The Week Ahead 02/04/2007 to 05/04/2007
Posted by dipanksaha on April 2, 2007
RBI announced another hike in CRR along with an increased REPO rate and reduced interest payment on CRR balance. Inflation number has got stagnant at 6.46% level for last two weeks and no visible indication of it’s going down. Harvest season is almost at the door. Global production of food crop is not satisfactory and occurrence of speculative hoarding is pretty high.
On the other side, market sentiment is not exceptionally strong. In last few days volume was high when market was in positive territory, that might force people to think that sentiment has got back its strength, but actually most of the strength was rollover backed. Even, magnitude of rollover is poor this time compared to past experiences. People are just too averse to take risk. No direct indication of follow through buying.
From second week 2006-07 results will start coming in. Appreciating rupee continuously shadowing the prospect of IT sector. Recent monetary tightening will hit banking companies hard. Due to increased cost of raw material, steel producers are increasing steel price and that can be a positive factor in the market.
Tomorrow market will often at down side only, if everything remains same. And if market fails to sustain couple of hundreds points down side then we can expect some down slide. After that Infosys will publish 4th quarter result on 10th April, any below the expectation number can set the fire. Though, it’s also true that some real good number from Infosys and other companies can change the course overnight.
I beg your pardon for my pessimism, but I am seeing no sure reason to get engaged in festivity. Best of luck.
Indian Techie said
The appreciating rupee & the possibility of bloodbath on IT stocks could be because of TATA’s Corus deal and RBI’s hand in increasing the CRR by .5 % to help tata’s move out $12 billion of forex to Europe
Here is my opinion
http://corusdeal.blogspot.com/
dipanksaha said
I respect your view. It’s well researched and well-established. I can even contribute few numbers in your favor. If you are right then Tata Sons/Tata Steel group will save around 807-900 crore rupee following the rupee appreciation. This number is the outcome of straight line calculation based on %decline in INR-$ exchange rate and Tata’s own contribution to deal.
But, I am still in doubt, how much reasonable it could be. Tata Group can be influential but the cost of sudden plunge in export earning will be huge, at least for small and medium size exporters. IT companies, specially, the bigger players won’t feel much heat since they do hedge their forex positions. But smaller players will feel the punch.
Other than Tata, this appreciation will help petroleum giants like reliance also.
But despite all this I am still in doubt. Time can only demystify my doubts.
Thanks