Since the political instability, and an early election fears vanished, with UPA government surviving with clear majority of 275/541 votes in favour, our markets opened with huge gap and posted one of the largest gains in this year, with huge volumes, due to short sqeeze on one side and fresh long build up too simultaneously. It is quite evident as the Nifty August series also turning in to premium during the day. Both the indices have cleared 50DSMAs easily due to all round participation of players and sectors, and also closed above them. This relief is expected by everyone, who is acquainted with markets, as how the sentiment changes for the better, once uncertainity is removed. FM stating that the government is committed to bring the inflation down in the coming months, and concentrate on clearing the reforms bills, cleared by standing committee, pending since 2006, during the ensuing 'monsoon session of parliament' too enthused FIIs who have turned buyers in financial stocks, which were beaten blue in the recent carnage.
CPM has expelled Sri, Somnath Chatterji, currently holding the post of speaker, for not carrying the ''whip' to vote against UPA in trust motion on 22nd. However, he continues to be the speaker, as per reports in the media, he wishes to put down his papers on 11th august, 2008, before commencement of Monsoon session of Parliament, since he is invited to chair the "Commonwealth Association of Parliamentarians" between 1st to 10th august. If he wishes he can continue as speaker, if the house too wishes him to continue, as per the constitutional provisions, and UPA ministers have already approached him to know his mind and to request him to continue. As of now, the UPA government could win the trust vote, with cross voting of 10 M.P.s and abstention of 10 M.Ps. on 22nd. Whether, the government will be able to get its speaker elected, in case Sri, Somnath Chatterji, sticks to his decision to step down on 11th August, 2008, as informed earlier to CPM party's polit beaurau! While the Government image is certainly tarnished with the 'bribing BJP M.P.s" issue, which is being investigated into, the ability of the government to get the speaker elected, and get the business going, throw some anxiety, as the numbers turnout, in future! However, as of now, government need not be insisted to seek another trust vote for 6 months, as per constitution, thus the continuation of the government is not in jeopardy.
Crude cooled to 124$ overnight, due to the demand destruction in US, as the consumption data shown down tick, and that Fed might raise rates from now on, to check the inflation. US congress presented the 'mortgage bill' to help the homeowners to continue to live in their homes, also helped sentiment in US markets. US government is happy with the developments in India on the 'Indo-Nuke deal' outcome, and are taking fast track steps to see the further steps are completed quickly, so that the approval of its congress also is obtained before the end of September, 2008, has lifted the stocks like, BHEL, L&T,NTPC and Power stocks which will be direct beneficiaries, if the deals goes through smoothly and quickly. Here I would like to highlight, that all what is happening is sentiment booster, and the actual increase in revenues and profits shall acrue to the stocks connected to this deal only after 5 years from now. One need to be cautious, as we need to get the confirmation of bottoming out, to go long agressively, however, the current rally might be having some more steam left, say ...can go up to 100 DSMA levels Nifty(4682) & Sensex(15565) in the immediate short term. VIX closed at 37.77 and put call ratio is inched up to 1.40 and inflation data shall be released today evening at 5 p.m. after market hours. Host of heavy weights results like RIL are to be announced today, will influence the markets. Markets might be volatile from here on as the fight between bears and bulls intensifies.
Asian markets are trading mixed currently, while Singapore Nifty futures are currently quoting at 45 points premium which might give postiive opening and some profit booking can be expected as the markets witnessed a continuous 5 days rally, posting substantial gains already.
Range for the Nifty: Nifty might trade in the range of 4320 to 4530 today.
Strategy for the Day: Buy 4500 puts on rallies and 4300 calls on weakness for intra day trading.
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