Volatility sets in again and time to be cautious!

Taking the global cues our indices opened weak, as anticipated, and short covering at lower levels lifted indices back into green by the end of the session, since the european markets opened positive initially. Nifty closed above 5110 critical level at the end of the session, with the help of Reliance Industries, RPL and oil related stocks. Crude cruised to US $133.17, and firmly closed above 132 level, further threatening to raise to 138 level, is no good news for global economies and equities in particular, though few companies like Reliance Industries, Cairn etc., shall be benefitted. FOMC minutes of April, 30th meeting observed that the US economy shall slow down in first half of 2008, the concerns of raise in inflation, unemployment, signal 'close call' on rate pause for a while, made investors nervous and the Dow, Nasdaq and S&P have tanked overnight. CBOE index is showing uptick, indicates return of volatility for US markets.

 

VIX has risen to 27.86 yesterday suggests volatile trade for the day and this week. Singapore Nifty futures are currently quoting at  99 points discount indicate gapdown opening for our markets. Roll over of derivative positions to next series shall bring in two way movement from now on. With every raise of Crude by US $ fiscal deficit of our country widens, since oil imports constitute the largest chunk of our imports bill. PSU Oil Marketing Companies have decided to market premium products of Petrol and Diesel in 18 major cities, will indirectly raise petrol by Rs.3/- and diesel by Rs.2/- which will make urban life difficult, where already inflation is hurting further. Once karnataka assembly polls are concluded, government might look at raising petroleum product prices, since it exhausted the limit of Oil bonds route already. PSU banks are awaiting release of funds from Government, for the amounts written off, as per the Agricultural Loans Write Off scheme announced in budget 2008-2009.

 

Range for the Day: Nifty might trade in the range of 4980 to 5140.

 

Strategy for the Day: Buy 5000 calls on weakness for quick returns.