the US Federal Reserve said that it would ease bond buying. Fed chairman Ben Bernanke last week said that the US central bank will likely slow its bond-buying programme this year and end it in 2014.
This saw world markets, including the US, reacting quite strongly and falling across sec-tors. The Dow Jones lost about two per cent for the week. Gold fell below $1300, a new three-year low and commodities, including crude oil, fell. In India, factoring in the rupee deprecia-tion, gold closed below Rs 26,850 and silver below Rs 40,850.
The
buy-back offer of Unilever to raise stake in its Indian sub-sidiary Hindustan Lever will entail a foreign funds inflow of Rs 29,000 crore if exercised in full.
The company has brought in Rs 3,000 crore so far and would bring more as the response to the issue becomes visible. Mar-ket participants are hoping that this inflow of $4.5 billion will help the rupee recover.
The government has also taken a decision to sell five per cent equity in Neyveli Lignite. The stock lost marginally for the week and closed at Rs 58.05.
(The writer is an investment analyst)
Courtesy: Mail Today
Special 
