"Market were volatile throughout last week, while July settlement ended quite positive with highest ever closing for Nifty(4619.80), the much awaited correction came on the last day of the week suddenly, on week golbal cues. Many supports were broken in the process in a single day. When such steep correction happens, the usual supports held in the past during the rally shall be the stoplosses for the nimble traders, which get triggered, thus accentuating the fall much more than as it would have been in normal course. This is the nature of bull market correction, the one we are witnessing now is a bull market correction and in sooner than later the markets will concentrate on the fundamentals of economy, performance of individual companies and sectors, and thus bringing stability back.
Results of Reliance Industries, SBI, Grasim and HUL are announced on Saturday/Sunday,which have shown excellent performance, and the buy back at aprice of Rs.230/- announced by HUL (formerly known as HLL) is at 17% premium to the CMP of 199 augurs well for the stock, which is an index heavy weight. Now that FIIs becoming net sellers after a long time, gives some relief to the strengthening of rupee, which is continuously appreciating. The Technology sector, export oriented sectors and ecpecially pharma should lend support to markets while the other hot sectors leading the rally so far would shed some more weight, in this correction. Markets need to consolidate in a range for a while before the next larger move unfolds.
Owing to the further weakness in the US markets on friday, markets shall be opening weak today and shall be volatile during this week; as one more important event shall be unfold tomorrow., RBI's Credit Policy tomorrow(on 31-07-2007) by 12 noon, which give fair idea on interest rate scenario, monetary measures and out look on the economy etc., Once this information is digested by market players, stability shall return to the markets.
August series is very long drawn one so the range on Nifty shall be wide; already it has closed below 20 DSMA, while Sensex is resting on 20 DSMA as at the close on last friday. The next logical supports are placed at 4318.30 (Nifty) and 14640.86 (Sensex) for today and tomorrow as they were June monthly closings, in case of continuation of weakness on further selling by Institutions or margin calls. However, the levels of 4362.95 (Nifty) and 14723.88 (Sensex) which were earlier tops of this bull rally shall usually invite investment by new players as well as long term investors. 50 DSMA are placed at 4329.25 (Nifty) and 14708.57 (Sensex) as of now; investing in performing blue chip stocks around these levels, on observing supports in the markets shall give substantial returns in the medium term.
Strategy for the month: Buy straddle of 4450 on nifty to capture the volatility on nifty. If one is a trader can purchase calls of 4300 on weakness and puts of 4600 on rallies during the month, for good returns.
The day's range for Nifty shall be 4365 (Support) and 4530 (Resistance); Sensex shall be 15000 (Support) and 15600 (Resistance)
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