Nifty closed above 200DSMA while Sensex missed by 100 points!

After almost 2 months of bearishness, finally Nifty has closed firmly above 200DSMA yesterday, due to heavy short covering in banking, real estate and tech stocks, where short positions were built a head of RBI's credit policy meeting, since rate hike was mostly expected. RBI's hawkish stance, to target the monetary and liquidity management, by icreasing another 25 basis points CRR w.e.f.24.05.2008, and leaving rates unchanged, coupled with few announcements made by FM on the floor of parliament, while replying on budget proposals, reducing customs duty on steel imports, introduction of export duty on steel, cement and basmathi rice etc., for ensuring increase in supply of these commodities, which are chief components contributing to raise in inflation beyond the tolerable levels of 5.5% for this fiscal, helped the indices to close firmly with strong gains.

US consumer confidence index was down to 62.3%(yoy); which made investors nervous and US indices have traded in negative terriotory and finally closed marginally negative. Crucial FOMC meeting is on and the decision on the rates will be known during US market hours, which will be 11.00 p.m. IST, and if the FED futures indication is to come true, 25 basis points rate cut is expected and being priced already in the stock prices. Any disappointment on this front, would create havoc on the US markets overnight and tomorrow too. Since crude is trading above US $115/- continuously, mainly on account of weakness in dollar, the firmness in global commodities prices also is because of this which is raising the inflation worldover, including US, where even growth started slowing down, threatening "Recession" and some analysts even predict 'Depression'...FOMC should pull up their socks to handle the larger problems of their economy and currency rather than looking at protecting stock prices, in our view. This realisation has to come sooner, then it is better for even world economic stability too since, US economy is the largest and its currency is 'defacto' internationally accepted currency for trade and transactions between nations.

Whatever decisions are taken by FOMC to night, can be effective with our markets only on 02.05.2008, since tomorrow is a trading holiday for us. Thus, investors should protect their portfolios with proper hedge like buying 5200 put options, during the day should not be a bad idea. VIX stood at 26.16 being the lowest level, indicates lower volatility and tight range for the market today. Today being the last day for April'2008, and since nifty firmly crossed 5137.45(January Closing) and whether it will clear 5223.50(February Closing) also today and close above it, will be watched by technical analysts, for monthly charts to improve the structure. Singapore Nifty futures are trading with 12 points premium currently, but profit booking can be expected in the later half of trading owing to a holiday tomorrow.

Range for the Day: Nifty might trade in the range of 5110 to 5250 today

RBI announces further CRR hike of 25 basis points & leaves Rates unchanged!

Dr.Y.V.Reddy, Governor of RBI, has decided to leave the rates unchanged for now. All rates.viz., Bank rate, Repo rate and Reverse Repo rate. However, as he is known to surprise every one on the street decided to raise further CRR by 25 basis points apart from 50 basis points raised on 17.04.2008. This stance from RBI clearly sends a strong message that containing and bringing inflation to tolerable levels of 5 to 5.5%, without compromising on growth in the economy. RBI will continue to watch the inflation expectation and the actual inflation very closely from now on, shall take steps and might take even stronger steps to fight the raising inflation, which hurts all sectors and sections of society.

There is a relief rally on the markets, as the rates are left unchanged, however, technically 200DSMA is offering stiff resistance for now, markets will be volatile and might settle flat to marginally positive today, in view of another important event i.e., FOMC meeting and their announcements, late in the night, which will effect our markets on 02.05.2008, since our markets will be closed on 01.05.2008(due to a holdiday.."May Day") However, the trading range appears to have shifted from 4500 to 5000 to the next level of 5000 to 5500, the confirmation of the same will be known depending on how markets close tomorrow, being the last trading of April'2008.

More analysis of RBI policy and its effect on our markets in regular postings.

Markets Await Policy Decision from RBI!

Our indices opened firm with positive bias and profit booking emerged around 5147 level which is very close to 200DSMA level, as predicted in yesterday's posting, after trading around 5100 level for quite some time, finally Nifty closed below it, a head of an important Policy Decision from RBI, and also what measures shall be intiated in today's meeting. More than the measures to be announced today, analysts and economists will look forward to the statement to be made by RBI Governor on Inflation, GDP growth, Liquidity Management, Interest rates scenario and also the recent problem of Forex Derivatives, which have put number of companies into surprising situation, where they have suffered huge losses, due to the AS-30 norms made compulsary from 31.03.2008 by ICAI.

 

Some volatility can be there just around the announcement of RBI decision on interest rates announcement and there after, but Nifty might trade in a range for the day, looking forward to another important meeting of FOMC which takes place tomorrow. Any how, 5150 level cannot be cleared so easily, since it is broken long back and some very strong, good news is required to surpass the same with overall participation, and volumes to take the Nifty into bulls camp. Nifty futures having closed at 16 points premium suggests optimism of players, which invites profit booking or bull unloading on any bad news. Margin for error is thus, not there at all. Singapore Nifty futures are trading at 7 points discount right now.

 

Range for the Day: Nifty might trade in the range of 5030 to 5150today.

 

Note: Another review and posting will be made after the announcement of RBI policy, intra day.

Will Nifty Clear 200DSMA placed at 5150 and move up?

Settlement of April Series is behind us, The settlement of May series being on 29.05.2008, shall be one of the longest period involving 23 days of trading, with important rate sensitive decisions poised during the week, and almost Q4 results season will be completed, where companies performance for the previous financial year are known and digested by the market analysts, apart from reading into the challenges thrown due to raising commodity prices and inflation, which will effect the corporate performance both directly and indirectly. Generally May has been an eventful month for our markets, where markets have received jolts, unexpectedly (one in 2004 and the other 2006) where bottoms were formed after markets made new highs in January of respective years, and they moved on from strength to strength. Coming to 2008, our indices have made an all time high in January around 10th and then went into 30% correction by march, and also have been trading below 200DSMA till now.

Now, Will May 2004 & 2006 pattern repeats! by markets finding a bottom or forming a bottom, and move up later this time too, or continue to reel under bear grip due to uncertainity, and negative news flow floating around all over the world, sentiment too being bruised badly, is being watched by many analysts and fund managers. 200DSMA of Nifty is placed currently at 5150, and whether the same shall be cleared today or during the week shall depend on the pronouncements by RBI tomorrow and FOMC on 30.04.2008, which can be known by our markets on 02.05.2008 only, (as 01.05.2008 being a holiday due to 'May Day') for our markets. Thus, one can expect higher volatility as the indices approach crucial technical levels, many HNIs, Funds are sitting on sidelines, for the clear trend to emerge, and then take a view on the markets, instead of taking any guess which might catch them on the wrong foot.

Asian markets opened positive and Singapore Nifty futures are trading at 17 points premium currently, should help our markets to open flat to positive initially. Nifty futures closed at 14 points premium on friday, due to short covering in the last one hour, shall invite profit booking before the two events scheduled this week on every raise, and some short build up also can be expected to hedge the portfolios by funds/FIIs, which may keep markets under pressure. Anyweakness below 5100 shall invite bull unloading, and short build up, hence investors are better advised to follow the under mentioned strategy:

Strategy for the Day: Buy 5150 puts on rallies and 5000 calls on weakness for intra day trading and quick returns.

Finally Nifty breaks 5100 barrier and looks at moving out of bear grip!

Nifty opened marginally positive and traded in a narrow range of 5020 to 5060 till 01.30 p.m., and with Bharti Aritel outstanding results, started moving up. The inflation shown an uptick to 7.33% as against 7.14% previous week, which along with Gujarath Ambuja Cements disappointed results for the Q4 have brought some selling and volatility in the markets. Shrugging off the negative factors, buying in index stocks, coupled with short covering in the last half an hour, lifted Nifty above 5100 firmly, finally closed at 5110.70. Similar trend on Sensex lifted it above 17100 level by the end of the session, which finally made the indices to post week on week gains for the 3rd consecutive week. VIX index stood at 27.40 at the end of the week, suggesting lower volatility, but Nifty Put - Call Ratio standing at 1.35, indicating that players have perfectly hedge against any sudden development, which might bring in the volatility back as indices make an attempt to challenge the 200DSMA now standing at Nifty (17454.44) & Sensex (5149.80) next week.

 

US markets were volatile and Dow Jones finally closed in positive territory, where as Nasdaq closed marginally in negative territory, on friday, pricing in the weak economic indicators, mixed corporate results poring in for the Q1. RBI Credit Policy meeting being scheduled on 29.04.2008, our markets might turn volatile, and trade cautiously. Any noises from the government on price control measures during the weak end or during market hours on monday also will have their influence on stock prices. Crude firming around $119 levels, due to supply concerns, will have its salutory effect on global economies in general, and our government initiatives to pass on the difference to indian economy will dampen the growth, and push the inflation further high. Thus, currently the Government and Regulators are caught between the "Devil and Deep Sea".

 

Range for the Next Week: Nifty might trade in the range of 4920 to 5320.

Nifty Stabilises around 5000 level - break out on upside is in offing!

April series expiry and settlement are smooth, albiet small volatility, due to information from external sources, such as government's proposed action to bring cement and steel under ESMA purview, disappointing results from ACC, in line results from HDFC etc., In finality, the settlement price is higher than March series(4830.25), by 169.60 points a raise of 3.51%, with satisfactory roll over to may series, is good news, that markets have finally stabilized around 5000 level which is crucial for sustaining the upmove. May series open interest position also being higher than the beginning open interest at the commencement of April series, gives indication of increased participation, though the pessimism and fear continue to daunt the bruised investors, during January to March steep fall and hightened volatility.

Markets are digesting the negative news slowly, and looking for positive cues on inflation (data to be released at 12 noon today); regulatory action from Government and RBI and FOMC decision on interest rates etc., by next week, and most of the results would have come by then too. This enables the fund managers to churn their portfolios, and readjust to look for winners in the uncertain times, which year 2008 is witnessing. US markets have closed firm and asian markets are trading with gains. Singapore Nifty futures are trading with 30 points premium at the moment, as new series begin today, we expect that Nifty will open positively at the opening and should trade above 5050 initially, and depending on the inflation numbers might attempt to clear 5086 resistance and move above 5100 today

Nifty might move in the range of 4350 to 5350 during the month. Thus, it is recommended to adopt the following strategies for May series:

Strategy-1: Buy May Nifty futures above 5020 with a stop loss at 4970 duly hedging with 5000 put option vailable at Rs.175/- currently. This strategy requires an investment of Rs.50,000/- initially.

Strategy-2: Buy May 4900 Call Option at Rs.235/- and Sell 5200 Call Option at Rs.77/- which are available currently. This strategy requires an investment of Rs.35,000/- initially.

Range for the Day: Nifty might move in the range of 4920 to 5120 today.

Nifty pauses and trades in a narrow range - Looking for break out!

Our indices have turned volatile as predicted after making higher highs at the opening of trading and finally closed in negative territory, due to roll over to next month series, a head of derivatives settlement on 24.04.2008(today). Nifty roll over to may series has seen heightened activity, since the cost of carry is positive, as against the total market wide roll over. NIfty Put Call Ratio stands at 1.38, suggests smooth settlement today, and Nifty might settle above previous settlement figure of 4830.25, since not much down side is seen from current levels, as 5000 level is held for the past 3 trading sessions. VIX has fallen to 32.37 indicates reduction in volatility too. As of now, the upside on Nifty is capped at 5100 for today.As long as 4990.96(5DSMA) is held today, nifty shall gyrate between 5000 to 5100 today. The technical structure is developing for a bullish cross over, and with positive news flow, and increasing levels of participation, the trading range of Nifty can now be 5000 to 5350, till a close below 5DSMA happens, where bears will regain control.

US markets were volatile and finally closed in positive territory. Asian markets are trading flat to marginally positive territory right now. Reduction in stamp duty on share transactions form 0.3% to 0.1% by chinese government, encouraged short term traders, which has lifted 'shangai index' over 7% in opening trades, this will boost sentiment on Hangseng too today. Singapore Nifty futures are trading at 35 points premium indicate positive opening for our markets today due to long roll over to next month series, initially. PM's advise to Steel Industries to hold the prices for 2 to 3 months, which is respected by all mojor players, affected the sentiment on the sector, resulting in 7% fall in Sail price yesterday. Further such measures of arm twisting by Government and regulators, in the fight to bring down prices, to gain control over raising inflation, will affect the stock prices in the short to medium term. AS 30 decalaration by corporates, on the forex derivatives exposure, is gradually bringing the skeletons out of the cupboards, from companies, banks and financial institutions, the current exposure affect and on individual corporates, on their own or on behalf of the clients, need to be analysed thoroughly, in due course of time, which shall affect the bottomline, in turn valuations too.


Range for the Day: Nifty might trade in the range of 4920 to 5120 today.

Strategy for the Day: Buy 5100 puts on rallies and 4900 calls on weakness for quick returns in intraday trading. Please note that the premiums shall rapidly fall and move in tandem with spot price adjusted to the strike price, since today is the last day for current series.

Nifty pauses and trades in a narrow range - Looking for break out!

Our indices have turned volatile as predicted after making higher highs at the opening of trading and finally closed in negative territory, due to roll over to next month series, a head of derivatives settlement on 24.04.2008(today). Nifty roll over to may series has seen heightened activity, since the cost of carry is positive, as against the total market wide roll over. NIfty Put Call Ratio stands at 1.38, suggests smooth settlement today, and Nifty might settle above previous settlement figure of 4830.25, since not much down side is seen from current levels, as 5000 level is held for the past 3 trading sessions. VIX has fallen to 32.37 indicates reduction in volatility too. As of now, the upside on Nifty is capped at 5100 for today.As long as 4990.96(5DSMA) is held today, nifty shall gyrate between 5000 to 5100 today. The technical structure is developing for a bullish cross over, and with positive news flow, and increasing levels of participation, the trading range of Nifty can now be 5000 to 5350, till a close below 5DSMA happens, where bears will regain control.

 

US markets were volatile and finally closed in positive territory. Asian markets are trading flat to marginally positive territory right now. Reduction in stamp duty on share transactions form 0.3% to 0.1% by chinese government, encouraged short term traders, which has lifted 'shangai index' over 7% in opening trades, this will boost sentiment on Hangseng too today. Singapore Nifty futures are trading at 35 points premium indicate positive opening for our markets today due to long roll over to next month series, initially. PM's advise to Steel Industries to hold the prices for 2 to 3 months, which is respected by all mojor players, affected the sentiment on the sector, resulting in 7% fall in Sail price yesterday. Further such measures of arm twisting by Government and regulators, in the fight to bring down prices, to gain control over raising inflation, will affect the stock prices in the short to medium term. AS 30 decalaration by corporates, on the forex derivatives exposure, is gradually bringing the skeletons out of the cupboards, from companies, banks and financial institutions, the current exposure affect and on individual corporates, on their own or on behalf of the clients, need to be analysed thoroughly, in due course of time, which shall affect the bottomline, in turn valuations too.

 

Range for the Day: Nifty might trade in the range of 4920 to 5120 today.

 

Strategy for the Day: Buy 5100 puts on rallies and 4900 calls on weakness for quick returns in intraday trading. Please note that the premiums shall rapidly fall and move in tandem with spot price adjusted to the strike price, since today is the last day for current series.

 

Tcs results Disappoint the street! - Crude touches 119.90 $ - Volatility to raise again

Our markets have turned volatile, due to the muted Q4 numbers from TCS, the largest IT company from our country, and their cautious outlook for the next quarter, have dampened the sentiment of investors, who were riding the IT wave since the announcement of good set up of numbers by Infosys, and confident outlook by other majors viz., Wipro & Satyam Computers. While TCS alone lost 11% from previous close, the highest ever since it listed on bourses in 2004, the rub off effect is felt on entire IT pack, which was down anywhere from 3% to 6%, across board.

 

Crude touched all time high of 119.90$ on the increase in demand, and due to weakness in dollar,  which has spooked US markets, where Q1 numbers from major companies fail to meet street expectations, and are unable to give confident future performance, in view of the Economic Slow down in US already being experienced. Results of Reliance Industries for the entire year have revealed sterling performance, but the margins looking down for the first time in last 9 quarters. The stock saw profit booking a head of expiry of current series. ONGC is slapped with a notice by IT department to pay tax on subsidy provided to Oil Marketing Companies, is a peculiar issue facing the company, the outcome of this litigation, would set the clarity on how government will deal with the issue of control of petro products in future. CRISIL down grades GDP growth forecast for this fiscal to 8.1%, due to raising commodities prices, inflation.

 

Nifty VIX has jumped a whopping 30.85% to settle at 39.62(the highest so far after its introduction) yesterday, indicates return of high volatility, as crucial technical levels are being approached. The band of 5080 to 5140 on Nifty offers stiff resistance, as 200DSMA also falls in this region, and is a heavy supply zone, where bears will gain upper hand, with lots of negative cues floating around, and crucial events to unfold during coming 7 days from now on. Singapore NIfty futures are trading at a discount of 10 points discount currently, and indicate weak opening of our markets, as asian markets opened in negative territory but recovering slowly.

 

Today being the penultimate day of the current series, saw a good roll over of Nifty to next month series already, while stock futures rollover lag behind, owing to mixed performance for Q4, and due to ensuing important rate sensitive announcements expected from RBI and FOMC. Nifty & Sensex have closed above 50DSMA firmly due to a 6 day strong rally on indices, which have seen some two way volatility yesterday.

 

Range for the Day: Nifty might trade in the range 4950 to 5100.

 

Strategy for the Day: Buy 5050 puts on rallies and 4900 calls on weakness for intra day trading.

RBI increases CRR by 50bps in two tranches to fight Inflation stabilizing above 7%

Our markets have posted gains on thursday, on the strength of global cues and better than expected results from Infosys and other tech companies.Finally Nifty closed above 50DSMA for the week ended 17.04.2008, though Sensex is at a shy away distance for such performance, missing by 100points. After market hours RBI announced CRR hike in two tranches since the inflation though shown a down tick from 7.41% to 7.14% is far above its tolerable (comfortable) level of 5% for the year. 25bps will be effective from 26.04.2008 and another 25bps will be effective from 09.05.2008. This will drain away Rs.18,500 from the banking system, apart from the MSS and LAF measures being put in place by RBI to suck the liquidity from the economy. This measure of raise in CRR, a head of its monetary policy meeting on 29.04.2008, surprised many FIIs, though every one is expecting raise during the meeting. Now, the mute question is whether this move helps in containing the ever increasing inflation or bring it down to at least below 7%? What other measures are in store from RBI and government to tackle the inflation 'dinosaur' which has gained centre point of attention and discussion, since government is under tremondous pressure, as every section of the people and sector of the economy is now feeling the pinch.

Tinkering with Repo rates, and further CRR hikes, or discouraging lending to non-productive sectors by commercial banks, bringing the constituents of the WPI under Essential Commodities Act, Increasing supply by allowing imports and banning exports etc., are already being attempted by Government separately, which also are not showing any impact, since the problem is complex, as the inflation is mostly imported phenomenon. Crude touched $117.50, due to supply concerns and raising demand and might touch $120 during this weak is destroying the economic growth of best performing economies like China and India too will be impacted shortly, as our dependence on imports is quite large even today. It is being estimated that inflation shall touch 8% in the coming months, owing to the above situation, is not at all good news to economy, equity markets, especially rate sensitive sectors like, banks & financials, automobiles, commodities and consumer goods sectors.

Thus, the technical levels of Nifty and Sensex, might give bullish indication in short term having stabilised above short term moving averages, but moderation of economy and effect on profitability will be felt by the above sectors, in the coming quarters, which 'cap the upside' on our markets too. Investors need to be cautious for committing large chunks of money to equities, in these uncertain, and conflicting times.

The Week a head: Though the VIX has comedown to 27.10 lowest so far after it is introduced by NSE, volatility shall return back during this week, due the expiry of current series on 24.04.2008, next inflation data to be released on 25.04.2008, results of important companies like Satyam(today) before market opens & Reliance Industries during or after market hours (today); TCS (22.04.2008). Institutions and investors will be guessing on medium term trend now, expecting the policy stance from RBI to be known on 29.04.2008 and finally FOMC meet on 30.04.2008.

US markets have closed strongly on friday and closed above february highs, confirming bottoming out in medium term, and asian markets are trading positive today, where as Singapore Nifty futures indicate a premium of 45 points, might give a gap up opening for our markets, and whether 5022 on Nifty will be conquered is to be seen!

Range for the Week: Nifty might trade in the range of 4740 to 5140 during the week.

Strategy for the week: Buy 5050 puts on rallies and 4750 calls on weekness of current series, as we expect the nifty to settle around 4920 on the settlement day(24.04.2008), based on the open interest position as of now.

Will Nifty clear 50DSMA and close above 5000 mark today?

After a stunning rally on 15.04.2008, Nifty was slightly volatile yesterday(on 16.04.2008), though opened gap up, profit booking around 50DSMA levels of 4950 was noticed, finally ending marginally positive. US markets had a strong rally overnight, on the back of doubtful financial sector stocks, announcing better than expected results, inspite of some weak economic indicators, should help our indices too to open strong. Asian markets are trading firm, and Singapore Nifty futures indicate positive opening due to the 70 points premium at which they are currently trading. Whether our indices clear 50DSMA 4949.84(Nifty) & 16618.97(Sensex) today and close above it, is to be seen in view of mixed signals / events to unfold today and during this week end. VIX has gone down by 7% to 27.94, brings down volatility, and indicates a directional move is in the offing.

 

Positive News: Global markets are firm and buying in index heavy weights seen on every dip/weakness. Results from corporates are in line with expectations or better than expected. Stock lending and Borrowing shall be introduced from 21.04.2008 on indian bourses, which makes our markets join the practice of developed markets like US markets, and infact, the settlement being T+1 here, as against T+3 on US bourses, makes our markets more efficient, in fact the best in the world. The scheme should create liquidity and participation interest among investors and institutions, is good for our markets in the long run.

 

Negative News: Crude touched 115.07$ yesterday and threatening to go upto 120$. This is mainly due to weakness in US dollar, Indian crude basket touched 106$ already, make ONGC and Oil marketing Companies suffer heavy losses, as they are not allowed to raise prices, since they are under government control. Any raise in Petrol and Diesel price will push the inflation further up and effects the manufacturing sector and entire economy. Raise in commodities prices world over, have imported inflation to our economy too and 7.41% reported last week, is way beyond tolerable threshold of RBI and Govt. While both have started expressing concern, taken few measures and shall take further measures, as they cannot be mute spectators of this 'devil' raising its ugly face continuously, as it hurts every one including the ruling governments, which face by elections, mini election and may be general election too. Unwinding of Participatory Notes issued under subaccounts of FIIs registered, who do not wish to regularise, who are given 18 months time, when the issue was settled by SEBI during  October '2007, is putting pressure on our indices, at every raise, which is evident from FIIs selling figures in 2008 so far.

 

Events which influence the markets from now on: Inflation data to be released today, whether it breaches 7.41% reported last week! Results and guidance of other Tech majors viz., CMC, Wipro, Satyam Computers and TCS; Expiry of April Series on 24.04.2008, Results of Oil Sector majors viz., Reliance Industries, Ongc etc., RBI Monetary policy meeting Scheduled on 29.04.2008 and finally FOMC meeting on 30.04.2008.

 

Range for the Day: Nifty might trade in the range 4750 to 5050.

 

Strategy for the Day: Buy 5000 puts on rallies and 4700 calls on weakness for intra day trading.

Better than expected results from Infosys lead to huge short covering rally

Infosys performance for Q4 was just marginally higher, however, dispelling all pessimism, the full year performance achieving what was guided a year back, and the confidence of the management, in guiding flat Q1, and 15% bottom line growth, for 2008-2009, enthused the investors, funds and lead to huge short covering of the stock, and other tech stocks too, which have moved up 5 to 7% in yesterday's trading. This  had a rub off effect on other non tech heavy weights too, which moved Nifty from the slogging range of 4650 to 4850. However, reduction in open positions in Infosys and Nifty futures having 35 points premium(based on last traded price) though the final premium stood at 18 points to the adjusted spot price of Nifty indicate, huge short covering in Nifty futures too. Roll over to May Nifty series also commenced using the increase in cost of carry existing, by funds was visible, with May Nifty futures premium raising on par with April series and some times, exceeding during the day.

 

Nifty has firmly closed above threshold level for bull domination, 4840 at the end of the session, on increased volumes and participation. US markets were volatile and finally closed in positive territory, inspite of Crude touching 114$ on weakening of dollar, asian markets are trading with gains, should augur well for our markets too. VIX has comedown to 30.23, a 10.64% fall indicates reduction in volatility today. Singapore Nifty futures are trading at  22 points premium right now, should help our indices to have flat to small gap up opening.

 

A Word of Caution: Since this is a truncated week, with 18.04.2008 being a market holiday, and roll overs have started, and the inflation data shall be released tomorrow, on 17.04.2008, which in our view might show an uptick, may invite bull unloading, and the premium on nifty encourages short selling by funds, since the indices are far below long term moving averages even now. One day strong upmove cannot change the sentiment, and long term trend, unless, follow up buying emerges, and Nifty closes  firmly above 200DSMA which now stands at 5140.

 

Range for the Day: Nifty might trade in the range of 4750 to 4950.

 

Strategy for the Day: Buy 5000 puts on rallies and 4700 calls on weakness for intraday trading.

Infosys Results & Guidance - Effect on Indian Markets

US markets traded in narrow range, inspite of results of one of the largest bank reporting reduced numbers, and cutting the dividend steeply to preserve capital, for future operations, and finally closed in negative territory. After a holiday our markets open for trading today, with infosys results already announced, along with guidance for the coming year, which shall influence in the movement of bell weather stock and also the tech sector, in general. HCL Tech also shall come with results today. Huge volatility can be expected as VIX has inched up to 33.83 on friday at the close. Singapore Nifty futures are trading at discount of 110 points right now. Asian markets are trading mixed, after a slump yesterday.

 

Infosys Results: It has announced the results for the Q4, which are in line with market expectation. Full year EPS achieved at Rs.81.56. Yearly performance is on target as they guided. The guidance for the next year  is at EPS Rs.94, and may enthuse the markets. The out look for the full year is cautiously optimistic, as the situation in US is uncertain, The Stock may open positive and then move up on short covering.

 

Wipro, CMC results are scheduled for 17.04.2008 and Satyam Computers results are scheduled for 21.04.2008. Reliance Industries will announce its results on 27.04.2008.

 

Range for the Day: Nifty might trade in the range of 4650 to 4850 today.

 

Strategy for the Day: Buy 4600 calls on weakness and hold them till expiry.

Inflation, IIP Numbers, & Infosys results scheduled for 15.04.2008!

On last friday, our indices moved in a narrow range, and were volatile due to release of market sensitive information, at intervals, however, at the end of the session closed in positive territory. Nifty had a knee jerk reaction when the Inflation data is realease around 10.40 a.m. shown the uptick to 7.41% highest, went down, only to recover quickly and move up when the IIP numbers shown positive raise to 8.6%. The fears of slowing down in manufacturing data, on the sudden fall of capital goods data in January are now put to rest, though these figures cannot give phillip to bulls to regain control, further damage was curtailed on the last day of the week, which has resulted in positive closing for our indices week on week basis. Nifty has closed above march closings and also above 5DSMA & 20DSMA is positive future. In view of Infosys results on 15.04.2008, before market hours, shorts are built in the counter, as our markets are closed today(14.04.2008) on account Dr.Ambedkar's birth day, profit booking was seen in last half an hour on friday.

US markets tanked on friday, with disappointing results from GE, and fall in consumer confidence index, the asian markets and european markets are down today, since our makets are closed for the day, the effect shall be felt at the opening of trading tomorrow, together with the over night cues from US markets tonight, and Infosys results tomorrow. Another feature is this is shorter trading week with only 3 days of trading, due to intra day trading and volatility shall be high, as our markets are closed on 18.04.2008 also(Mahavir Jayanthi holiday). Investors are not having confidence to keep or build long positions, as falls are steep and raises are small, which is clear feature of typical bear market. Nifty traders dealing in options need to understand that the value of options fall steeply as the expiration date approaches, and naked options are highly risky, and loss of entire capital in no time shall happen, if proper hedging is not taken care.

Range for the Week: This week Nifty might trade between 4350 to 4850.

Crude touches 112$ and IMF forecasts global slowdown!

Our markets opened in negative territory, and wer volatile oscillating between positive and negative territory till about 2.30 p.m. and buying in index heavy weights, coupled with short covering helped the indices to climb above 5DSMA and 20DSMA on closing basis, at the end of the trading session, albiet, low volumes, which is a regular feature ever since the crash in January' 2008, participation got reduced a lot. Crude touched 112$ and then cooled off to 110$ later yesterday, on global slowdown forecast by IMF. Bank of Japan has left rates unchanged, and the manufacturing data shown a decline of 12.7%, which makes Nikkie open negatively already. US markets opened and traded in negative territory during the entire session and closed negative on profit booking. Bank of England will meet today to decide on rates, the home sales data from UK also reportedly falling.

While all markets traded in negative territory and closed in negative territory, our markets have closed in positive territory, due to short covering, makes them vulnerable to sharp fall today once again, with weak global cues. Singapore Nifty futures are trading at 29 points discount right now, indicates a gap down opening for our indices. VIX (Volatility index on Nifty Options) shown an increase of 21.7% over tuesday's level of 31.40, now stands at 38.24, indicates increase in volatility further. Steel companies have announced Rs.5,000/- per ton, raw material surcharge on the end product, to be passed on to the end users, to justify the price rise, and explain to government the factual position, has hurt steel stocks yesterday. Automobile companies started raising the prices, to pass on the input cost to consumers, and higher oil prices, force the government to pass on the loss of oil marketing companies, which will push prices of petrol and diesel. All these factors push inflation further up, which hurts growth. Yes bank results were better than expected, in view of the fear among investors on the forex derivatives exposure which is to be declared in AS 30 under new ICAI rules, is a relief. However, Yes Bank is a small private sector player and has no exposure at all, how ICICI Bank, HDFC Bank deal with their exposures, which are index heavy weights is important to be watched upon.

Range for the Day: Nifty might trade in the range of 4600 to 4800.

Strategy for the Day: Buy 4600 calls on weakness and 4800 puts on rallies, for intraday trading.

Nifty Volatility Index launched on 08.04.2008 by SEBI Chairman!

Our indices opened flat to marginally positive initially, and profit booking set in immediately, Sail and other steel stocks corrected 5 to 7%, as predicted in the morning report, on the news that Coke prices will firm up by 200% due to supply concerns during the year; Nifty breached crucial march closing and 5DSMA and 20DSMA placed at 4735 and the total fall of nifty from the peak of yesterday measured 90 points(100 points fall was anticipated). Finally, though the nifty closed above 4700 on adjustment basis, it closed well below 5DSMA(4728.81) & 20DSMA(4736.22); gives strength to bears to hold control of trading. US markets tanked initially after hearing the FOMC minutes, which indicated confirmation of recession in US Economy, but still recovered by the end to close marginally negaive, on the hope of another rate cut in ensuing 30.04.2008 FOMC meeting by 50 basis points. Asian markets have opened mixed and trading mildly positive, and it appears that all markets, devoid of any serious bad news, excepting crude touching 111$ in intraday trade, are in sideways consolidation mode for now.

 

Nifty volatility Index, will be knows as "VIX" is launched by Sebi Chairman yesterday after closure of market hours, which will measure the 50 stocks options comprising the Nifty movement intraday, in terms of volatility, similar to CBOE volatility index, which is very popular amongst deriavatives traders. Gradually after some time it will be listed and investors and traders can trade on this index too, however, for the present this index gives a measure of volatility quantum, to hedge the portfolios, before hand, and is a good tool for portfolio managers. The measure indicates modernisation of trading practices in Indian Stock markets, which are receiving greater attention and participation, from over seas investors. Singapore Nifty futures are currently trading at 32 points premium, however, Nifty futures closed at discount of 15 points yesterday, might bring in two way movement for the indices, as the fight between bulls and bears continues for some more time. Volatility can be high during this week, as VIX stood at 31.40 points yesterday, as reported, since we have a truncated week with 3 days of trading next week, and at beginning of the week, on 15.04.2008, Infosys will announce its annual performance, dividend and also guidance for  the next quarter/year, which might decide the short term trend of the market.

 

Range for the Day: Nifty might trade in the range of 4600 to 4850.

Strategy for the Day: Buy 4600 calls on weakness and 4900 puts on rallies, for intraday trading.

 

Week begun well whether follow up buying emerges or Weakness creeps in again as usual!

On set of Telugu New Year "Ugadi" and Gudipadava (New year for Maharashtrians) augured well for investors, and all markets had surprisingly strong rally, due to short covering, and buying at lower levels in index heavy weights. The mood is same everywhere, however, Nifty encountered the resistance at 4800 specified by me yesterday, and profit booking cum short initiation resulted in reduction in premium of Nifty futures in the last half an hour trading. Nifty futures are at meagre 2.80 points premium to spot closing of yesterday, on adjusted basis, indicate lack of confidence of bulls and market players to carry the long positions overnight, because every day and night shocks are received from overseas and domestically too. US markets opened quite firm, and traded strong through out the session, and gave away all gains at the end of the session, finally closing flat to marginally negative, as investors await unfolding of results season during this week.

Commodity prices are showing their ugly raise, due to weak dollar and on supply concerns, Crude reached 109$ and the news that the coke prices will raise by 200 to 250% during this year, on supply shortages, is not at all good news to Indian Steel majors, who import 80% of the requirement, puts pressure on input cost, hurting the margins, while they are under tremendous pressure from users and government to contain prices of end products. The price of steel is important component for many industries viz., infrastructure, automobiles, construction, tranformers and electrical equipments, whole lot of consumer goods too, which pushes the prices, keeping consumers away. Inflation showing its ugly head above 7% levels shall have its effect too, with the raise in commodities prices, and the government is in catch 22 situation; as they want the growth to continue, this being the election year, do not like prices to spoil the chances of re-election comfortably.

Singapore Nifty futures are trading at a discount of 45 points, and a weak, gap down opening, can be expected, as asian indices too, are trading in negative territory right now, whether Nifty gets follow up buying support at 4740-4700 levels is the key point to watch for the day. The 5DSMA & 20DSMA are placed around 4735-4740; should be held, if bulls wish to take the advantage of yesterday's gains; failing which Nifty will fall by 100 points to retest 4677 level, during the day.

Range for the Day: Nifty might trade in the range of 4600 to 4850.

Strategy for the Day: Buy 4600 calls on weakness and 4900 puts on rallies, for intraday trading.

7% Inflation makes our markets fall like 9 pins!

Our markets opened slightly positive and were looking nervously at the inflation numbers to be released at 12 noon, where markets expected flat to slightly lower numbers in view of the measures initiated by the government, but when the numbers touched 7%,a three year high, there was dumping of all stocks and index futures, continuously till the end of the session, since RBI intervention also is being felt to tackle the situation before it goes to worse from bad. While US markets have posted substantial gains week on week, our indices have posted 6% losses on week on week basis, shows the disconnect between the markets. Thus, the domestic issues are playing major sentiment drivers to both foreign investors and domestic investors at the current juncture. The resumption of bull market cannot be foreeseen till indices close above 200DSMA for at least few weeks successively.

 

Investors need to understand that we are already in "bear market" and preservation of capital should be the top priority, as many analysts suggest picking of beaten down stocks, for good returns over period of 2 to 3 years;

 

I refer to our indication in the posting dated: 03.03.2008 cautioning investors about onset of bear market, while everyone thinks it is correction "

 

A word of caution: Bull markets end while everyone is thinking that the weakness is a correction, and on set of bear markets is realised by everyone, when enough damage is already done. Every one should hedge the portfolios with proper hedge depending on one's own risk perception"

 

It is currently sideways distribution phase which is in place, any portfolio is to be duly hedged with in the money put options of individual stocks in the portfolio or with put options on nifty. Any relief rallies should be used to lighten the weak stocks in the portfolio even at loss and increasing cash levels, trading would be a good strategy, from now on. The Telugu New Year Ugadi begins today(same is called Gudi Padava in Maharashtra); and this new year readings from astrologers indicate turmoil in politics, financial markets, raise in prices, and possible early elections to Parliament, will keep markets guessing on the direction, ignoring postiive developments.

 

Infosys Technologies informed the stock exchanges that it would announce its results and dividend for the year on 15.04.2008, generally before market hours, would set the tone for the stock, an index heavyweight and the sector too, based on its guidance for the year gone by, and the guidance for the next year. BHEL results spooked the markets, and stock crashed due to higher valuations, and still the capital goods stocks would correct more, as the average price earnings multiple of most of index heavy weights under this category far above index P.E. or other sectors. No doubt that the infrastructure sector is important for our country, and the current order book is very strong, but how the operating margins affect, due to raising input costs, inflation which does not allow reduction in interest rates by RBI and banks, should not be overlooked while looking at the correction of these stocks from their January' 2008 peaks.

 

Range for the Week: Nifty might trade between 4450 to 4850 during the week.

 

Strategy for the Day: Buy 4500 calls on weakness and 4800 puts on rallies for intra day trading.

Whether Bulls win over Bears now?

The trading pattern since the financial year ending 31.03.2008, is influenced by number of factors. The abstaining of trading fraternity, protesting STT revised treatment brought down the volumes drastically. Gap up and Gap down openings, influenced by overseas cues, are due to FIIs control over the markets. DIIs, HNIs and Retail investors, are watchful since lot of noise is made on TV channels, suggesting that further serious meltdown is on cards, once results season unveils. In this back drop, the pattern developed is bulls are defending 4740 level(closing of March,2008), where as bears are ensuring that the level of 4831(March settlement price of 27.03.2008) is not lost, inspite of gap up openings and markets clearing this level on few occasions in the past few days of trading in April'2008. Thus, the battle lines between bulls and bears are in a striking distance of 100 points (4840-4740). The volatility has come down, as overseas markets, especially US markets are stabilizing, and lack of participation by traders, HNIs and retailors who create liquidity for our markets, brought down the volatility and range for our markets, specifically. Nifty has closed above 20DSMA (4758.17)yesterday, and a marginal cross over of 5DSMA (4788.37), tilts in favour bulls, who are waiting to take the lost fort from bears.

The mute question is who will win from now on? No doubt that markets are in firm bear grip, as they need not exit till 200DSMA is cleared with large scale participation and volumes. Few Developments taking place are of interest to markets.

RBI allowed MFs to invest upto 7$ billion in overseas assets(an increase from 5$billion dollars existing);

BSE Sensex futures will be listed and trading from 04.04.2008 on USFE(United State Futures Exchange), Chicago and will trade for 23 hours, giving arbitrage opportunities to FIIs and ADR investors.

SEBI permits FIIs to punch their orders directly on indian exchanges, instead of routing through registered broking houses, helps FIIs to reduce their cost, and trade freely, without allowing Brokers to do any front running. Certainily, broking companies who are having this business will get affected, who are already suffering due to low participation by retailors, will have loss of earnings.

SEBI proposed to allow Short selling in our markets, including Stock lending & Stock Borrowing by Institutions from 21.04.2008, will change the trading pattern of our markets.

Today's trading and final closing after knowing the inflation data latest, will decide the break out in either direction of the markets from next week. Singapore Nifty futures are trading at 15 points premium currently.

Range for the Day: Nifty might trade in the range of 4650 to 4950 today.

Fighting between Bulls and Bears intensifies!

Taking the strong closing of Overseas markets, our markets opened on strong note, gap up and traded firm, inspite of profit booking by traders and trapped investors at high levels, for most part of the trading. When European markets opened in negative territory and US futures indicated weakness, a head of Fed chairman Mr.Bernarke, before congress, traders became nervous and cautious, as gap up and gap down openings are hurting retail investors, thus, resulting in indices giving away entire gains, by the end of the day, however, closing flat to marginally positive, holding the gaps created in the opening of trading. Though Mr.Bernarke made confession about the problems being faced by US economy, and steps taken to save the Bear Stearns from bankruptacy, investors are enthused by raise in private jobs data which showed + 8000 as against economists expectation of -40,000, made indices to trade in narrow range and close flat to marginally negative.

In this back drop our markets will now concentrate on domestic issues, expectation of performance of companies as results will start trickling in from next week, and the guidance for the coming financial year, will give reaction to stocks and sectors. US markets seem to have bottomed out, and will be on the verge of break out as expectations of another rate cut being expected in ensuing FOMC meeting on 30.04.2008. Nifty has closed around 4740 levels on both negative opening day and positive opening day, which is above 'march closing' gives an indication that the consolidation in the range of 4550 to 4950 for few days, will give a break out on upside to challenge the 200DSMA too. CBOE volatility index has dropped to 22 indicate reduction in volatility for the present, and markets might get into no interest zone, as investors, funds look for real cues on performance of Indian Economy from now on. Singapore Nifty futures are currently trading at 15 points premium.

Range for the Day: Nifty might trade in the range of 4650 to 4850 today.

Government initiates measures to fight inflation - Commodities markets crash!

Our indices opened with posititve gap and due to short selling breached 31.03.2008 lows, and by mid afternoon, when asian markets closed firm, and European markets opened in positive territory, short covering and fund buying lifted the markets from lows, finally Nifty ended flat to marginally positive and sensex closed marginally negative. Trading community abstained from trading on 01.04.2008, protesting the change in treatment of STT in this financial year which eats in to their margins, and threatens their survival, lead to low turnover, inspite of huge volatility. Government of India has announced several measures to increase the supply side of commodities, which immediately effected the commodities markets to crash and some commodities have hit lower circuit. This action coupled wtih steel ministry asking the industry to voluntarily co-operate to reduce prices, should show effect on steel companies shares today. The effect of these measures on containing inflation or bringing it down will be known after few weeks, but markets always discount the future, so banking and financial stocks to do well from here on.

 

US markets had spectacular rally overnight, on the news that UBS and Lehman brothers are raising fresh capital to shore up their balance sheets, and the march manufacturing data shown marginal improvement over february, enthused investors to lap on to equities that some calmness is returning to the US economy which is threatening to have one of its worst recession. Whether it is a one day affair or a fresh rally began will be confirmed if follow up buying emerges for few more days. Singapore Nifty futures are trading with 200 points premium currently, and gap up opening for our markets is a foregone conclusion, as there would be short squeeze, since many players are short on 4800, 4900 & 5000 calls of current series, expecting further down side. How Nifty behaves around 4950 to 5050 level is the important observation which gives clue for future course of our markets.

 

Range for the Day: Nifty might trade in the range of 4750 to 4950.

 

Strategy for the Day: Go long on April Futures above 4825 with a stop loss at 4770.00 duly hedging with 4900 put option.

How April unfolds and the challenges for fiscal year 2008-09!

Ending of March'2008, the last day of the monh, quarter and the financial year 2007-08; surprised every one, including me, due to sustained selling from the bell rung in the morning till end of the session, the small hope that fund buying shall help indices stabilize or recover from the bottom, when belied, traders who have built long positions have no other way except to cut the positions and book losses, which brought the indices much below the anticipated support level of 4850-4800-4750 etc., on Nifty. Nifty finally closed in the lowest point on monthly basis in 2008, and what happens from today being the first day of April'2008, where number of developments on global as well as domestic front will confront the economy, corporate performance, liquidity, inflation and naturally our markets too. US markets closed in positive territory, and Singapore nifty futures are trading at premium of 60 points, while asian markets are postive and firm, before opening of our markets.

RBI governor expressed concerns on inflation reaching unexpectedly high levels and said that prepared to tackle the situation, if required instantly too. Government has announced number of measures to allow imports and curb (remove the incentives) the export of commodities and items, which are components of CPI and WPI to tackle the inflation. The clarification from ICAI on treatment of mark to mark losses on derivatives exposure by corporates for this fiscal and qualification for previous financial year(year ended on 31.03.2008) caused good amount of panic among even institutional investors yesterday, who have dumped stocks. SEBI's draft proposals released yesterday evening, shall dampen the sentiment of retail investors and broking community further, as minimum networth of Rs.5 lakhs (duly certified by a CA) has to be obtained from client for allowing derivatives transaction. Ofcourse these are draft proposals, market men must be having some clue about its coming, thus further liquidation of positions in momentum stocks too was witnessed.

I have indicated that 4800 to 5800 will be the range for March, but Nifty has closed below 4800 on the last day at 4734.50, which is the lowest closing during 2008. While sensex breached January low of 15332, nifty has held above 4448.50 during march. RBI credit policy announcements on 07.04.2008; and unfolding of results season starting with tech bellweather "Infosys Technologies" and its guidance, and views on the prospects for the tech sector, which can indicate the effect of US economy on Indian tech sector to major extent, will decide the major trend of the markets for the month and this quarter too.

Technically, Nifty can break the level of January low, during April and can go to 4296.97 on any panic day, which is 38% retracement level of entire bull market from 935.70 to 6357.10; Yesterday's closing below 5DSMA doesnot augur well for the markets in this month, until 200DSMA placed at 5100 is cleared with volumes and participation of all players and majority sectors, long trem trend of the market is also in question now.

Range for the Month: 4300 to 5300 on Nifty.

Strategy for the Month: Buy 4600 calls on weakness