Our markets have opened weak following asian cues, China was down 8% and Hongkong was down 4%, and traded in negative territory for most part of the session, registering new lows in 2008; nifty(4369.80) & Sensex(14645.31), however, due to short covering recovered in the last one hour of trading. Nifty closed at 4449.80 and Sensex managed to close at 14889.25 finally. Nifty futures which were trading at a discount of 35 points for most part of the trading finally closed with 2 points premium, indicates the short covering, as indices have corrected more than 10% in june already. Overnight US markets closed flat and crude cooled to US $131 as dollar strengthened against euro, on the assumption that fed might start raising rates from now on as fighting inflation will be the azenda from now on. VIX has fallen by 6% and closed at 30.23, indicates continuation of volatility. CBOE index too closed at 23 indicating volatility for US markets.
Nifty has closed below 4500 for the first time in 2008, thus, it is to be seen whether this level is conquered quickly today/tomorrow and it moves into the 4500 to 5000 range! Failing which, it will test 4296.97 which is 38% retracement of entire bull rally, and should then bounce to give a relief rally upto 4678.56. Our markets are moving in synchronization with global markets as issues such as...raising crude prices, inflation, slowing down of economy are common problems being faced in 2008. We have few more issues to deal with, political instability, growing fiscal deficit, over hang of outstanding ODIs which are forcing FIIs to exit our markets, thus squeezing liquidity. In my view, Nifty might consolidate in the range of 4300 to 4700 for some time and build a base and take a direction depending on how events unfold. Investors need to realise that the bull market started in 2003 ended in January' 2008 and indices cannot reach the highs made during this year at any point of time.
Many analysts are suggesting portfolio building in a small way etc., which can be initiated with proper hedge in derivatives, if one is knowledgeable and can afford. Small retail investors should prefer investing through mutual funds route only, rather than burning by direct investing in secondary markets which will continue to be volatile till another 12 months minimum from now on.
Range for the Day: Nifty might trade in the range of 4300 to 4600.
Strategy for the DAy: Buy 4600 puts on rallies and 4400 calls on weakness for intraday trading.
June Strategy-3 suggested: One can construct calender bull spread buy going long on 4400 calls of current month at Rs.153/- and selling 4700 calls of July series at Rs.103/-, where margin requirement will be Rs.20000/-(approx) also there. The strategy gives maximum profit of Rs.12,500/- on an investment of Rs.2,500/-. The maximum loss if nifty settles below 4400 by expiry of current series on 26.06.2008 shall be Rs.2,500/- only.. Break even level is 4450 on nifty.
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