Our indices opened in positive territory and traded in narrow range till the inflation data was released which showed flat w-o-w at 7.82%. This being the provisional figure for the week ended 10.05.2008, should have enthused the markets, but the revised figure for week ended 15.03.2008 was at 8.02%(provisional figure was 6.68%) an increase of 134 basis points, spooked the sentiment, where global weakness has already set in. Thus, on adjusted basis the current provisional figure would result in inflation already being at a level of 9.16%(7.82 + 1.34), is not at all good news for equities. Nifty broke 5000 level and even 4950 level which is being watched by many analysts, to close below it at 4946.55. The only solace in the carnage during the week was May low of 4913.80 is held so far, the 50DSMA currently placed at 4907.31 is the last hope for bulls to defend, for carrying on the medium trend up. During next week, once this level is gone, then bears will have upper hand.
US markets have closed in negative territory on friday, Dow breaking below12500 level and closed below it, is not a good sign for global markets. US markets are closed on monday. OMCs and Petroleum ministry are pressurising government to consider various alternatives including the price hike, which is not heeded so far, as it would push the inflation further, and also the growth in manufacturing would be hurt, due to spiralling effect. Petrol and diesel prices are increased by 4 paise with effect from today, which is the compensation to OMCs who have to pay to retail pumps.
How next week unfolds: Settlement of May series being scheduled on 29.05.2008, the outstanding contracts are at higher levels, higher volatility can be expected, as the fight between two camps intensifies. CBOE index has risen above 19, VIX closed at 34.06 indicate volatile times for the week. Investors should be careful with futures positions, as triggering of stop losses on either side will wipe out the initial margins itself. The news flow from government, RBI and crude price movement will influence the markets.
Range for the Week: Nifty might trade in the range of 4800 to 5200.
5 comments:
Dear Sir,
I gone thru your blogs and are really exiting. And I sincerely will read on daily basis.
Mr.Rao..Ideally, your puts for 5000 should have helped but the time decay effect is also there. Anway, what is the strategy for the next week. As you said, US is closed on Monday and hence the bears might have a field day for both Mon and Tue. On the other hand, I expect a fickle reversal, some time on Monday. What do you think?
Dear Mr.Rao,
Whether you think 5200 will be crossed in June? Last time Nifty didn'y break 4900. I hope there is strong resistance. What do you feel?
Dear Sridhar,
Our markets are perfectly intertwined with global markets currently, especially during may'2008, since the results season and corporate performance is more or less done with. Raising Crude prices, inflation and moderation of growth are common problem for global economy as well all economies including ours.
Under these circumstances, stock specific action, more than sector specific action would continue beyond June,2008. I have suggested at the beginning of 2008 itself that this year will be tough for equities. Bull run started in 2003 has peaked in January 2008, and continuation of it cannot be expected at least till October 2008, as the events unfold and news flows, to which markets will continue to react.
I will be suggesting my views on June'2008; once May'2008 performance on closing basis is seen i.e., on 31.05.2008.
bkvrkrao
One can recover the cost of 5000 puts of current series, which are currently quoting at loss, by selling next month puts(4900 puts of June'2008) where one has to maintain margin.
Alternatively, hold the same till expiry, as a hedge against portfolio one holds.
bkvrkrao
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