Out look for Thursday "Huge rally with an upward break out in store"

"Inspite of positive closing of US markets which bounced from lows on Tuesday night, Our markets turned volatile, due to unwinding of long positions and huge shorts created a head of derivatives settlement on 29.11.2007 ; anticipating down ward break out by majority of players. Nifty broke few important supports in the last hour of trade, due to triggering of stop losses, and closed below 5DSMA, where as Sensex is resting on 5DSMA exactly.

 

However, the positive feature is both the indices are holding above previous week's closings, the big rally in US & Europen markets on positive indication of another Fed rate cut on the ensuing FOMC meeting on 11.12.2007, and fall of Crude to US 91$, shall give phillip to the bulls, to give a gap up opening on Thursday, is a foregone conclusion. Since our indices, both Nifty and Sensex have completed 61.8% of retracement of previous week's range, they should give an upward break out initiating a fresh rally from today which might take the indices to test previous highs in december, with huge volatility.

 

Index funds would like to see the closing on friday, 30.11.2007, being the last day of the month, also to clear the October closings, to prop up NAV.

 

Strategy for the Day: Buy 5600 Straddle of Nifty  in December series for substantial returns, intra day too.

Outlook for Friday "Relief Rally on cards"

"Our indices have turned quite volatile as was anticipated during the month of November, 2007 in the absence of any domestic cues, totally aping global markets. Nikkie, Dowjones and Nasdaq entered bearish trend in the past few days, the rub off effect is felt on our markets too. Profit booking at higher levels and small buying support at technical levels of our indices, by long only funds are making our markets look resilient, though clear distribution cum consolidation pattern is visible on medium term charts. Bearish cross over has resulted in yesterday's trading indicating frim grip of bears on our markets. Since our markets have seen negative closings for 6 days in a row, a relief rally can be expected today. The way indices found support at 50DSMA ( Nifty 5393.99 & Sensex 18258.54) intraday number of times and closed firm in last minute short covering augurs well for bulls today.

 

Nifty spot and futures were at 5600 at the end of the session though on weigted average adjustment came down to 5519.35 (spot) & 5536.20 (November futures). We can expect gap up opening taking positive closings of European markets overnight, US markets were closed yesterday on account 'Thanks giving Holiday' and asian markets are indicating positive openinig after recent carnage. US futures after market hours point to positive opening today, however, volatility shall continue, as we are heading into settlement week, where huge outstanding positions are to be rolled over to December series. Inflation data shall be released at 12 noon shall be watched by players very closely, to guage the policy stance of regulators and policy makers.

 

Strategy for the Day: We expect Nifty to settle around 5850 on settlement day, as per the trading pattern observed till date, in derivatives; hence, one can buy 5400 calls on weakness and 5750 puts on rallies for quick returns today.

 

 

Outlook for Tuesday "Bearish ness continues"

"November month is witnessing volatility and global sell off, due to huge write downs by financial companies of US, due to subprime losses, and resultant signs of economic slowdown, now looming large. Our markets started correcting from 05.11.2007 onwards were making lower tops and lower bottoms on daily basis, breaching 5DSMA & 20DSMA in the process, by yesterday. Though there are bouts of buying at key support levels, by DIIs and HNIs, the unabated selling by FIIs who have to reduce the postitions created under ODI, are putting pressure on our indices. Yesterday Nifty opened weak and buying support at lower levels around 5500 and short covering in the last one hour turned Nifty futures into premium of 25 points at the close.The traded volumes are low on rallies while they are high when markets correct, is an indication of short term bearishness.

 

US markets opened positive and traded firm but, selling in the late hours brought both Dowjones and Nasdaq below/near 200DSMA overnight. Nickie is already in bearish trend, thus, the global cues do not support any relief rally in the near future, in the absence of any cues for our markets. Investors are advised to sell into rallies and stay in cash, for picking up the quality stocks at lower levels, in the days to come. Nifty might test 50DSMA currently placed at 5188.76, in case it breaks 5410.76, which is 10% retracement level during this week.

 

Strategy for the Day: Buy 5400 calls on weakness and 5800 puts on rallies for quick returns.

Outlook for Wednesday

"Our markets have posted all time highs last week, and closed at all time highs on 02.11.2007; and in the absence of any news flow, moving sideways since this monday(05.11.2007) following global cues. The irrational exhuberance noticed in Reliance group small price stocks like RNRL and Reliance petroleum, has met with spead breaker yesterday, as though the business models are exciting for both companies, the delivery of returns is yet to be seen in terms of performance. While RNRL has a dispute to settle with RIL on gas purchase formula and Reliance Petroleum is yet to be commissioned and commence commercial production. Banning of fresh ODI by unregistered FIIs and their subaccounts, has put a halt on capital flows since 26.10.2007. However, our markets did not crash, due to the strength and support from DIIs and retail, who are maturing to enter on dips, a head of "Diwali" an auspicious occasion for most of the Indians, as New year begins, where accounts are opened.

 

Nifty futures have closed at 16 points premium, after huge volatile session, which was an 'outside day' and nifty spot closed below 5DSMA 5867, while Sensex 5DSMA stands at 19706. Today, is "Dhan Therus" where sentimentally every indian makes purchases, which is supposed to be auspicious, and with support from strong global cues from US markets which closed with substantial gains, our markets shall open with a gap up and should clear the above levels initially, and might march a head to challenge previous strong resistance levels, 5976 (Nifty) & 20033 (Sensex) in the process, on heavy short covering, as yesterday's fall was a bull trap, in our view. Accumulate FMCG majors HUL and ITC which have found stability in these volatile times, for long term appreciation.

 

Strategy for the Day: Buy 5700 calls in the opening trade and 6000 puts on rallies for quick returns, for this week.

Outlook for Friday "Volatility to live with it"

"Our markets opened firm taking positive global cues, and profit booking made the indices volatile and finally closed in negative territory. Nifty touched new high at 6011.95, while Sensex is unable to close above 20000 mark, though an attempt is made thrice during the week so far at the opening of sessions and intraday, suggests that investors are cautious at higher levels, is a good sign for the markets, in the long run. Nifty futures closed at a steep discount of 41 points, on creation of short positions once 5850 was broken intraday, indicates further weakness.

 

 Crude touching 96$, and down grading of citibank by analysts brought huge selling in US markets overnight, which will lead to gap down opening on our indices too. Asian markets have opened weak already, and the inflation data to be released at 12 noon shall decide the trend for our markets. 5% correction levels from recent tops on Nifty(5711.35) & Sensex(19226.25) should offer buying support in case of weakness in our markets intraday, as India story is very much intact. Buying in blue chips which have given good performance Q2 is recommended for substantial gains in the future. Any weakness in indices is a buying opportunity, as the markets are in sideways consolidation mode, after a spectacular run for the past 2 months.

 

Strategy for the Day: Buy 5700 calls on weakness and 6000 puts on rallies for quick returns in day trading.

Out look for November " Nifty scales 6000 and retreats on Profit booking"

"This week and October month were quite eventful and historic for our markets and as well as global markets. Our indices have closed at all time highs on 31.10.2007, inspite of heavy volatility swings during the month, taking CRR hike in their stride, owing to good corporate performance for Q2 and assuring better performance in future. DIIs and Retail are participating in a big way in the absence of PN players, who are banned since 26th october, 2007. November promises to be another good month, especially Diwali "New year" being observed as an auspicious occasion by many players and investors and indices shall continue to post gains till 9th Diwali, on sentiment basis.

 

US FOMC meeting last night, has cut the Fed interest and the discount rates by 25 basis points as anticipated, however, indicated that there will not be further cuts in December meeting. Crude touching US $ 96 and slowing of home sales market, are a cause of concern for US economy. We are in for times of huge volatility as indices are trading at all time highs, daily volumes are averaging more than a lakh crores, one has to exercise caution in trading, as stop losses get triggered on either side easily. RBI and Finance Ministry are having the problem of huge capital flows on hand, raising crude prices are making oil marketing companies to bleed, raise in petrol prices is being put on hold as it would push inflation and input costs.

 

Technically Nifty can go upto 6550 if 5614 is held on weakness during the month. Any weakness is a buying opportunity in quality blue chips which have proved their performance in this quarter for long term accumulation.