Correction in Commodities prices help recovery in Equity prices!

The trading was volatile as anticipated and indices have closed in positive territory inspite of the overall market breadth being highly negative. Short covering with long roll over to next month series in index heavy weights, will continue today too and markets will post further gains. US markets opened firm yesterday and closed in positive territory, on the news that JP Morgan increased the acquisition price of Bear Stearns, the troubled 'investment banker' , from 2$ to 10$. CBOE index is dropped to 25 now from the recent peak of 34. The commodities which were rallying on the weakening of US $, as most of the hedge funds, booking profits in equities, or after suffering losses in equities, have been parking the funds in commodities. Already commodities have corrected anywhere 10% to 15% by now, and might correct another 10% in due course of time. Slowly these funds re- enter equities, with sentiment too improving, which shall give a relief rally from 28.03.2008.

Nifty will be volatile during this week on account of expiry of the settlement on 27.03.2008, and it has closed above 5DSMA (4593.15) yesterday, if held will attempt the 20DSMA now placed at 4909.41 during the week. Nifty Singapore futures are trading positive with 66 points gain at the moment.

Investors looking for building long term portfolios; can pick up Andhra Bank, Uco Bank, Vijaya Bank, Nagarjuna Fertilizers, GSPL, GMR infrastructure, Itc, Wipro, Reliance Communications, some that have corrected very steeply and are trading at quite attractive values. One should avoid all momentum stocks such as RNRL, etc., which have reached astronomical valuations, due to investor frenzy in the beginning of 2008. Protecting capital and staying in cash will offer number of opportunities during this 'bear phase' to pick value picks, at any opportune panic reactions.

Range for the Day: Nifty might trade in the range of 4450 to 4850 during the day.

Strategy for the Day: Buy 4500 Calls on weakness and 4800 puts on rallies for quick returns, in intraday trading.