Our markets closed with gains yesterday, due to short covering and bargain hunting by funds at lower levels. Nifty futures discount widened to 27 points at the end of the day, indicating building of short positions, confirming bear grip on the markets. RBI raised Repo rate to 8% to check the inflation, which shall show an uptick this week and next week, pricing in the increase in petroleum products. This will certainly force banks to increase deposit rates, as short term deposits are already giving negative returns to investors. The rub off effect will be there on PLR as the banks have to manage the NIMs to maintain profitability. IIP numbers shall be released today, which might show continuancy of growth in the economy around 8%; which must have given RBI to muster strength to raise rates, as growth will not be effected. VIX closed at 30.23 and volatility has become part of the markets world wide now.
US markets posted losses overnight, as crude cruised again to US136$. Already our markets have opened gap down now, and trading in negative territory at present, however, previous lows of 2008 are held for now, once IIP numbers come positive there should be some relief in the laster part of the session. Nifty is consolidating between 4300 to 4700 now. This consolidation for few days/ weeks will give base formation for a rally on upside or on breaching 4300 level conclusively our markets will go into deep bear phase lasting for another year or so., Investors are better advised to hedge the portfolios with put options on index or stocks as per the portfolio composition, during these volatile times. It appears that 26.06.2008 setttlement shall be less than may settlement 4835.30(29.05.2008) as per the outstanding positions of current series.
Range for the Day: Nifty might trade in the range of 4300 to 4550.
Strategy for the Day: Buy 4400 calls of current series and hold them till tomorrow.
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