Following global cues our markets too recovered the losses of 29th, after announcement of RBI policy decisions, as crude cooled to 120$. The decisions to raise Repo and CRR to 9% is certainly negative news for equities, and the actual crude price raise is not fully passed to the consumers in our country, as it is being done in USA., where the price of gasolene and petrol are directly linked to crude prices being quoted in exchanges, and being the prices are market determined unlike, being administered in India, US investors and markets reacting positively to fall in crude prices is understandable. Crude started raising after hitting 120$ recently, and Goldman Sachs research report predicts it to touch 149$ once again in this reversal! If it happens then it will be a disastrous event for all equity markets including US markets. Thus, it is the time for investors to be extremely careful in having or taking long positions in the next series, without proper hedge, and equities will give negative returns only for the rest of the year, until inflation cools to 7% as being targetted by RBI. However, the volatility if captured with sound technical and fundamental knowledge, gives excellen trading opportunities to 'professinal traders only'. US markets were volatile overnight but posted good gains at the end of the session.
Nifty futures closed at a premium of 12.85 points for current series where August Nifty futures are closing at 16 points premiums, indicates long roll overs so far, and optimism for the next month. Nifty rollovers have completed 55% by yesterday, and atleast another 20 to 25% of the outstanding contracts/positions need to be rolled over before 2 p.m. today, if the average is considered for the past several settlements, which brings volatility and two way movement, for certain. VIX closed at 51.72 yesterday. Singapore Nifty futures are currently quoting at a premium of 26 points indicates positive opening for our markets initially, since short positions are mostly out of the system, long roll overs shall give fall of indices during the middle of the session. Today being the last day of the month too, some NAV prop up by mutual funds can be expected in the last one hour of trading. Any upsides will be facing selling pressure today at 50DSMA levels of Nifty(4372.06) & Sensex(14629.95) and nifty might close below 4400 today, in my reading! Inflation data shall be released at 5 p.m. today after market hours shall influence the markets tomorrow onwards again. Both the indices have closed around 5DSMA levels, and any weakness should find support at 20DSMA levels placed currently at Nifty(4127.14) & Sensex(13724.51), which look far from current levels. June monthly closing of Nifty was 4040.55, whereas june settlement price was 4315.85, around which nifty closed yesterday, will be interesting to watch, whether it can close above this level? Analysis of entire July month options trading indicates to me that Nifty might close between 4200 and 4400 today! Higher range is on account of higher volatility index which is above 50 currently.
Range for the Day: Nifty might trade in the range of 4200 to 4400.
Strategy for August: Buy 4300 straddle on Nifty and sell strangle 4000 put and 4600 calls to capture the higher premium on account of higher volatility.
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