Nifty is range bound between 20DSMA and 50DSMA in volatile trade due to pick up of roll overs!

Taking global cues in their stride, our indices opened in negative territory, and were volatile with two way movement, finally closed with marginal gains due to short covering. The roll overs picked up but lower than previous month, suggesting less enthusiasm for the next month, as there are no important triggeres in the near term, till 15th September'2008, when the advance tax payment numbers from corporates indicate the corporate performance for this quarter, and inturn the fiscal position of the government too. VIX has closed at 33.90 suggests lesser volatility. US markets have closed flat and with marginal gains, as dollar and crude become volatile. Investors are unable to decide the trend of the markets world over, as side ways consolidation phase has set in everywhere.

After a strong bull market and volatile and vicious bear phase, this type of sideways movement is witnessed where consolidation and base building happens for change of trend. Since we are in down trend, if the lows made during this year are held commencement of bull phase may be on cards. Alternatively, this wide range of sideways movement, might bring in further weakness extending the bear phase or turning the markets in to deeper bear markets for prolonged periods. However, a strong clue or an event is required for break out in either direction. The inflation peaking out, interest peaking out, or crash in crude prices below 100$ should happen for an upward break out.

In my view, crude falling below 100$ appears to be remote possibility, as the cost of production with raise in inflation and weakening of dollar, raising demand in emerging economies, which are on growth path, inspite of moderation, will not allow the prices to breach this level. Thus, crude might consolidate between 110$ and 140$ for some months, and break out in upper direction breaching 150$ levels and shoot upto 170$ or even 190$ sometime next year, on some external event which cannot be predicted. Asian markets are trading in positive territory, and Singapore Nifty futures are quoting at 9 points premium which might give positive opening for our markets initially.

Range for the Day: Nifty might trade in the range of 4250 to 4450 today.

Strategy for the Day: Buy 4400 Puts on rallies for intraday trading