Our indices opened marginally positive initially, due to positive trend in asian markets, and were very volatile through out the day, as european markets opened, Sensex Februrary low of 16457.74 and closed below it at 16339.89 finally. Where as Nifty has held 4800 level in the carnage, which is the downward range and support advocated in the earlier posting. Both the indices have closed below 200DSMA firmly for two days, make things difficult for the trend to reverse immediately, as bears hold firm grip on all markets. Now the 200DSMA offers stiff resistance to any relief rally and trapped bulls will liquidate their positions, as the month of march is already having continuous down tick days.
In this type of uncertain times, safe investment principle shall be picking stocks with good dividend yield, low P.E. and having growth stories in tact. PSU stocks and PSU banks offer great value on every down tick. Indian economy growth momentum shall be intact, in spite of what happens globally, like recession in US etc., as they cater to domestic economy which is buoyant. Price to Book Value of some of the PSU Banks looks quite attractive as they offer decent returns, in long term portfolio; One should stay away from over owned stocks like infrastructure, momentum stocks which have reached astronomical levels during the euphoria of bull markets, on futuristic stories doing round during 2007.
We have indicated in our posting dated January 8, 2008 "At the outset a happy new year to all viewers of the blog! 2008 shall be a tough year for equity and financial markets, as inflation, raising commodity prices, Elections for US president, and last budget from UPA, certainly aiming at the early elections in 2009; would bring in huge volatility on indices world over, including Indian Markets.
One need to understand that bearishness will not continue daily and indices will not become zero, there will be relief rallies and out performers in such markets too. One needs to devise a strategy to identify such opportunities and churn the portfolio, instead of thinking that momentum stocks having corrected 50% to 60% will go back to original levels, have sleepless nights.
Strategy for the Day: Buy 4800 calls on weakness and 5200 puts on rallies for intra day trading.
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