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