"US FED cuts another 50 basis points"

"US markets and market players were expecting 50 basis points rate cut at the conclusive session of FOMC meeting on 30th Jan'2008, in spite of 75 basis points cut two weaks ago in an emergency meet, and Mr Bernarke delivered it" This decision leaves all regulatory news from over seas completed for the month, the fears of recession are now factored by all markets, the credit crunch and turmoil in Financial markets in US and performance of the Financial Sector whether improves with these relief measures is to be seen in times to come.

Certainly the interest differential at gross level and real terms widened between US and India, as RBI has left the rates unchanged since ecoonomy is doing well, though few sectors of the economy are affected due to appreciation of rupee and slowing down in US economy. RBI always maintained to act, as per the need of the hour or situation, without linking to scheduled Monetary or Credit Policy meetings. RBI expects huge capital flows from overseas, and is presently giving importance for the liquidity management.

Reliance Power the largest IPO from an indian corporate has finalised the basis of allotment, and decided to allot 15 shares to eligible applicants who subscribed for 225 shares in retail category, and the refund of excess application money starting 01.02.2008, should be in the hands of investors by next week, improving liquidity with market players. Today is the Derivatives settlement for January and also the last day of the first month of 2008.

January 2008 has seen All time highs and 30% correction from tops and has been quite volatile, driving away the small investors and traders from the secondary market. However, both Sensex and Nifty maintained the support at 200DSMA in the carnage, due to the support from Domestic Mutual Funds and DIIs. September closings of 5021.35(Nifty) & 17291.10(Sensex) will act as strong supports for today, in case of weakness and 5383.35(Nifty) & 18361.66(Sensex) previous week's closings would offer resistance for today. Any weakness is to be bought into at support levels, for a pre budget rally beginning from 01.02.2008, since the outstanding derivatives positions have come off from very high levels, as relief rally can be expected in our markets, concentrating on the corporate performance and the expectations from the Union Budget to be presented on 28.02.2008.

Strategy for the Day: Buy 5000 Calls on weakness and 5400 Puts on rallies for intra day quick returns in January series. Note: book profits quickly as the time value for money(premium) vanishes in no time, since today being the last day of the settlement.

Alternatively, one can buy 5000 straddle in February Series and wait till the settlement of February series.