US Fed lowers rates by another 50 basis points along with discount rates, to ease credit crunch! October series end with huge losses!

Derivatives settlement on 29th saw some volatility, however, ultimately Nifty ended around 2700 levels as against previous settlement at 4110 levels, thus, posting huge losses for the month. 30.10.2008 was a trading holiday for our markets on account of 'Bhai Dhuj' and today is the last day for the month. US Fed has lowered the interest rates from 1% to 0.50% another cut of 50 basis points to ease the credit crunch, and they have just another 50 basis points left in their arms for future rate cut action. The indication though anticipated by many analysts, it alone cannot solve the economic and financial mess the country is facing right now. US recession is confirmed now, and UK Prime Minister too have made a similar statement recently. Dr.D.Subba rao, the RBI Governor who succeeded Dr.Y.V.Reddy too have hinted at slowing of growth of our Indian Economy and inflation target pegged at 7% level for the financial year ending 31.03.2009.

 

Though major Indian Companies are still posting better performance during this year, the sentiment factor from investors and the double whammy being faced by FIIs ...one fall in stock prices..coupled with weakening of rupee against US dollar, made them to unwind long positions and press for sales. So far it is estimated that FIIs have withdrawn about 12$ Billion dollars from our equity markets itself, shows the reason for damage of fall in prices. While ECB Norms are relaxed by RBI, which help inflow of dollars, still the companies having import obligations prefer to keep dollars abroad, as weakening of rupee make dent on their cost and earnings; Certainly importers are major sufferors during 2008, which puts the expansion plans on hold due to huge depreciation of rupee against US dollar.

 

VIX has closed at 68.35 on 29th and volatility shall continue as new series begin today. Nifty might trade in a band of 2500 to 3000 during the week.

 

Strategy for November: Buy 2700 Call and Put and hold it till the end of series for good returns.

Samvat 2065 brought lots of cheer to all equity investors worldwide!

Well, one of the toughest bearishness finally ended with the bounce back on monday, from the lows, and the gap up opening on diwali day (28.10.2008), posting 5 to 6% gains is good news for indian investors. In its first ever major move by US government to subscribe 125$ billion equity with major US banks and Financial Institutions, enthused the investors due to which US markets have posted around 10% gains overnight. All global markets have thus, found medium term bottom for now, however, the confirmation would come by next week, as US FOMC meets, BOJ decides on interest rates, major event will be the outcome of US Presidential Election result on 04th November'2008, where the mojor policy view will be known to US as well as global economies, once it is Obama or McCain will be the Next President!

 

VIX has closed at 70.27 indicating huge volatility a head, that too today being derivatives settlement day, we can expect two way movement. Better Stay away from trading till 31.10.2008.

 

One need to remember that we are in a strong bear market, and every rally will be sold into, by trapped bulls and investors. Thus, very long time investors, having capacity to hold for at least 2 years can start building portfolios, on every dip from now on.

 

Wish every reader and their family a Happy Samvat 2065!

Happy Diwali! Hope that this diwali onwards markets shall stabilize and give some relief albeit volatility and uncertainity on global front!

At the outset, let me wish all readers a Happy and Prosperous Diwali and New Year for most parts of India, especially North India! I Stopped writing since 21st as the prediction of deep bear market is confirmed in October'2008 once 3000 level on Nifty and 9900 on Sensex also were broken effortlessly, due to panic unwinding of long positions a head of derivatives settlement on 29.10.2008 for this series, and bears who were licking their wounds in the last 4 years bull run were on spree and making merry of the situation. Now that the hardcore optimist and the last strong bull also might have thrown his towel and started looking at the stars and consulting astrologers for respite, and is confused, I feel markets are near the long term bottom. The lows made yesterday i.e., on 27.10.2008 on Nifty (2252.75) & Sensex (7697.39) are very close to the previous 8 year bear cycle tops, which should hold from now on. Though the markets shall witness strong relief rallies as they entered oversold positions, return of bullish ness can be just forgotten for few months. Only professional traders with strict discipline and technical stop losses can benefit from the bearishness cum sideways consolidation which will continue for at least 12 months to 24 months before the highs made in this year are challenged.


VIX has touched an all time high of 90.02 yesterday with markets bouncing from lows of yesterday, indicates that we are near medium to long term bottom. Though other markets work full session, it is a holiday for markets and banks in India. A Special session of Muhurath Trading will be held between 06.15 p.m. to 07.15 p.m. which will certainly see upside initially, and some selling by traders who went long yesterday at bottom, as it is the sentiment which people believe that some gains are to be taken home today which will bring prosperity for the entire year Samvat 2065' Tomorrow being the Derivatives settlement day, we can expect positive closing today and tomorrow.

The range for Nifty: Today Nifty might trade in a narro band of 2400 to 2600 due to short session.

Strategy for the Day: Go long on 2400 calls and book quick profits today or tomorrow, as Nifty might settle tomorrow above 2500!
vrk

VIX touches high of 74.80 and closes at 57.13 amidst volatile moves with small gains!

The technical levels indicated in yesterday's posting seem to be offering some support as indices entered oversold zone, with huge two way volatility, indices have finally closed with small gains, as the global markets too supported such move. RBI has cut Repo rate by 100 basis points, inducting further liquidity in to banking system, ending rate hike for now, and the banks should now pass the benefit to borrowers reducing the lending rates, as CRR also is brought down by 250 basis points from its peak level of 9% during the last one month.PM's statement in Parliament 'suo motto' confirming and assuring the house and people of our country that all bank deposits with Public and Private banks are safe, should calm the nerves of investors and depositors, after seeing series of large banks and financial institutions failure abroad in recent times. The inflation also has cooled off to 11.44% as reported last week, Crude has corrected more than 50% from its all time peak of 147$ suggests that the excesses of the commodity and equity markets are adjusted to maximum extent. US markets have closed with gains over night and asian markets trading positive territory.

 

5DSMA of Nifty is currently placed at 3264.70 will be the first hurdle to be conquered by bulls and it should close above that level on weekly basis, initially, for confirming some base formation. RBI's stance in the ensuing Credit policy meeting on 24th is already indicated with Repo rate cut yesterday, that liquidity management, without hurting growth of the economy shall be the main azenda.  28.10.2008(Diwali...Lakshmi Puja) an important festival for most of the business people especially entire North India, where the new accounts are started, and equity markets too in our country give importance to 'muhurath trading' should give some smiles to the investors and broking community finally, as this year has been torchure for all class of investors and traders so far not only Indldia but also in all markets. It should not be construed that the bear market is over and bull markets have begun where every one makes easy money!

 

Systematic investment periodically, or professional trading with strict discipline shall always give returns in the long as well as short term, irrespective of whether we are into bull market or bear market! Following professional advise, along with self analysis and taking informed decisions on investing in stocks and exiting the same, based on one's own risk perception, always benefits anyone. Buying stocks on gossips, romours, on suggestion from persons who have neither fundamental nor technical knowledge can be disastrous, and indian investor is hurt number of times viz., 1992, 2000 and in 2008, that is the reason why, percentage of households investing in stock markets is the lowest in world even today. Singapore Nifty futures are currently quoting at a premium of 49 points should give positive opening initially for our markets today. The put call ratio of Nifty has touched a low of 0.71 indicates huge shorts in the system, and this level was the bottom of this index on number of occasions, where markets have formed short to medium term bottoms. Thus, derivatives settlement next week, it is to be seen whether some short covering rally will push the indices up in the days.

 

Range for the Day: Nifty might trade in the range of 3100 to 3250 today.

 

Sensex retraces to 61.8% level from its all time peak and closed below 10000 after 28 months! What next?

The ferocity with which all global markets have fallen during last week and in October surprised and shattered the investor's confidence very severely. Stocks have reached such levels which were never imagined by even the hard core bear in a such a short span of time, all this happened while commodities are cooling like crude touched 68$. The correlation that is being drawn by some experts that funds from equities have found their way into commodities also is proved to be wrong in this mayhem, as equities, commodities, currencies everything is seeking lower levels, fearing the 'Global recession'. The short term measures or instant solutions sought by regulators and government in US have compounded the crisis, which is quite deep and serious, and has spread to Europe and other economies too, gradually. However, one need to understand that life does not stop here and markets will not become 'zero' the index stocks will not become 'zero', and these cycles of ups and downs are common in markets, businesses, even for that matter lives of individuals.

The irrational exhuberance is observed in strong bull markets like one which ended with bursting of 'Reliance Power' IPO in January in 2008 for our markets, and the unreasonable pessimism shall come to halt very soon too. Brave hearts who stayed or increased cash levels can pick of quality index heavy weights, which have domestic market share, from now on to build portfolios, however, no one has any iota of doubt right now that we are into a prolonged bear market, which might take one year to three years from now, before we seek new "high". The illiot wave theory and Dow theory etc., indicate the levels where reversals can happen, based on past historic analysis to near perfection, but base building has to happen before the next bull market begins which will be be much stronger than what we witnessed in the last 4 years, as Indian economy is going to make strong strides to post double digit growth in the coming years, where investments would follow once the political situation, regulatory mechanism are in place. RBI's Credit Policy on 24th October'2008, which will reveal the mind of New Governor Dr.Subbarao, will be watched for clues on monetary situation, currency and inflows strategies, apart from how the indian banking will be geared to be insulated from the perils being faced abroad etc.,

Senex touched a low of 9911.31 on friday, the 61.8% retracement from all time peak being 9914.20 indicates completion of correction, and markets should now move in a band to build base. However, Nifty's corresponding level 61.8% is currently placed at 3006.67, shall be the last support or hope for reversal of bearish trend and some relief rally that can be expected, as markets entered oversold territory on all indicators. Absence of buyers rather than selling is depressing the markets more than anything, and calmness should return before 'Diwali' but we will be in tradeable markets only, or one should have long term horizon of at least 2 years to get good returns. Volatility will be high, as the bears will press for sales at every rally, since bulls have completely vanished for now.

Nifty has firmly settled in 3000 to 3500 band, as observed last week, and this range should hold this week and for some time now, thus, any weakness should be used as a buying opportunity for intraday trading.

Range for the Nifty: Nifty might trade in the range of 3000 to 3200 today.

Strategy for the Day: Buy 3000 calls on weakness and hold for 2 days or till derivavtives settlement with suitable stoploss as per the risk perception of the trader/investor.

RBI cuts another 100 basis points of CRR yesterday after market hours to infuse liquidity!

After touching 3648 on Nifty, selling emerged, supported by weak global cues, markets had a down tick day due to huge cut in Larsen & Toubro shares. Nifty closed below 3500 yesterday, indicating that the relief rally might be over; bear grip has tightened and bulls are totally absent, in these extreme pessimistic situation all around the world on all parameters. Now, it appears that Nifty would settle in 3000 to 3500 band from now on. 3178.55 is the 50% retracement level, once gone, then the next level of support can come at 3000 psychological level, or at 2630 level where the first raising gap left unfilled since 14.06.2006. VIX has closed at 46.07 indicating higher volatility, Singapore Nifty futures are currently quoting at 225 points discount suggests gap down opening, as US markets tanked last night on Bernarke testimony that there shall be 'no quick recovery' possible inspite of US government coming forward to major banks by infusing capital directly. Asian markets are in dumps and trading with huge losses. Crude cooled to 75$ is no relief since the fall in price is being attributed to demand slowdown (destruction) as global recession fears strengthening.

RBI has reduced another 100 basis points of CRR yesterday after market hours, thus finally bringing CRR to 6.5% to provide liquidity with banks in India, may not have any positive effect in immediate short term on the sentiment for our markets. Markets ignore positive news in bear markets and over react for any negative news and vice versa in bull markets. 5DSMA of Nifty is currently placed at 3428.31 itself could not be held even yesterday, suggest further weakness.

Range for the Nifty: Nifty might trade in the range of 3180 to 3520 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.

Week has begun on strong note, as global markets entered oversold zone! Crude cooling to 80$ also helped the recovery!

All markets have posted gains on the first day of this week, after a historic mayhem week. Crude is hovering around 80$ and with US markets posting one of the largest gains in percentage terms overnight, is already having its rub off effect on asian markets. VIX has closed at 46.49, and Singapore Nifty futures are currently quoting at a premium of 162 points, suggests strong gap up opening for Nifty & Sensex, where short covering can push above 3500 zone, which I was referring yesterday. 3700 to 3800 area which offered strong support on 4 occasions earlier shall be the supply zone for this relief rally. Volatility levels are  high, once again, so trading with leveraged funds will hurt severely, if caught on the wrong foot.

 

5DSMA of Nifty currently placed at 3498.49 shall be comfortably overcome today, and 20DSMA is currently placed at 3915.38 will be far away to reach. Nifty might trade in the range fo 3500 to 3715 today, with an upward bias. Buying at the opening may not give any gains, when such huge gap up openings occur. However, investors who entered at lower levels on friday, with courage, can book 50% profits around 3700 levels on Nifty, as the bear grip will not be let loose in near term.

 

One should watch the Rupee : US dollar exchange rate, vs indices movement, to understand the FII flows and their activity, who are literally dictating the fate of all emerging markets. If indices go up with buying from FIIs rupee will strengthen from 48.10 to say 47.40 , 47.10 in the days to come. Naturally with 5% gain on exchange rate and 15 to 20% gains on indices, once again they will off load the trapped PN holding positions, as we near 31.03.2009 dead line set by SEBI. Thus, one need to understand and look from all these various permutations and combinations.

 

Range for the Nifty: Nifty might trade in the range of 3520 to 3720 today,

Global financial tsunami hits Indian shores (equity and currency markets)

At the outset let me inform all viewers that I was away for the past one week on some important project work, due to which could not post daily views. The week passed was historic, all global indices touching new lows in 2008, rupee's breaching 49 level, due to heavy rush for dollars as FIIs continued to press sales from Indian markets. RBI has cut CRR by 150 points in total during the week to ease the liquidty. Crude crashed below 80$ is a good news for our economy, but the advantage is offset by weakening rupee, thus, the strain on Balance of Payments stands as it is. The Infosys disappointing performance for the last quarter and lowering of dollar guidance for 2009, naturally sent shock waves, confirming global slowdown, amongst investors. The valuations look quite mouth watering, but in deep and prolonged bear market, valuations does not attract any investment, until some stability on macro picture emerges.

 

CBOE index has shot up to 70 an all time high, suggesting more weakness and volatility for US markets, which had free fall last week, surprising all technical analysts. Fed action to reduce the rates by 50 basis points to 1.5% did not help to bring any calmness, as the financial mess in US is spreading now to European economies, since some skeletons are coming out of cup boards.

 

VIX closed at 44.70 on friday. Asian markets are trading in positive territory in positive territory, Singapore Nifty futures are at a premium of  115 points currently, might give positive opening for our markets today. Last week I have written that the Nifty has shifted to 3500 to 4000 band, after so many months, and expected it to hold 3600 hold on any weakness. However, once 3700 to 3800 band is broken which offered support more than 4 times, hell was loose on Nifty, which made a new low of 3198.95 on friday(11.10.2008) which almost completes 50% retracement from the all time high of 2008 made at 6357.10.

 

Consolidation cum base building should happen which gives prolonged sideways movement for the markets, with a long term bias clearly being down, sell on rallies always gives an opportunity pick up the same stocks at much lower levels, as this bear phase is not going to wither away at least before one year from now. It is to be seen whether Nifty will bounce back above 3500 during this week or settles in the next lower band of 3000 to 3500, as results from other sectors and companies start trickling in slowly.

 

Range for the Week: Nifty might trade in the range of 3000 to 3500

Inflation at 11.99% but selling continues on Dalal Street which make 2nd weekly closing below 4000 level!

Nervousness on Dalal Street continued a head of passage of Bail out package by US House of Representatives and inspite of inflation taming to 11.99% profit booking cum bearish ness continued which resulted in yet another weekly losses, thus, finally Nifty closing below 4000 levels firmly confirming the trading range shifting to 3500 to 4000 as feared. US markets have closed with losses on friday and later in the week end the package is passed by House of Representatives. CBOE index rose to 48.4. The implementation of the package and how it will help in recovery of the financial system are to be watched. The actual system is 60 trillion $ and the bail out package being 750$ shall be pea-nuts if the problem is deep and wide spread. US president's signature to Indo-US deal cleared by the House Representatives is still to be done, thus, the accord is put on hold by India, though the secretary of state was here on saturday and sunday.

 

VIX has closed at 35.10 and Nifty futures have closed at 20 points premium on friday. This is again a short week of trading for our markets on account of trading holdiday on 09.10.2008, being the Vijaya Dasami. 5DSMA now is currently placed at 3905.11(Nifty) & 12828.07(Sensex) will be the initial resistances on any attempt by bulls to take the indices up, rupee being held around 47 levels against US dollar, SEBI's meet on review of PN guidelines introduced in last October 2007, shall have influence of FII flows and sentiment from tomorrow. Results of tech sector and other export oriented sector, should have naturally been benefitted with depreciation of rupee by 17% in the last 3 months against US dollar, but, most of them have hedged around 41-42 levels, as no body expected this steep fall, inspite of cooling of Crude and other commodities and also fall of US stocks and markets. FIIs are reported to have sold 9$ billions so far in the last 9 months during this year, and might continue to unwind the PNs to meet dead line of 31.03.2009.

 

Asian markets are trading in negative territory, Singapore Nifty futures are currently quoting at a discount of 

115 points suggest weak opening for our markets too initially. 3814.26 is the 40% fall from its all time peak of 6357.10 recorded on 08.01.2008, should be held on closing basis dailly for any base building for expecting reversal of the bearis trend. Failure to sustain this level, shall push the markets into further deeper bear phase in the coming weeks and months to much lower levels like 3646.40 & 3006.67 where the bear market could end.

 

Range for the Week: Nifty might trade in the range of 3600 to 4000 during the week.

US markets close in red and CBOE volatility index shoots upto 45.27! Our markets too may have rough ride!

US markets have closed with losses as the investors were nervous with the revised bail out package approved by US Senate, which will have to be cleared by House Representatives now. The current form of package ensures safety of depositors, small and medium families and businesses, rather than capitalising ailing banks directly. The deposit insurance is raised from $100,000 to $250,000 is good for the above category, but increases the cost of insurance of banks and financial institutions, which are already down with losses on account of heavy provisions. The proposal to clean the balancesheets by purchasing troubled loan assets, which are illiquid, directly by Government, would have helped the financial system, to get fresh lease of life to move on. The administrators though wished this method, in the first instance, the senators are shrewd to protect the depositors and investors rather than the share holders and management. The bad management need not be protected and they have brought this situation troubling the US economy due to reckless practices of misuse of securitisation concept, building castles without any base and adequate capital adequacy norms, and risk management systems in place. Thus, though in the short to medium term there is no perfect remedy or solution to the crisis that is being faced, the measures initiated and approved by Senate are good in the long term for US financial system and economy.

 

As an ex banker, I just wonder, how banks all over the world, including in India, lend at higher rate to a weaker enterprenuer (with lower credit rating), and give concessions even below 'prime lending' rate to a strong and sound businesses. Actually, it should be otherway round. The small and medium sized businesses which have to compete with large players in the market economy, where 'concept of Global village' concept is in vogue, should be encouraged with cheaper credit, thus, every one survives. This shall be in tune to charge or collect the revenue, taxes, interest etc., proportionate to the incomes or returns.

 

Our markets will open weak initially and shall be volatile, as Singpore Nifty futures currently are quoting at a discount of 78 points, and the inflation data to be released in the after noon, if comes below 12% might bring some stability at the end of the session. However, it will be intersting to see whether Nifty closes above 3985.25(previous weekly closing) and able to conquer the 4000 mark today.

 

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

 

Indo-US Nuke deal cleared and will be signed on 04th October' 2008! Nifty faces 4000 level as a supply zone!

Our markets are closed today on account of Gandhi Jayanthi holiday. Yesterday our markets added some more gains, however, Nifty 4000 level proved to be supply zone, and profit booking on account of a holiday a head, also kept markets subdued. However, both indices have closed around 5DSMA levels at the end of the trading. VIX has closed at 35.54. Indo-US Nuke deal was cleared by House of Representatives paving the way for signing of the agreement between two coountries on 04.10.2008, which makes availability of transfer of technology, availability of fuel etc., helps India to use for Civilian Purposes. The real benefit will come afte few years, but the base is now clear makes our position advantageous solving the infrastructure problem.

 

US Senate has cleared revised bail out package of 700$ Billion today at the early hours (IST), has paved the way to seek House of Representatives clearance today or tomorrow. Asian markets posted losses today, and US futures indicate weak opening, as the bail out package in the revised form shall not straight away solve the problems being faced by the financial sector and that too immediately. Jobless claims data has come at its 7 year peak also will keep the sentiment weak tonight. While our markets open tomorrow for trading after holiday, will certainly follow overnight US cues and being the last day for the week will have lack luster trading. Crude has cooled down to 97$ is welcome news, and rupee also closed at 46.62 against dollar yesterday after breaching 47$ levels. As of now, this 47 level will be defended by RBI and it might trade in the band of 45 to 47 for some time, may be till October 24th Policy meeting and measures if any to be initiated will affect the currency either way. The fall in crude price being offset by depreciation of rupee, thus the fiscal situation in India is not much affected currently. In case of more FII flows from next week, based on results expectation and performance of corporate sector.

 

Inflation data which is due to be released today, is deffered to friday, tomorrow, as today is a central government holiday. It is estimated that inflation might be below 12%, which comes true will improve the sentiment for equities, as RBI might hold monetary tightening for some more time, at least policy meeting.

 

 

Yet another new low of 2008 made and huge short covering lifts indices everywhere ending bearish streak!

Owing to global weakness our indices opened gapdown to register new lows for 2008 on the last day of September 2008, month and quarter, which confirms how bearish the markets have been in the year so far. The sentiment among all class of investors is at its lowest ebb, still capitulation situation is yet to be reached, where equities will be 'no no' to every one, and under such mood generally bear markets bottom out, and consolidate to form a base for reversal of trend. So far indices are making new lower tops and lower bottoms continuously and moving in a downward sloping channel. Nifty registerd 3715.50 low which is not any technical low, though the bounce from this point due to huge short covering lead by banks, rate sensitives and tech sector lifted Nifty to 3960 levels. One interesting feature need to be remembered is so far nifty moved in the band of 4000 to 4500 in the last quarter, and whether the band is shifted lower to 3500 to 4000 is be seen during October month, in which case, the bearishness will continue further, with intermittant relief rallies and bounces. Nifty closed at 3921.20 yesterday, thus, posting month on month losses, more than it posting quarter on quarter on losses for consecutive 3 quarters is most disturbing fact for bulls.

 

The trend is resembling the situation in 2002 when indices have posted 3 consecutive quarterly negative returns, post 9/11 crash world over, and the good news could be the markets consoldiated for one year from there on to rally into a strong bull phase where indices posted 7 times gains in just 4 years. Thus, in my opinion, one year down the line from today by next diwali this bear market cum base building should be completed, from where we should see the 'mother of all bull markets'. Long term investors using every weakness to accumulate quality index heavy weights will have multifold gains in future.

 

VIX has closed at 37.19 with volatility raising once again, put-call ratio is below 1 indicates that bottom formation may be in place. US markets had relief rally as other markets too had yesterday night, on the hopes that some other plan to save the current financial crisis/mess will be taken up by the authorities by this week end. Asian markets are trading with gains, and Singapore Nifty futures are quoting with premium of 48 points currently shall give positive opening today initially, and Nifty shall face selling pressure at 4000-4040 level as our markets are closed for Gandhi Jayanthi holiday tomorrow, (02.10.2008), as traders would like book profits and do not carry overnight positions, in these high uncertain volatile times.

 

Range for the day: Nifty might move in the range of 3820 to 4020 today.