On Friday, our indices opened flat to marginally negative and traded firm as the day progressed, as it was the first day of new series, April, during which the Q4 results of many corporates would be announced; and also the guidance, outlook for the next fiscal will be indicated. Since, the outstanding postions in new series at the opening of the day were quite low, in fact lowest in 2008 so far, addition of open interest is seen in many index heavy weights, based on advance tax numbers released by 15.03.2008. Inflation data released at 12 noon indicated an untolerable level of 6.86%, which induced traders to go short on the market at crucial resistance levels such as 4925 - 4950 etc., expecting the fall by the end of day, expecting profit booking on week end considerations, since the European Markets are trading negatively and US markets are likely to be weak over night. Fund buying in the last one hour of trding, forced the traders to cover the shorts, which lead the indices to post good gains on friday.
This phenomenon was foreseen and indicated in our posting of 03.03.2008, titled How march Unfolds: "Markets will improve from 28.03.2008, due to NAV prop up by mutual funds, to close the financial year on positive note, and players will look for first quarter results in April 2008, based on advance tax payments made by 15.03.2008." Nifty and Sensex have crossed and closed above the 20DSMA firmly in the process on friday, now today being the last day of financial year, month and this quarter, similar phenomenon can be expected. Further due to clubbing of Settlements on 02.04.2008, as banks will be closed for finalising accounts tomorrow, i.e., 01.04.2008, Buy Today and Sell Tomorrow facility will not be available for investors in tomorrow's trading, for the purchased made today, which forces people to square of the transactions today it self, if one is not interested in taking delivery. Thus, only funds can control the markets today, who have vested interest in prop up of NAV at the end of this day on year end considerations.
Any rally, should be viewed from this perspective, as things have not settled in US, and turbulance shall continue for some more considerable time, and with inflation reaching 14 month high, for our economy, government is already, initiated measures like withdrawl of DEPB scheme, reducing tarriffs on imports, for tacklinng the supply - demand mismatch of components of CPI and WPI, for controlling inflation. Many analysts and economists are expecting RBI to initiate measures tinker with interest rates, hike in CRR etc., but in our view, as the inflation is not caused due to liquidity, money supply(M3) and purely due to supply - demand mismatch in a growing economy the monetary measures shall not yield desired results. More over since banks also will be resorting to some window dressing today, which is an usual phenomenon, to present a better picture of performance in terms of Balance Sheet size, RBI may come out with any measures by week end or next week only. FM has indicated that the inflation shall be tackled, at any cost, including compromising on growth, if moderation is required, should be noted with caution, as the current level of inflation reported at 6.86% is way beyond the year end target of 5% and crossed the tolerance level, which is already hurting the consumer in every sphere of life.
Nifty might post gains today too, and close positively at the end of the session, but at what level it closes will be interesting for technical analyists? 5000 to 5100 has series of resistances, and a close around 5100 today(which is 200 DSMA) with volumes and participation of all sectors, all category of players in the market shall give some hope and relief for the out performance of markets in April Month. Asian markets are trading in negative territory, taking cues from US markets, and Singapore Nifty futures are trading at discount of 70 points currently, indicate negative opening for our markets and volatility will be the nature of the markets, as usual.
Range for Day: Nifty might trade in the range of 4850 to 5050 today.
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