After closing with 9% gains for month on month during April'2008, with number of events and most of the corporate performance is being out, we enter in to the month of May'2008, today. May month series is longer than April and already inidces have posted gains after April series settlement, till now. While Nifty firmly closed above 200DSMA, Sensex had an attempt at it in the last trading session(0n 30.04.2008) thrice, but due profit booking on holiday consideration, could not close above it. With US markets rallying over night, due to some signs of positive economic data, and cooling of Crude to 110.90 $ due to profit booking, on strengthening of dollar, as FOMC indicated that rate cutting is done with for some time, and would watch 'inflation', attempt at tightening and controlling from here on which will be the main azenda, as the turmoil in financial markets seems to be calming down. Bank of Japan has left rates unchanged. RBI has left rates unchaned, but increased CRRby another 25 basis points. Chinese Central Bank too has raised CRR last month, also is concentrating on bringing down the 'inflation' even at the cost of moderating the 'growth' in the economy. CBOE index is 19.53 being the lowest, and VIX has hit its lowest point 25.16.
Today, there will be a short covering, relief rally at the opening, and the 'inflation' data to be released at 12 noon, shall extend the same till the end of the session, in case it appears easing out below 7.41% highest touched so far few weeks ago, as number of measures are initiated by Government & RBI, which made Industry also to repond to hold prices for 2 to 3 months. Singapore Nifty futures are currently trading with 70 points premium shall give gap up opening for our indices.
May month out look: Our indices, both Nifty and Sensex have posted higher highs and higher lows during the month gone by(April'2008) albiet volatility, uncertainity around, and also posted gains over March Closings, which are the lowest in 2008. We have indicated that Nifty shall move in the range of 4300 to 5300 in our 01.04.2008 posting, which proved to be more or less true, as the range of Nifty for April actually was 4628.75 to 5230.75; Now what will happen in may? May month is generally devoid of any market sensitive news, excepting unforeseen external/internal factors in 2004 and 2006, brought indices to bottom out generally. If we consider the statastical trend and pattern year 2008 falls into the same groove, whether a bottom can be formed during this month? and which factor can bring about such sudden fall and volatility is beyond any done's comprehension. The only indicator which bring in panic reaction and wrong policy decisions by regulators could be shooting up of inflation beyond 8%; shall force the equities to suffer most suddenly and swiftly, since the sentiment and risk aversion to this asset class is already bruised with the steep correction in the first quarter. 100DSMA of Nifty is currently placed at 5329.61 should offer stiff resistance, on slaught of bear pressure coupled with bull unloading. The rally from bottom formed in March 2008, is a relief rally in a bear market, and could be a 'bull trap'. Thus investors and traders should exercise caution, take the profits and stay in cash, or alternatively hedge their portfolios duly with ITM put options.
Nifty might move in the range of 4500 to 5500 during the month.
Strategy for the Day: Buy 5300 puts on rallies and 5100 calls on weakness for quick returns in intraday trading.
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