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 So far it is estimated that FIIs have withdrawn about 12$ Billion dollars from our equity markets itself, shows the reason for damage of fall in prices.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.
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