The weak opening with downward gap of indices due to Repo rate hike by RBI was countered by better than expected IIP numbers released at noon. The adventurous shorts created at the opening trade, by traders at the lowest point of indices, expecting further weakness, forced them to cover from afternoon onwards, as predicted in yesterday's posting, which was quite evident from the 30 point discount in Nifty futures narrowing by the end of the session to just 5 points. Both the indices have closed with gains at the end of the session, at the upper end of the session, based on strength indicated by positive opening of european markets, and premium in US futures.
Corporte Developments:
Reliance Industries AGM became a non event as investor's hope for an announcement of 'bonus' or split of face value, which was making rounds around every AGM for the past few years, are belied this time too. Ranbaxy promoters selling their entire stake of 35% to Daiichi, Japanese pharma giant, for an outright cash deal of Rs.10,000 crores surprised the entire pharma sector, other corporates, as well as analysts, as it is the first of its kind in Indian corporate M&A activity. Though Daiichi offered Rs.737/- for Ranbaxy share which is currently quoting at Rs.550/-, investors are sceptical about the prospects of the company, since the promoters are totally exiting from their stake, the shares have closed with losses in yesterday's trading. However, counter offer if any, for the entire block of promoter's stake from GSK pharma or Pfizer now being talked in industry circles will keep interest and two way movement in the stock in the days/weeks to come.
Crude cooled to US $132 again, which helped US markets to post gains overnight, inspite of Lehman brothers making another write down of US$2.6 Bn, and announcing to reduce the balance sheet size to avoid raising further capital, exerted pressure on the stock price. The subprime problems doesnot seem to be over, while now the cancer will spread to prime lending, credit cards defaults, and credit failures, is being talked specific to US economy will throw more challenges to the equities in US and world wide. VIX closed at 29.23 amidst huge volatility yesterday. Inflation data to be released at noon being expected to be around 8.34% further raise over previous week, since the raise in petroleum products are yet to be priced in will influence the market movement from there on. Some profit booking can be expected at the end of the session too on weak end consideration. excepting on 10.06.2008 Nifty managed to close above 4500 till now, recovering from lows around 4400 is a good sign, and also heightened volatility around 4400 to 4500 range is one indication of bottom formation, as bulls are fighting hard to defend this level. FIIs are sellers on most of the days during the month, as the macro economic environment is becoming more and more murkier, due to weakening of currency, raising of inflation, fiscal deficit and tightening of monetary policy by RBI. The sentiment has turned quite negative overall and we cannot expect it to turn around immediately, owing to the developments taking place worldwide.
Range for the Day: Nifty might trade in the range of 4400 to 4650.
Strategy for the Day: Buy 4700 puts on rallies for intra day trading.
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