Our indices make new lows in 2008! Fall out of US bail out plan brings melt down of US markets overnight!

On the news of UK financial system also facing similar problems haunting US financial sector, lead to steep sell off in our markets along with asian and european markets, which resulted in Nifty and Sensex making new lows for 2008. Nifty bounced from the new low of 3777.30 in the final hours on short covering, as some hope was there on the possible bail out package passage by US congress to night. Sensex touched new low of 12402.84.Today, as the bail out package is declined by US congress US markets have posted one of the largest cuts in recent history. Asian markets are already trading with huge losses, Singapore Nifty futures are currently quoting with a steep discount of 180 points makes a foregone conclusion of weak opening for our indices at the opening. The question is how steep the cut will be and where and whether any buying support can emerge today, and bounce or relief rally can emerge, as indices and stocks are entering oversold territory. The romours that ICICI bank management was also selling the stock, brought it down below 500 and there was some nervousness among retail investors overnight at ATMs cueing up for withdrawing some cash. This feature has become a common scene for the past few years, though the Indian banking system especially ICICI Bank regulated by  RBI is well capitalised and not having any such serious problem, excepting that the profitability might affect as they have exposure to overseas investments to the extent of 4.5$ Billion across globe. VIX has closed at 34.90. CBOE index has shot up by 35% to 42.72 suggests the higher volatility to continue in US markets, which affect other markets including india.

 

Today is the last day of september month, quarter and halfyear where actually some buying or relief rally is expected by me in the earlier posting, hoping that Nifty would close above June quarter closing of 4040. This hope is now belied due to the turn of events, as pessimism is dominating all around the world; Nifty put-call ratio has come to 0.90 is the first sign of market nearing the bottom. Thus, inspite of weak opening of 150 to 200 points down on Nifty some buying coupled with short covering should see markets recover in the later half. One thing is certain that markets will have wild gyrations, as volatility raises, whether 3800 on Nifty and 12500 on Sensex will be held on closing basis need to be watched. Any closing below these levels, will brew some more trouble and panic among our markets too from tomorrow. Nifty broke the lower band of range suggested in yesterday's posting i.e., 3800 intraday yesterday and closed at 3850.55 yesterday. What is in store today cannot be predicted as things are fast changing every minute across globe!

 

Range for the Day: Nifty might move in the range of 3700 to 4000 today.

 

Strategy for the Day: Buy Nifty futures at the opening with a stoploss of 50 points below the purhcase price for intra day gains, if one is a very high risk trader.

Indo-Nuke Deal cleared by 2/3rds majority by US Congress! 250$ Billion bail out package finalised by US govt!

Friday, our markets experienced selling pressure, due to week end consideration, and uncertainity on the proposed bail out package of 750$ Billion by US authorities to avoid crisis in financial system, though US markets posted gains on thursday. Nifty breached 4000 mark quite efortlessly and closed below it too on weekly basis, indicating the bearishness, and weak sentiment. Investors stayed away, where as FIIs pressed sales in spite of lower prices, as rupee continues to be weakening against US dollar, which is a double whammy for them in Sept '08 throughout. Well the good news came on the week end, in the form of US congress clearing Indo-Nuke deal, dropping clause and reference to Iran, on strong insistence of Indian authorities, with a 2/3rds vote ends the '34 years of nuclear apartheid of India among global arena'. The bill is to be cleared by US senate, which shall be a formality, since the senate committee cleared with 19-2 vote already. The deal might be signed on 3rd as reports stand now, is a clear positive news for power sector, capital goods sector and manfucaturing sector too. The other suspense on the bail out package of 750$ billion also is discussed and now finalised first tranche to be 250$ keeping another 100$ billion at the disposal of President, to meet any contingency is also welcome news for rate sensitives in US and world over. Friday night US markets though traded in negative territory finally posted gains.

VIX has closed at 33.96 and Singapore Nifty futures are currently quoting at a premium of 36 points should give positive opening initially for our markets. Nifty will face initial resistance at 4040 and 4100 later today. August closing of Nifty was at 4360, which is a tall order at this point for nifty to climb and close above it in two days left for the month. However, 4040.55 being June quarter closing should be conquered on closing basis tomorrow, to save the quarterly charts in tact, for some solace next quarter, as we move into Q-2 results season and 'Diwali' during October' 2008. 30th September is a non-banking holiday on account of Half yearly closing of Accounts by banks in India, and 02nd October 2008, is a trading holiday on account of 'Gandhi Jayanthi' makes this a truncated week, thus markets will be confined to a narrow range.

Range for the Week: Nifty might trade in the range of 3800 to 4200 during this week.

Strategy for the Day: Buy Nifty futures at the opening with a stoploss of 50 points below the purhcase price for intra day gains, if one is a high risk trader.

Inflation flat at 12.14% but rupee weakens against US dollar as FIIs continue to exit Indian Equities!

Derivatives settlement of September series is behind now, where Nifty has closed 114 points down from august settlement closing. Nifty futures of October series have closed at 48 points hefty premium is positive for markets today, which might add from today till month end. US markets have closed with gains overnight, on the assurance from Govt quarters of getting the bail out package passed by congress smoothly. Asian markets are trading flat to negative and Singapore Nifty futures are also flat right now. Nifty closed well below 5DSMA yesteday, amidst volatility, however, the price adjustment on settlement day cannot be considered for technical analysis, as funds will try to ensure the closing price to suit their outstanding positions of the series. The first hurdle for the markets today shall be 5DSMA placed at 5173.40, and then previous week's closing 4245.25, once the psychological mark of 4200 is cleared with volumes. It will be interesting to see how and where nifty closes today at the end of the session.

 

Inflation figures came flat at 12.14% suggests that the head line inflation might be stabilizing and in the coming weeks it might come down, is comforting news for RBI, which need not take any further measures on monetary tightening. Q-2 performance and results season commence from first week of October which will be priced into by market players from today. Some fund buying to prop up NAVs in index heavy weights cannot be ruled out till 30th Sept'2008. Though US dollar is weak against Euro and other currencies, rupee instead of strengthening is becoming weak is a cause of concern for our economy. This is mainly because FIIs are continuing to exit equities and are pressing for sales at every raise in prices, as Participatory Notes unwinding continues. As indicated earlier All outstanding PNs which are not registered with SEBI need to be wound up or register with SEBI by 31.03.2009. Thus, the bearishness shall invariably continues till such time in our markets. Another irony of rupee weakning is hurting soft ware exporters too, as they have not forecast this much of depreciation, almost 15% over previous quarter, and have taken hedge around 40 to 41 against dollar, are loosing an opportunity of profit. The fear that they might post huge forex losses also putting pressure on tech stocks, which are under performing.

 

Range for the day: Nifty might move in the range of 4040 to 4240 today.

5DSMA is being held as bulls fight back to break the range! Settlement & Inflation shall bring in higher volatility today!

Uncertainity over bail out package from US Government to help the current financial crisis, brought nervousness in US markets, which have become directionless. The economic data on housing, consumption, etc., are indicating clear indication of recession setting in US, making dollar weakening against other currencies, should be actually good news for emerging economies like India, which should receive good dollar flows. Contrary to this expectation, Indian rupee is also weakening inspite of strong fundamentals, as RBI and Govt pursuing weak rupee policy to encourage exports and exporters and discourage imports, since our oil import bill is quite large and cannot be funded by 'hot money'. This observation is strengthened by the fact that when dollar is weak against Euro, rupee should strengthen, but rupee : dollar exchange is moving independent of this cross currency exchange movement. Our indices especially, Nifty tried to climb 4214 level yesterday, a head of expiry today, but selling did not allow to close above 4200 level. VIX has closed at 35.61. 5DSMA is currently placed at 4158.92 and 20DSMA stands at 4266.97 could be the boundaries for today.

Singapore Nifty futures are currently quoting at a discount of 30 points indicate weak opening as asian markets are also trading in negative territory. Inflation might look up marginally when the data is released at 5.30 p.m. after closure of market hours. Trading on NSE is having halt and extended hours since 24.09.2008 due to sun outage and shall continue till 08.10.2008. The trading ends at 04.15 p.m. all these days. This also brings in some additional volatility to our markets, as observed in the past too. The range of Nifty could be 4100 to 4300 today.

Nifty found support at 5DSMA so far this week, if held will bounce to clear the 4400 mark!

Our markets have faced selling pressure on monday, after touching crucial level of 4300 being the 50DSMA and closed negative. The nervousness continued on tuesday, as global cues were weak, and nifty found support at 5DSMA level and closed around it on closing basis. US markets were volatile overnight and ended with losses as the bail out plan of 700$ billions from Government details are not yet clear. However, Warren Buffette deciding to invest 5 $ billion with Goldman Sachs and US senate committee clearing the Indo-US Nuke Deal with 19-2 vote, are positive for our markets. Today being the penultimate day, short squeeze cum long roll over to next series can be expected, as PM Dr.Manmohan Singh meets George Bush tomorrow to finalise the deal. Tomorrow is the settlement day for current series, and inflation data will be known after market hours, which might be around 12% levels, with which markets have learnt to live. Crude and Indian currency also have become too volatile which is reflecting in equity and bond markets too. VIX has closed at 38.74 and Singapore Nifty futures are currently quoting mildly positive.

Watch 4250 to 4300 levels for resistance in case of any rally today, and markets will be volatile having two way movement as the roll over to next month series is still to pick up. Once the derivatives settlement is over tomorrow, market players will concentrate on next month results, some fund buying til 30th can be expected to push up the indices, as they would like to show better NAV performance, for the month, quarter and halfyear!

Range for the Day: Nifty might trade in the range of 4100 to 4250 today.

Strategy for October: Buy 4100 call and put option of October series and hold them till 15th October for good returns as the markets are likely have wild gyrations.

Whether markets have found bottom last week amidst higher volatility? Confirmation will come this week or month end!

Last week was one of the highest volatile moves in all markets including ours. If one watches week on week performance the indices have posted marginal gains to almost flat, however, intra week swings were more than 5% daily and on particular days like thursday intraday swing is almost 10%. Russian markets have seen 40% swings. Dow though broke the multi year support at 10700 and closed below it, with the bail out package announced for AIG and Government considering serious long term measures to protect the financial system lead to huge short covering on friday, the tripple witching day for US markets. Does this mean that markets have found bottom? We can say that bottom formation is in progress. Whether the lows touched last week are bottoms for the medium term trend or reversal of bearishness to bullishness is a big million dollar question. The global economic concerns which have surfaced during 2008 prominently cannot wither away, in hurry in a week's time. Just as bull markets have corrections or bear phases, deep bear markets too will have vicious relief rallies and dead cat bounce, to trap the bulls. Thus, one cannot jump to conclusion that the bearish ness has ended, or bull market has begun. One need to remember that markets cannot go up continuously for ever, similarly the markets or all stocks cannot become zero, it is the over reaction on either ends of the markets which represent the sentiment of majority of players, indicating the general trend.

 

Well coming to this week, we have derivatives settlement on 25.09.2008(Thursday) and the next month settlement will have the Q2 performance of corporates, and H1 performance of the economy in place, some adjustment and pricing in the profitability based on the advance tax payments, exchange rate etc., shall take place, where volatility can be high, though may not be at the level witnessed in the last week. In my view the derivatives settlement should be above August settlement price of 4214, where the indices are resting now. It is also to be seen whether the September monthly closing will be above 4360(August closing), which confirms the bottom formation. In my opinion our markets have seen lows for this year 2008, around 3800 on Nifty & 12500 on Sensex. VIX has closed at 39.12. Nifty futures have closed with a premium of 27 points invites long roll over and some short build up today/ tomorrow, as indices have already posted more thatn 10% gains from the lows touched on thursday. Asian markets are mixed and Singapore Nifty Futures are currently quoting at a premium of 12 points might give slight positive opening and two way movement for our markets today as roll overs pick up to next month series.

 

Range of for the Day: Nifty might move in the range of 4100 to 4400 during this week.

Spectacular recovery from 2008 lows puts an end to bear run of 7 days! Inflation shows uptick to 12.14% again!

Both indices have opened gapdown following global cues and almost hit 2008 lows, from where fund buying in index heavy weights coupled with huge short covering, lead the markets close with gains at the end of the trading. The news that US Fed granted 2 year bridge loan of 85$ billions to AIG to bail it out, and major central banks deciding and acting to pump in liquidity of 180$ billion helped all markets to recover yesterday at the end of the session. The 7 day bear run is thus arrested, and some relief rally can be expected from now on, ofcourse with huge gyrations and volatility as we enter the settlement period next week. Inflation data showed small uptick to 12.14%, suggests that it is not going to fall below 12% as anticipated in hurry. VIX closed at 39.56, intra day high touching 68.33 indicates volatility to stay higher for some time. US markets oscillated between positive and negative territory till mid session, Dow registering new low for 2008 at 10459.44 almost touching 52 weeks low, staged a strong recovery on the news that US government is seriously considering a long term solution to the current credit crisis. Tripple witching, the settlement of options and futures of indices and stocks scheduled for friday(19.09.2008) also lead to huge short covering, which lifted all US indices to post 4% gains over previous day's closing. The strong US markets rally might give some rub off effect on asian markets and our markets too, but, selling pressure can be expected in our markets, at higher levels, thus, going long at the opening should be avoided.

 

Singapore Nifty futures are currently quoting at a premium of 183 points and asian markets are trading with gains, shall give positive gap up opening for our markets today. Nifty shall face resistance at previous week's closings 4228.45, which needs to be watched with care. The exposure of ICICI Bank to Lehman Brothers investments might force the bank to post MTM loss provisions to the extent of 40$ million during the quarter is putting pressure on the stock, which is an index heavy weight, though the management is putting brave face to dismiss the issue saying the provision is of miniscule when compared to the size of the balance sheet. The PSU banks are finding favor with funds and investors, which have less or no exposure to these interenational institutions which are under going turmoil. The current credit crisis coupled with slowdown of global economy, cannot be solved with short term solutions like injecting liquidity, which is being resorted by all central banks, until the mess is cleaned up with proper systems in place, recovery of financial sector will be a long process. The britain's financial services authority(FSA) banning the short selling in financial stocks till the end of January, 2009 helped european markets, and the hope of such a move by US too helped stability and recovery of financial stocks yesterday, a head of tripple witching settlement.

 

Range for the Day: Nifty might move in the range of 4040 to 4240 today.

 

Strategy for the Day: Short Nifty futures at the opening with a stop loss of 50 points above the purchase price for intra day gains, if one is a high risk trader.

Dow breaks crucial support 10700 in panic selling over night! Troubles compound for our markets from now on!

The initial positive opening was sold into yesterday, and the late hour selling by FIIs brought the Nifty to sub 4000 levels at the end of the trading. On adjustment Nifty managed to close at 4008.25. The mayhem in US markets on the panic selling by investors fearing the spreading of credit crisis to other institutions. The news that Morgan Stanley also likely to be in trouble is now pointing to greater trouble to equity markets world over, which is the reason why the investors are flying to safety...Crude and Gold have raised overnight. Dow which was holding 10700 multi year support during this year so far, which is observed by all technical analysts, has gone yesterday, is very disturbing news for US markets and world markets too.

 

Singapore Nifty futures are currently quoting at steep discount of 154 points will give a straight cut of 4 to 5 % straight away for our indices at the opening itself. The mute question will be whether 2008 lows will be tested or breached today/tomorrow. While the valuations of our markets are not that high. the sentiment is worst and complete risk aversion, makes buyers to stay away from equities. VIX has closed at 33.99 yesterday. June quarter closing of 4040.55 (Nifty) & 13461.60 (Sensex) are breached yesterday on closing basis too, in any possible relief rally which might come tomorrow or monday onwards, whether these levels will be cleared need to be watched. In case these levels are cleared in the next 3 trading sessions, our markets will breach the 2008 lows and the trading band of Nifty will shift downwards to 3500 to 4000, making things worse for the next quarter. Traders and investors should for calmness to return to the markets, as we may be near a bottom, if 2008 lows are held today/tomorrow! Inflation data is likely to be sub 12% levels which will be released after market hours, will not be of any significance, as the sentiment to equities is completely negative.

 

Range for the Day: Nifty might move in the range of 3840 to 4040 today.

 

Strategy for the Day: Buy Nifty futures at the opening with a stop loss of 50 points from the purchase price for intraday gains, if one is high risk trader.

US Fed leaves rates unchanged, however looks at bailing out AIG lifts sentiment in US markets!

Yesterday ahead of US FOMC meet all markets turned volatile and our markets opened with negative gap to register new lows for the month of september breaching August lows, threatening worst day for equity.. Late in the afternoon once some calmness returned as domestic funds lent support to PSU Banking stocks, lead by SBI huge short covering helped the indices to close flat at the end. US Fed overnight has left the rates unchanged at 2% but considered taking up bail out of AIG, the leading insurer of USA  which also is facing bankruptacy situation, due to heavy losses booked so far. Dow has hit 10740 a multi year trend line support and bounced from there to register substantial gains at the end of the session. Singapore Nifty Futures are currently quoting at a premium of 44 points and asian markets are trading in positive territory shall give gap up opening today at the beginning. VIX has closed at 34.90 after hitting a day high 53.62 suggests higher volatility to continue today and for few more days.

 

Advance Tax Payments from Banks are encouraging, whereas Tata steel & ACC have paid less than previous quarter suggest that all is not well with our economy. Rupee is depreciating everyday due to tight money conditions, on account of advance tax out flows is a cause of concern, which is addressed by RBI by encouraging FCNR and NRE inflows, a decision announced after market hours. This alone in my view shall not help as demand for dollars continue for oil imports and FII capital out flows. Much stronger and quicker measures are required like reduction in CRR or Repo rate too, in line with China. The New Governor's mind and policy is yet to be understood by markets and corporates. Though Dr.Y.V.Reddy was always unpredictable, this type of one sided slide of rupee might not have been allowed by him, hurting the economy. The confidence of FIIs and FDI flows also will be hurt if the currency is not stable and moves in wide range. Already Rupee has depreciated by 16% in the last one month, by any standards, is not conducive for long term business planning. USFDA has banned 30 drugs produced by Ranbaxy shall be a setback to the stock at the opening today.

 

Nifty found support in the band of 3920 to 3950 in the last two days in the sell off and bounced back to close above 4040 is a good technical level to watch today. Nifty shall try to rally to 4180 to 4220 band today and might face selling pressure there. If support emerges in the band of 4000 to 4020 it is good time to go long for intraday or intra week gains, with suitable stop loss as per the risk appetite of individuals. Until Nifty closes above 4360 bearishness coupled with huge volaility shall continue in extreme short term.

 

Range for the day: Nifty might move in the range of 3980 to 4180 today.

 

Strategy for the Day: Buy 4200 puts on rallies and 4000 calls on weakness for intraday trading.

Crude crashed to 94$ and global markets too! Global economic slow down is confirmed now! Where to go from here???

At the outset let me say that I was on vacation from 12th and back to work, due to which updates are missing in the intervening period.

Nifty 4200 to 4555 range is finally broken yesterday, at the opening of markets itself, on the news of Chapter 11 bankruptacy filed by Lehman Bros, in USA, which was doing rounds for some time. The reaction in our markets is overdone, as the beta is high for our markets, it would be higher movement on either side, which we are observing since 2003. Confirmation of prolonged bear markets has come yesterday, with global economic slowdown in place. Generally equities have rallied when ever crude cooled or fallen when it rallied. One can observe that Crude breaching 100$ level also had no positive impact in the past few days. This is because the fall in crude price is assumed to two reasons: 1. Strengthening of US dollar and 2. Demand destruction for the commodity, as inflation is high, which is evidenced from lower consumption from US highways data. Thus, the correlation between Crude ends for some time. China has reduced interest rate by 27 basis points and Cash reserve requirement by 1% confirms the cooling of its economy. US fed meet today to decide on interest rates in a very highly volatile disturbing financial crisis situation, as one after other major institutions show poor performance and complete failure too. CBOE rose to 31.70 indicating higher volatile times for US markets.

While coming to Indian economy, cooling of crude to 94$ is offset by weakening of rupee to 46 against US dollar, which is 15% depreciation, net - net does not help the fiscal situation. Advance tax payment for this quarter pressure on corporates has ended by yesterday. The information received so far from Reliance and HDFC Bank etc., show almost flat to marginally higher tax payment, does not give any enthusiasm on this front. VIX has close at 33.12 amidst high volatility after the day high being 63.32. While leading heavy weights like Reliance and Bharti etc., already broke 6 months lows, indices are holding, however, with so much of negative news flowing around, equities will not attract fresh investment for some time, may be till diwali!!

Now it is to be seen whether July lows Nifty(3790.20) & Senex(12514.02) which are lows for 2008 will hold and some stability returns to the markets, as indices have breached August lows Nifty(4201.85) & Sensex(14002.23) and closed below it too. US markets have fallen steeply overnight and Singapore Nifty Futures are currently quoting at discount of 117 points, suggests weak opening for our markets at the opening for sure. Trading also is not advisable as the range is quite wide, and stoplosses will trigger on either side.

Range for the Day: Nifty might trade in the range of 3900 to 4100 today.

Crude Falls but does not help the Sentiment!

As expected, our Indices opened mildly weak yesterday and the level of 4427 was held during the morning session. However, the Indices broke down in the afternoon session due to heavy selling by FIIs and closed at the psychological support of 4400. Today, our markets will open weak as the Asian markets are currently trading weak. 4363 being August'08 close should be held for today, in which case, one can go long on Nifty futures with an appropriate stop loss of 25 points.

 

Crude has weakened to $102 whilst Indian crude basket is below the $100 mark. Every $1 fall in the crude price helps the under-recoveries of Indian Oil firms by Rs.3000 Crores. But, Rupee weakening to Rs.45/$ and further signs of weakening to Rs.46/$ offsets the gains for the Oil firms mentioned above. Advance tax payments on 15th Sep'08 will continue to put pressure on the markets and the next directional trend will be clear once the advance tax payment numbers are out for the ensuing quarter.

 

SGX Nifty is currently trading at a discount of 90 points, which shows that our opening will also be weak. However, 4300 to 4320 is a strong support for Nifty where one can expect signs of reversal.

 

Range for the day: 4200 to 4420.

 

Strategy for the day: Go long on Sept Nifty futures with a 25 point stop loss at the opening.

Mildly Weak Opening expected!

Markets opened gap down due to the global weakness yesterday, but a flurry of short covering coupled with positive sentiment due to the NSG deal pulled the markets in to the positive territory momentarily before closing flat. Lehman brothers couldn't shore up enough capital yesterday in a failed deal with Korean Development Bank; Lehman's shares slumped a whopping 45% in yesterday's trade on NYSE. This should dent some of the positive developments in India and put the focus light back on the credit crunch.

SGX Nifty Futures are currently trading at 38 points discount, which would indicate a weak opening for our markets too. Any gap down opening should find the first support near the 5 DSMA (4427) and the upward move should encounter a stiff resistance near the 100 DSMA (4553).

Range for the day: 4360 to 4553

Strategy for the day: Buy 4300 CE on weakness for Intraday trading

NSG clears the Indo-Nuclear deal by consensus shall boost sentiment of our markets today!

Last week saw a volatile market, finally closing flat in the end on week on week basis. The inflation holding sub 12.5% levels, and the week end historic decision by NSG group to allow India to use the Nuclear technology, supply etc., unanimously, ends the 34 year embargo on our country's access to fuel and latest technology for civil purposes too. This paves way for US congress to consider the Indo-US nuclear deal during this month's congress session itslef, and might clear the process to initiate the process for transfer of technology to India will solve long term power requirements of the country to some extent. Though, critics argue that the 123 agreement and Hyde Act, have some clauses which might zeopardise our country's interest anytime, if testing is done or whether the fuel and technology is diverted to other than civil purposes, generally believed, military purposes.

However, the Government of India is sincerely committed to self proclaimed non-proliferation, and its policy not to 'first use' in any agression too, will not pose any threat to continuous seeking of the technology transfer and future in the years to come. It is a clear victory for Dr.Manmohan Singh, Prime Minister of India who has put his complete weight behind achieving it, inspite of strong opposition from left and some of his men too, though privately; US markets have closed flat to marginally positive on friday, as the two troubled mortgage lending institutions are being bailed out by US Government, was welcome news for the investors there. US futures indicate huge gap up opening to night(IST), will certainly induce asian and european markets to rally today. Crude is hovering below 107$ and might bounce once it touches psychological level of 100$, in case of weakenig further.

VIX has closed at 32.65 on friday. Singapore Nifty futures are currently quoting at a whopping premium of 202 points gives a thumping opening for our markets, but profit booking in the band of 4500 to 4550 can be expected, as corporates plan for advance tax payments by 15.09.2008. Technically Nifty finds support at 4320 for the day on any weakness and shall face strong resistance at 4555 (100 DSMA). Stocks relating to power sector, and capital goods sector shall rally from now on.

Range for the Week: Nifty might move in the range of 4300 to 4600 during the week.

Strategy for the Day: Buy 4550 puts on rallies for intra day trading.

Rally halted at 4520 on profit booking! Inflation is down at 12.34%. Weak global cues and political turmoil may keep markets volatile!

Profit booking has set in at the opening of trading itself and continued till the end of the session after a spectacular rally on 02.09.2008, since the issue of political turmoil once again cropping up due to Indo-Nuke deal stance of our government is questioned by opposition parties severely once again. Crude bounced from 105$ levels and the inflation has cooled down to 12.34% as against 12.40% previous week, might not influence the markets today much on the upside. The jobless claims increasing as per US unemployment data, spooked the markets overnight as concerns of recession and slowing down surfaced. European markets too posted losses on the ECB statment that slowing of economy spreading to its region. Asian markets are already trading weak and Singapore Nifty Futures are currently quoting at a discount of 120 points which indicate gap down opening for our markets. 50DSMA currently placed at 4265 should offer good buying opportunity today at the opening, for intraday traders. It is to be seen what will be the closing today, if Nifty continuously trades below 4360 today, expect weakness continue next week, as corporates will be pressing for sales for meeting advance tax payments by 15.09.2008. VIX has closed at 31.23.

 

Range for the Day: Nifty might move in the range of 4250 to 4400 today.

 

Strategy for the Day: 1.Buy 4200 calls on weakness for intraday trading.

                               2.Buy Nifty futures at the opening with a stop loss of 25 points below purchase price for intraday swing.

Stunning rally as Crude crashes to 105$ after 'Gustav' hits Gulf of Mexico! Will it sustain and move up further?

After weak to flat opening on tueday, the indices had moved strongly due to huge short covering coupled with long build up as Crude has fallen to 105$ after a long gap of 5 months. Falling of crude prices will help in reduction of stress on fiscal situation domestically, apart from helps Oil marketing companies to post better performance. The news that the hurricane 'Gustav' has crossed the coast and there was no damage to oil rigging and refining areas also is cheered by markets, though the resumption of production in that area shall take some time. Nifty has close above 20DSMA levels which was offering some resistance for the past two weeks and now its way to challenge 100DSMA currently placed at 4560.29. US markets were just flat to negative on 2nd and 3rd being concerned about the domestic problems, cannot offer any clues to our markets today. VIX has closed at 30.45 on tuesday. On wednesday our markets are closed on account of Ganesh Chathurthi holiday! Today when they open few domestic developments might influence the trading pattern.

 

Tatamotors has decided to shift the Nano plant from Singur, along with ancillary units. West Bengal Governor took initiative to sort out the dead lock between Trinamool Congress, Government and Tatas in a meeting scheduled tomorrow 05.09.2008. Indian Industry leaders like Mukesh Ambani, Sunil Mittal and N.R.Narayana Murthy, have expressed support to Tata's concerns. FDI and Investment into mega projects in India will receive a set back if Tatas are forced to close the unit. Though the protest from Trinamool Congress to protect the 400 acres of Agricultural land is genuine, in the larger and long term interest of food security of our country, W.B.Government and other stat governments acquire or allocate fertile Agricultural lands is against national interest. Industrialisation is desired, but not at the cost of Agriculture which is the main stay of 70% of population of India. It is forecasted that in the coming decade there will be shortage of food, with rapid industrialisation in emerging economies.

 

The news that Indo-US nuke deal which is before NSG, is in geopardy, as some of the members are against giving blanket approval to India, in the absence of our country signing NPT and CTBT. There is a news item from US which leaks information that US reserves the right to stop supply of fuel anytime, if India goes for test, is causing political ripples in New Delhi. The outcome of this issue and any possible fall out at Centre etc., are to be watched carefully. The intraday swings on either side are hazardous for traders too, and now that Crude corrected more than 25% from its peak, the volatility has set in its price. The inflation data will be released today after market hours will have their effect tomorrow, However, some profit booking can be expected today initially or at the end of the session.

 

Range for the Day: Nifty might trade in the range of 4420 to 4620 today.

Crude falls to 110$ as hurricane 'Gustav' hits the coast and weakens! RBI will have Dr.D.Subbarao as full time Governor from 05.09.08.

US markets were closed yesterday on account of labour holiday. Our markets opened weak and traded in negative terriotory for most part of the day, but on the news that hurricane 'Gustav' weakened to level 2 category and has hit the coast of Gulf of Mexico, has brought the Crude prices sharply to 110$ intraday, which pushed shorts to cover in the last hour of trading, as a result, indices recovered most of the losses at the end of the day. The effect of the Gustav will be known after some time, as refineries have to re start production. Cooling of Crude is good news for equities in general and our markets in particular. There will be an initial enthusiasm today, to pull the markets up, which will be sold into as our markets shall be closed for 'Ganesh Chathurthi" holiday tomorrow (03.09.2008). Dr.D.Subba Rao, currently Finance Secretary has been appointed as Governor of RBI for a period of 3 years from 05.09.2008, as Dr.Y.V.Reddy the present Governor lays his office on attaining super annuation. The illustrious and one of the most effective Governors of RBI, who has seen the greatest raise of stock markets, GDP growth, Fall in interest rates. inflation and raise of the same in recent times, comes to an end by 05.09.2008. Markets, FIIs would have loved to see Dr.Y.V.Reddy to continue till the uncertainities on the global arena settle, by 2009 end or so., at least, would be missing him, his actions and punches while answering intriguing questions on various aspects of Indian Economy! However, let us hope that Dr.D.Subba Rao, who has varied experience since 1972, will continue the legacy of good governance and see that Indian GDP breaks into double digit growth during his tenure, leaving his own mark too.

Nifty futures have closed flat with 2 points premium, indicating indecisiveness on the trend. VIX has closed at 31.28 indicating lower volatility, as the volumes fell a head of a holiday. Markets shall trade in a narrow band today. Automobile sales numbers for the month ended are mixed, Cement figures will be known today. Both Exports and Imports are up substantially, which show the business environment is still encouraging. Rupee is firm around 44/- against dollar helps tech sector to post gains. Nifty faces resistance at 4414 today which is 20DSMA on any rally and support might come at 4255.20 (50DSMA). Asian markets have opened with gains and Singapore Nifty futures are currently quoting at a premium of 29 points should give positive opening for our markets inititally. It is to be seen whether nifty can close above August closing today at the end of the session, giving scope for further gains from 04.09.2008?

Range for the Day: Nifty might trade in a narrow range of 4300 to 4400 today.

August month ends on positive note on the last day due to short covering! How September series fare?

The last day of trading of our markets after a collapse on the settlement day, in the last one hour, proved to be anti climax, due to heavy short covering in rate sensitives along with some long build up in tech sector, as rupee weakened against dollar. Both the indices have closed with gains, week on week basis in the first instance and also above July closing levels, which I have been advocating during the last few days regularly. Nifty futures have closed with a premium of 10 points with addition of open interest is encouraging too. VIX closed at 33.31 but intraday high stood at 73.29 suggesting higher intra day swings to continue further.

 

GDP data releaed on friday has shown a down tick to 7.9%, below 8% after 9 quarters, is the first sign of moderation of growth. The components once analysed show that this will unfold further down in the coming months, as inflation is at double digit levels, interest rates are almost double from their lows registered in 2005-2007 period. The fiscal situation shows stress due to unbudegeted loan write off, pay commision arrears payment, raise in oil, food and fertilizer subsidies. RBI is concerned about the M3 raise, and might use CRR or Repo rate any time, as rupee is weakening due to demand for dollar raising. Though crude corrected from its peak levels of 148$ still the pass through effect of actual price is half done by PSU oil companies, which continue to bleed under current pricing mechanism.

 

US markets became nervous on friday, as the hurrican 'Gustav' intensifying in Gulf of mexico, likely to hit 40% of crude production and supplies and 25% of gas production, which might again push demand for crude in the near future. September Nifty series have begun on positive note, but this week 03.09.2008, is a trading holiday for our markets on account of 'Ganesh Chathurthi' thus, investors and traders might resort only to trading intraday. Nifty 4360 level will be a reference level for this week as it was the August month closing too. Our markets might open weak today, following weak global cues and the first indication will come from Singapore Nifty futures which shall start trading fro 07.00 a.m. (IST) will confirm the mood of FIIs, who are mostly operating on Singapore Exchange now a days, as volumes have shifted from NSE to SGX.

 

Range for the Week: Nifty might trade in the range of 4200 to 4400 during this week.

 

Strategy for the Day: Buy 4400 puts on rallies for intra day trading.