Yesterday's trading pattern clearly suggests that the indices are encountering supply around 100DSMA levels Nifty(4611.98) & Sensex(15411.54). Added to it the indices have closed below 5DSMA level Nifty(4551.01) and Senex(15227.27) itself yesterday! The relief rally is already 5 weeks old, and today being the last day for this week, might give negative closing as global cues suggest. Crude rose to 115$ on supply concerns, US markets closed negative after volatile moves as the problems of mortgage loans are spreading now to credit. Inflation data to be released today shall show an uptick to 12.49% as predicted by some analysts. Dr.C.Rangarajan, ex-chairman of PM Economic Advisory council, expects the GDP growth to be 7.7% as against 8% projected by Government and RBI. He also observes that inflation to cross 13% and achieving 7% target of RBI by march 2009, shall be very challenging. He expects that it might moderate to 9%. If 7% target of RBI is to be achieved then more tightening and moderating consumption and growth is required, which is not good news for equities.
Chathurvedi committe appointed by PM on pricing of petroleum products, has submitted its report and Oil ministry is examining the feasibility of implemnting the recommendations in stages. One of the recommendation is to raise Petrol price by Rs.2.50ps every month and similarly other products too, to make the prices of these products, which are heavily subsidised by Government, through Oil Bonds, sharing by upstream companies like ONGC and GAIL etc., to be market determined from next fiscal onwards, so that burden is off from government budgeting. SBI and most of the banks have already raised PLR, following the dictat from RBI, which makes cost of production more dearer to industry and shrinking of margins. Banks profitability also will be hit due to lower credit off take and higher CRR, raise in cost of funds. Period starting from 18.08.2008 to 17.09.2008 is generally devoid of any domestic triggers for markets to rally, thus, either they consolidate in a range or slowly drift downwards. Investors are better advised to exit long positions and sell portfolios and increase cash levels to minimum 50% from now on, so that they get the same stocks much cheaper at a later date. Singapore Nifty futures are currently quoting at 46 points discount and asian markets are trading with losses, our markets also open in negative terriotry and will have two way movement today. VIX has closed at 34.76 suggests return of higher volatility again.
Range for the Day: Nifty might trade in the range of 4420 to 4620 today.
Strategy for the Day: Buy 4400 calls on weakness for intra day trading.
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