"Markets are moving in synchronization with global markets, with a day difference. July month closing was positive for our indices, but lower than the settlement levels of 26th was a clear indication of bear hold on the markets for August series. Sensex opened with downward gap yesterday, and went on to clear all technical supports throughout the trading day, closing at the lower end of the day. Nifty rested on 50DSMA giving some hope that the major selling is completed. June closing levels of 4318.30 (Nifty) and 14640.80 (Sensex) should invite support from long term institutional interest, since we are in a long term bull market. Bull market corrections are always, sudden, sharp, swift and also short lived. Both indices have corrected more than 5% from the recent life highs, and markets might stabilize and consolidate in a wider range during this month and till 15th September, before making the next upward move.
Overnight US markets closed positive after volatile trade till the end of the session, should give some relief to our markets too. Nifty futures discount stands at 58 point to the spot, as at the close of trading, confirms that heavy shorting was done both in nifty and stock futures. Positive opening shall invite short covering and continued buying can insist short squeeze, since our economy and corporate performance is very much on track, un like US, can force recovery in our markets with more vengence, since our markets have higher beta.
Strategy for the Day: Buy 4300 calls on any weakness in indices and hold them till expiry. One can construct calender spread by going long on August 4200 call at 185 and sell september 4550 call at 98 for substantial gains. Net out flow of premium will be 87 per contract, which will be the loss if August series settle below 4200 on the settlement day. Margin requirement shall be Rs.30000/- Maximum profit could be Rs.263 per contract which shall be 300 % in premium terms, in real value 38% on the investment for one month.
The day's range for Nifty shall be 4304 (Support) and 4445 (Resistance); Sensex shall be 14850 (Support) and 15235 (Resistance)
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