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.