Crude touches US$ 106 and BOE leaves rates unchanged!

Our Markets were closed on account of 'Maha Shivarathri" holiday yesterday(06.03.2008), while they closed in positive territory on 05.03.2008 after volatile trading, but they are still way far below 200DSMA on both indices. Crude touched 106 $ as OPEC decides to maintain the same level of production, and US inventories shown fall. Bank of England has left the rates unchanged at 5.25 as it expects the inflation to touch 3% with raise in crude prices. These indicators made investors nervous in Europe and the european markets posted losses, and US markets tanked on further weak data from Home sales etc., overnight. Asian markets which recovered yesterday and posted gains, on the strength of overseas cues are trading in negative territory already.

Our markets will continue to be volatile as marginal purchases by long term funds around 4800 on nifty, have held this level till now. The sentiment is completely shattered, and every raise will meet with liquidation by trapped bulls, and if 4800 is broken, then margin calls will trigger further fall easily. Increase in Short Term Capital gains tax to 15% and treating STT as business expenditure are direct hit for traders, jobbers and market makers, who create liquidity and volumes in any markets. The fall in volumes in our markets is a direct indication of lack of interest and participation by these group of players. Inflation data will be released by 12 noon which should have further uptick, as the raise in petrol & diesel and other commodities will be taken into account.

In our view, even if 4800 is breached intra day or during the month, march closing on settlement day should be above this level, thus one has to watch this level carefully, to decide on the long term trend of our markets.

Strategy for the day: Buy 4800 Calls on weakness for intra day trading.