Bounce happened as anticipated! Where to go from here on? Inflation data to hold key!

Our markets opened gap up and traded in the positive territory on long build up coupled with short squeeze, finally closed with gains after 5 days continuous fall. Technically, 5DSMA & 20DSMA are converging around 4430 on Nifty, which offered resistance yesterday, where as bulls ensured that July closing of 4330 is held so far. What happens from now on depends on inflation data to be released after market hours today, which is expected by analysts to show further uptick to 12.62% or so., Last two days trading pattern suggests that the raise in the indices was on account of short covering only. VIX closed at 33.95 registering 11.10 as lowest, suggests lower volatility. Nifty futures closed with a premium of 20 points, will invite creation of shorts once again on any rally today. Since derivatives settlement is close by, roll over of positions too shall commence which will give two way movement from now on. While support on any weakness can be expected at 50DSMA level currently placed at 4290.02(Nifty) and resistance on rallies can be expected at 4450-4480-4500-4540 levels. US markets posted gains yesterday, on account of good results posted by HP, however, crude started raising once again to 115$. It is oscillating between 112$ to 117$ for the past few days. What ever raise or rally happens today / tomorrow should be used as an opportunity to liquidate weak long positions, and portfolio churning, as I presume the August settlement may not be above 4600 from the outstanding positions data as of now.

Asian markets are trading mixed, Singapore Nifty futures are currently quoting with 30 points discount might give negative opening for our markets initially, may be long roll over shall take place from today onwards to next month series. Fertilizer Minister announced release of further subsidy to Fertilizer companies, will keep interest in fertilizer stocks, however, the subsidy burden of Rs.1,19,000 crores will certainly hit the fiscal deficit target, to be noted as negative for the overall economy.


Range for the Day: Nifty might trade in the range of 4320 to 4520 today.

Strategy for the Day: Buy 4500 puts on rallies for intra day trading.