Weekly wrap up

Markets ended on a weak note on Friday with the BSE going down by 2.5%. It started on Monday at 10080, peaked at 10180 and ended at 9238. The fall on Friday could mostly be attributed to advance tax numbers which were down 22.4% YOY. Advance tax numbers are a reflection of what companies earnings will look like and these numbers were worse than expected. The fall starting from the beginning of the week can be attributed to technical resistance points at 10200.

 

Banks outperform the index due to lower than expected inflation numbers. It fell by 6% for the week compared to 6.5% for the BSE. The expectation is that the RBI can now aggressively cut rates which should benefit banks and kick start the lending process.  The oil & gas index fell by 9% while the metal index fell by 9% and the IT index fell by 8%.

 

The possibility of war between India and Pakistan will have a negative impact on market sentiment.My view is that the markets will continue to move downward and will bounce at 8900.

 On other global news, Manufacturing in the U.S. probably shrank at the fastest pace since 1980 as the deepening global recession forced customers in North America, Europe and Asia to cut back. For more information check out http://www.bloomberg.com/apps/news?pid=20601084&sid=aiV5FT1F6hfk&refer=stocks

 The TED spread, the difference between what the government and banks pay to borrow for three months, fell for a fourth week. It declined one basis point to 1.48 percentage points, down from a record high of 4.64 percentage points Oct. 10. This indicates that banks are now far more willing to lend to each other. This also ties in with a rise in treasury yields this week as investors rely less on treasuries to keep their cash. The rise in yields is also due to an increased supply of treasury bonds.

For more information check out http://www.bloomberg.com/apps/news?pid=20601009&sid=aiw3cE2FfsLU&refer=bond