Volatility becomes part of markets! Bottom formation round the corner!

Both the indices, made new lows for 2008, Nifty(4225) & Sensex(14163.45) yesterday, and Nifty even closed below 4296.97, 50% retracement level indicated while Sensex held 14263.12 on closing basis. June nifty futures turned into premium, indicating shorts are rolled over to July series which currently quote at a discount of 20 points. VIX closed at 31.32 indicates volatility to continue. US markets were volatile but Dow closed flat and Nasdaq with marginal losses. Singapore Nifty futures are currently quoting 25 points premium, and asian markets opened in positive territory. 4200 on Nifty might be held till expiry, as only two more days to go. Dr.Y.V.Reddy, RBI Governor while addressing at NIBM, Pune, tried to convey the message that though we are passing through tough times, due to imported infaltion caused because of abnormal raise in crude prices, growth projections shall be on track, as other indicators are under control. He further said that RBI is well prepared to check the demand side factors for ensuring growth targets are met, as envisaged in April policy. So far roll overs are muted and only short positions are rolled over.

Advance tax numbers from ONGC,RIL,NMDC etc., all have shown good jump and total advance tax collections were quite substantial as per CBDT release. Q-1 numbers will be good, especially from tech sector, Oil refining companies and commodity players, and the valuations have come quite attactive, thus, small quantities of purchases are being made by insurance companies, which are not able to match the selling from FIIs, due to which we have witnessed continuous down fall of 700 points on the Nifty and 2500 points on Sensex during this month. Even long term bear markets will not have continuous down days and shall have bounces and relief rallies intermittantly. Currently indices are in oversold position, and a short term bottom formation has begun, where we will witness large volatility.

Range for the Day: Nifty might trade in the range of 4200 to 4350.

Strategy for the Day: Buy 4200 calls on weakness and 4400 puts on rallies of june series for intra day trading.