Last week was quite eventful and volatile. Credit policy for the third quarter was published on 31st January and last data released on inflation showed continuation of high inflationary trend, it was recoded at 6.11% far above the target of 5.5%, RBI set for the economy. Stringent provisioning rule for loan exposure to capital market would make positional trading expensive in equity market. 7.5% of REPO Rate will make short-term money expensive, which will again make short-term speculative initiative costly. These will definite act on the volume and volatility in the market.
For last two days open interest for nifty-index futures were down, f&o turnover is still lower than average for the last month. Cash segment turnover is pretty good compared to derivative counterpart. With 17 more trading days left for 2007 union budget, some correction can be expected in coming days, as traders would like to lightweight their position ahead of budget. But in the week ahead such correction is unlikely at least in the first half of the week.
Current PE for CNX Nifty50 is at 20.12; historical PE resistance for Nifty 50 is found to be around 21.8. If we consider current earning and PE resistance than fair value of Nifty can be around 4500. We can expect couple of hundred more of Nifty 50, but not likely before budget.
For the week ahead nifty is expected to get support around 4083 and on the upper side resistance can be around 4250-80. Without any other improvements, the market is expected to remain ranged with some positive turns in the first few days.
