The week ahead 12/02/2007 – 15/02/2007

Major incident for the week was another disturbing inflation figure in line with the current increasing trend. Latest figure is recorded at 6.58%, which is at two years’ high. This data is coming at a time when some of the major food prices are coming down considerably, like sugar and some major grains. Such move would lower the real return from any asset.
Money market for the week was pretty steady. In the first half of the week it shown intra day move above 8% but other wise settled near 7% which was quite close to short term borrowing cost.
On the forex front rupee is getting stronger and RBI is accommodating the move. It can help to counter inflation to some extent. Rupee dollar exchange rate has come down to 44.1050.
Last week the market was pretty straight with ranged move in 2nd half. It closed with a negative tone on Friday, which was quite expected facing deteriorating inflationary scenario upcoming budget session. The second event, i.e., budget will again effect this week’s market. Monday stock market is expected to remain down and that tone may continue in the first half. Decisive support will be at 4083; closing below 4080 may induce some further down trend. But armed with good overall December quarter corporate result and favorable current index PE we cannot expect any crash at this moment. Market will remain dull with some end-February surprises. Final course will be decided only after budget.
FII transaction figure remained positive for the week and with strong rupee against USD foreign fund would like to book some profit, although this may not be true for hedged positions.