Inflation at 7.57% 42 months high! Sensex too closes above 200DSMA finally!

Taking the strong overnight cues our markets opened with gap up firmly on friday, and traded volatile till the release of inflation data, which was expected to be higher. When the data came as a surprise at 42 months high at 7.57%, initially, there was a sell off in rate sensitives but, owing to firm close of asian markets and strong opening of European markets, our indices have closed in positive territory, posting week on week gains too. In the process, Nifty has closed at 5228.20 crossing February closing of 5223.50, giving indication of bullishness. Sensex which was strugglilng to cross 200DSMA has opened above it with a gap and finally closed above it at the end of the session at17600.12. Now both the indices are well above 200DSMA, as markets look for information from now on during the week and this month, and further gains whether can be there, in view of raising crude prices once again, inflation crossing tolerable levels, is a big question. Investors need to exercise caution, though 200DSMA levels are crossed, any external news or event also can invite selling from FIIs, and markets are not going to rally as they did in the last 4 years. Currently VIX closed at 24.21 on friday, indicates low volatility, and raise in any volatility from now on should be treated as the first sign of reversal of trend.

US markets opened firm on friday and gave away all gains, due to raise in crude prices, and mixed economic data, investors preferred to book profits, while Dow posted marginal gains, Nasdaq has closed with marginal loss at the end of the session. Asian markets are trading mixed and Singapore Nifty futures are currently quoting at 25 points premium, which should give marginal positive opening for our markets. Our markets might consolidate at higher levels for sometime, in case they wish to move up. Professional short term traders can place their first stoploss at 200DSMA on Nifty which is currently placed at 5165, for all long positions, and final stoploss at 5087, in case one wish to take higher risk. This is not a bull market and retail investors should not try to catch the momentum on either side, as they run the risk of loosing money, when the tables turn against them suddenly and swiftly. SBI came with better than expected results and also announced that all its subsidiaries merger with it might be comleted by March 2009, is positive news for the stock, its subsidiaries and a rub off effect on banking sector also can be seen initially.

Range for the Day: Nifty might trade between 5110 to 5320 today.

Strategy for the Day: Buy 5300 puts on rallies and 5100 calls on weakness for intraday trading.