Nifty made a double top at 5181 and Sideways movement continues!!!

Nifty which corrected sharply after making an intermediate top of 5181 on 20.10.2009, to 4538 levels on 03.11.2009, reacted at a faster pace to climb above 5000 levels by November end. The upward push continued in December amidst volatility, and a reaction came exactly at 5181 now, on 03.12.2009, and yesterday correction has set in, as gains on indices and appreciation of rupee became favourable to FIIs in our markets. This week will see some sell off from Corporates, as they draw funds for meeting 'advance tax payment' due on 15.12.2009.

 

While Nifty made a higher low at 4806 on 27.11.2009, and quickly retraced entire fall, whether the present correction/fall halts above it or around the same level, will unfold the possible reversal of short and intermediate trends. From the Options data analysis it appears that puts of strike prices 5000 and 4900 are aggressively sold by bulls and 5200 calls too are shorted on rallies in current series. This indicates a range of 4800 to 5200 for the month, as at present, and some external or domestic trigger is required to break this range which decides the further trend. Any positive news on raise on advance tax numbers which will be known by 16.12.2009, will help bulls to clear the double top formed at 5181 and Nifty can easily race to 5250 - 5290 levels immediately and then to 5555 levels, where the valuations shall look stretched.

 

Many analysts are cautiously bullish and are expecting 5300 to 5500 levels during December itself looking at the liquidity situation and the firmness in global markets. However, I am little sceptical on the second target for this month and 2009, as herd of IPOs and FPOs from both private and public sector companies are in cue, to raise resources through the booming stock markets. RBI and Government of India are watchful and are concerned of flows and appreciation of rupee with huge volatility which is hurting exporters, and liquidity tightening measures like raising CRR, Bank Rate and or REPO/Reverse REPO rates suddenly can upset the sentiment of overseas investors, which might bring in the desired correction breaching the level of 4800 too.

 

Thus, one needs to be cautious, and duly hedge the portfolio, going long on 4800 puts of current month series, or participate in the markets by increasing cash levels to 25%, by selling stocks at current levels and going long on 5200 calls.

 

Nifty Range for the Week: 4800 - 5200.

Nifty above 5120 level and what next????

Well November Series ended around 5005 levels, and markets reacted to DP World Debt Crisis along with global markets next day, where Nifty touched an intraday level of 4806 and bounced back to 4940 at the end of trading last friday. Once the impact of Dubai crisis is estimated and its effect on Indian companies directly or indirectly is clear, there was a smart rally on 30.11.2009, which was the last day of the month, where nifty climbed 5000 level at the opening and closed around 5032 levels. Recovery in Global markets helped Nifty to post further gains yesterday to clear important technical levels of 5080 and 5120 with ease.

 

US markets have posted substantial gains overnight and today the opening should be good for our markets, where Nifty should clear 5155 initially and even challenge 5182 the high of 2009 so far. However, since the rally from 4806 has already given substantial gains some profit booking can be expected in the zone of 5180 to 5200. Investors and Positinal traders who have entered Nifty at lower levels can exit the futures or calls around the earlier high or alternatively hedge the long positions with 5200 puts and ride the rally which might give further upsides of 5290 or 5500 also during this month before 10th.

 

 

Nifty Range for the Day: 5050 - 5100 - 5150 -5200.

Settlement Blues once again!!! How December Series unfold???

Nifty managed to close around 5005 levels on the settlement day yesterday, amidst huge volatility, induced due to heavy outstanding positions to be rolled over to Dec Series. The Asian markets weakness and collapse on an important day worsened the situation, since most of the traders and short term players were expecting that Nifty would close at 5100 + levels and march a head in December posting further highs.

 

US markets were closed yesterday on account of 'Thanks Giving Day' and futures are indicating huge fall today. European Markets have reacted in tune with Asian markets yesterday, and currently Asian markets are trading in negative territory. SGX Nifty futures are already indicating a discount of 72 ponts at present, which certainly give a gap down opening for Nifty where 4920 levels may be tested. What happens after that shall decide the medium trend since short term trend already is down, as Nifty closing above 5055 today, being the last day of the week, appears to be a herculean task for bulls  as global markets are correcting from November peaks.

 

Short term traders can sell into rallies with a stop loss at 5050 levels for today, for quick returns on Nifty.

 

Nifty Range for the Day: 4900 - 4950 - 5000 - 5050.

Nifty is back above 5050 level and whether further upside is possible from here on ???

The weakness during last week till thursday, and gap down opening on friday tempted lots of traders to go short as many analysts were hoping that the 80% retracement was the final leg of the rally, and the announcement from Finance Minister that P- Notes will not be discouraged helped to improve sentiment amongst FIIs. The talk that Government is considering merger of PSUs to reduce the number of banks operating also encouraged a rally in PSU Bank Stocks, and the announcement of Disinvestment of PSUs has already pushed the listed PSU stocks. When the bulls forced the rally beyond the predicted resistance levels like 5000, 5020 and then 5040, intra day traders and short term traders have no other way except to exit the positions at what ever price in the last 15 minutes of trading, as they will not have the capacity to carry forward the positions on a week end.

This observation is based on the huge premium of 24 points with which November Futures traded at the end of the day. Now that the indices have closed firmly above 5050 and 17000, whether there will be further short squeeze coupled with fresh buying which can push markets further during this week is the mute question. This week being the Settlement week, and the outstanding open interest positions at record high, above 1 lakh crores, huge volatility can be expected during this week. Roll over of positions to December also will provide two way movement in Nifty. Investors may stay away from markets for this week, and can take a view on the markets next week, after knowing whether fresh rally has begun, or sideways movement with downward bias shall continue for some more weeks/months emerges with clarity.

I will update the posting next saturday, after the settlement and november montly closing is known. The range for the week could be 4800 to 5200.

Strategy for the Day: Buy 5100 Puts on rallies and 4900 Calls on weakness of November Series for quick returns with adequate stoploss owing to one's risk perception.

Whether Nifty Can Challenge 2009 High???

Well the 'V' shaped recovery of indian stock markets after touching lows on 03.11.2009, at hightened volatility, was surprising to many analysts, who were looking at deeper correction to levels of 4200 and so on, in the down move started on 17.10.2009. But the markets have their own mind and always defy logic and especially consensus opinion, in whichever direction it builds up. The volatility index hovering around 29 and Nifty's attempt to close above 5000 last week, suggests that the retracement is almost completed. I felt that Nifty will in a band of 4500 to 5000 during this month, proved to be on dot so far. Currently both the indices have retraced 70% of the fall and might move upwards upto 80% retracement levels during this week. Nifty level to watch shall be 5054 and Sensex it will be  17061, from where down move should start once again, or sideways movement of consolidation will last till next trigger emerges during December in the form of 'Advance Tax Numbers' and the outlook on economy, especially on Agriculture front.

 

Watch the level of 5054 for clues and exiting long positions around this level is not a bad idea. One may look at buying a straddle of 5000 Nifty for quick returns, capturing the volatility.

 

Range for the Day: 4920 - 4950 - 5020 - 5050.

Whether the correction is completed at the bottom of 03.11.2009???

The volatile movement of yesterday on our indices, must have hurt both the bulls and bears (traders) as the range was wide, and stoplosses triggered on either side. The ultimate bull charge in the last hour of trade, forced short covering by intraday traders, which made Nifty to close above 4750 level and Sensex above 16016 finally. The overnight strong rally in US markets will certainly push the indices further up, possibly with gap up opening today, as indicated in SGX quotes (where nifty is trading around 4826 level) and whether a bottom made on 03.11.2009, will hold for now is the question on everybody mind as the sentiment turned negative.

 

Peculiarity of market dynamics is they tend to correct when everybody is bullish and looking for higher levels, with complacency, and reverse the trend and start going up, when the mood is of pessimism. FM announcement on disinvestment of existing PSUs and unlisted PSUs to bridge the Fiscal Gap, was mostly welcomed by FIIs and DIIs. US markets rallied as senate approved unemployment allowance support for another 20 weeks, and the production data, jobless claims etc., came positive. Dow finally closed above 10000 and Nasdaq climbed 2100. Back home, inflation data was not announced yesterday, as the Government decided to announce it on monthly basis, shifting the base also from 1993-94 to 2003-04, from this month onwards.

 

Nifty is exactly at the mid point of 4500 - 5000 range advocated by me, and I expect today being the last day of the week, after a gap up opening profit booking might come around 4840-4860 levels, where 50DMA is placed. One may buy 4900 puts on rallies and 4700 calls on weakness for intraday trading for quick returns, using adequate stop losses, as per one's own risk perception.

 

Range for the Day: 4650 - 4750 - 4800 - 4850

Is it a Dead Cat Bounce!!! or the relief rally???

Our indices have recovered the entire losses posted on tuesday(03.11.2009) by wednesday (04.11.2009), thanks to fund buying since the markets were oversold, coupled with short squeeze in index heavy weights like RIL etc. Both Nifty and Sensex in the process have created upward gaps, which indicates the bull pressure, which might be tested and covered sooner than later. Nifty closed around October Closing level, and the immediate hurdle is 4750 series settlement level, which nifty needs to cross and close above it. However, the levels of 4800 and 4850 will offer stiff resistance, way a head. CBOE index and VIX raising to levels of 29 after a prolonged stay at around 23 to 25 levels suggests of higher volatility. Higher volatility in weak markets indicate possible bottoming.

 

Owing to the fundamental and economic data pouring in around the globe, there is no reason for markets to be exhuberant for some time, the 10% correction in our markets from 52 week highs happened with great speed and in less time, so some more spending in a range of 4550 to 4850 on Nifty shall be good for resumption of rally later. Break out or Break down of these threshold levels will move the markets into the direction upward or down ward, which need to be closely watched.

 

Options are the best products in these times, as IVs are low, since stoplosses need to be at deeper levels if one wants to take a position in futures.

 

Range for the Nifty today: 4660 -4750 -4800.

 

Strategy for Day: Buy Straddle of Nifty 4700 strike price for quick returns capturing two way movement and volatility.

How will November month unfold??

October month has witnessed the 52 weeks high by Diwali and deep cuts in our markets and also amongst global markets later on, owing to domestic as well as global cues. Both October derivatives settlement and monthly closing posted negative returns over September. Now the mute question is whether the rally ended by 17.10.2009 highs for our markets and are we to witness further deeper cuts and sell offs, as the turn of events unfold!!. Many analysts are looking at a maximum relief rally, if it happens from here or later cannot surpass 4920 or 5000 on Nifty during November.Markets having corrected already 10% from their 52 week highs would post another 5% or more correction is the most preferred view. Now in this back drop where will November series and monthly closing would happen important.

October series ended at 4750 while monthly closing was at 4711, these are the bench mark levels for bulls to defend, if there has to be a relief rally or if one is over enthusiastic for resumption of the rally after this 10% correction. Most of the funds and analysts are advocating sell on rallies, instead of buy on weakness which was the dictum for the past 5 months, when the rally began in March, 2009. RIL being weak due to the litigation takes and twists before Supreme Court, has to lead the rally or relief rally which is possible once there is settlement on Gas Pricing Issue between brothers, and a clear policy from Government, as the power and fertilizer projects viability is dependent on the chief raw material, where ascertainment of price is must. AGM of RIL is scheduled for 17th November where the 1:1 bonus issue will be approved and a record date will be finalised, before AGM or Record Date to be announced (later) if this issue is resolved amicablly privately, through arbitration, or through Governmetn action, that could be turning point for the bell weather stock which can decide the future of our markets. Thus, the bearishness shall coninue till this one issue is resolved.

November might witness a range of 4500 to 5000 in my assessment and Nifty is currently exactly at the middle level. Professional traders can buy puts when there is upside and calls on weakness at the money for quick returns with adequate stop losses, owing to one's risk perception.

Nifty Range for the Day: 4600 - 4650 - 4750 - 4800.

Settlement Blues!!!!!!! Can we expect some relief rally now?????????

October Settlement of Nifty was exactly at 4750 which was not anticipated by any one, in my understanding, since every analyst was expecting a strong rebound from 4930 level which extended support on more than one occasion, after there was a break out on upside from the 4500 to 4740 range. Markets were on a roll till Diwali (17.10.2009) and closed around 5140 level and every one was complacent, as observed by me in my earlier postings, and giving further upsides to 5300, 5500 etc., The mute point I always re-iterate is markets are 'dynamic' and will discount future, or react to news and expectations, and generally trend reversal happens where there is large consensus among various category of players. I was also hoping that market will not break 5000 level on 'block theory' and will post further gains after brief correction to 5000 levels. Any way November Series commence from today, with lot of pessimism around and futures have closed with 24 points premium will help bears to continue shorting, as they made huge profits after Diwali.

 

RBI's hawkish stance to raise SLR by 100 basis points and increasing the provisioning against Standard Assets to be complied by September 2010, have sent zitters in banking stocks and real estate sector. Weakness in global markets also contributed for further fall, as USD strengthening became favourable to FIIs to press for sales, amongst emerging markets, including India, because the valuations of some sectors and stocks reached astronomical levels. The scanty support from DIIs have not helped the markets to hold important support levels, and already analysts and experts are suggesting deeper correction to levels of 4400 or 4200 in this run itself.

 

However, in my view, Settlement of October series is behind us, November series today will open on positive note, as markets have held the break out level of 4730 in the recent may hem which ran for 9 straight sessions without any break. US markets have posted huge gains overnight, on positive GDP data and reversed the trend, which should help a relief rally in emerging markets and back home, where Nifty to move to at least 4920 level in the coming days. Further today being the last day of October month, some fund buying in index heavy weights like, RIL, ONGC,DLF, SBI, M&M etc., should give a closing between 4850 to 4900.

 

Nifty Range for the Day: 4700 - 4750 - 4850 - 4900.

 

Strategy for the Day: Buy November Futures around 4800 levels with a stop loss at 4750 for a target of 4920.

 

 

Global Markets enter into correction mode and so our markets too become volatile!!!

Nifty struggling to hold 5000 level in past 5 trading sessions and Sensex being far away from 17000, inspite of some outstanding corporate results, indicate formation of short term top and fatigue in the bull camp. Dow has become more volatile in the recent past moving 100 points + / - range of 10000 level. Volatilityin the movement of US Dollar, make  matters worse for all markets and all asset classes in the near short term, since it is the defacto global medium of exchange. Crucial RBI Monetary Policy Statement scheduled for announcement today, shall give indication of interest rate movement, inflation tackling measures and liquidity situation which are anxiously awaited by market players, especially FIIs.

 

FIIs or Domestic corporates and infact every investor and participant, wishes stability in Exchange Rate, and predictability of its range over short to medium term for planning investments in the economy. SEBI has cleared the proposal to allow Stock Exchanges to extend trading hours from 09.00 a.m. to 05.00 p.m., after ensuring the necessary related infrastructure issues are in place, is a welcome measure for FIIs, who need longer trading hours for proper hedging the investments across globe. Indian Banking and the Clearing agents and Depositories etc., need to tune their working hours too to suite this proposal, for implementation of the new system.

 

Positive Features: Investing in stock markets, commodity markets, forex markets etc., will invite more players and participation which raises volumes on bourses. Extended hours will necessitate for shift operations for front and back office staff, which creates more job opportunities in the field. Since complexities raise as markets take cues on economy, exchange rate apart from performance of corporates, opportunities for Port folio Manager, Investment Advisors, Analysts, Private Equity Players, Venture Capitalists and Merchant Bankers will increase.

 

Since markets are becoming top heavy, Strategy of Sell on rallies to increase levels to 25% of investments is not a bad idea, as there will ample opportunities to purchase the same blue chip stocks at much lower prices in the weeks/months to come. The Monetary Policy Statement and analysis of its effect on markets shall be posted after its announcement separately.

Out look for October Settlement & Monthly Closing!!!

Last week indices have turned volatile and closed with losses over previous week, since profit booking and long unwinding started from Muhurat Trading on 17.10.2009. While Sensex has breached 17000 level, which was observed by me as crucial for upmove to continue, Nifty also broke 5000 level on closing basis, though managed to close around the same level. The main drag on the indices was RIL which started receiving negative news after. of positive announcement of 1:1 Bonus, which became the target of Bear on slaught. Banking Sector is saving the day, due to outstanding performance, and SBI is continue to post new highs, however, RBI's monetary policy annoncements scheduled for 27.10.2009, bring any surprises will lead the further fall. Crude continuing to move upwards, and inflation showing upward tick week after week, shall force RBI and Govt to initiate some measures either through the policy announcement date or after it, which would bring the banking sector too under pressure of profit booking.

 

This week shall be quite interesting to see the future of the current bull rally in the major bear market which began in January 2008, after all time highs were made. The question is where the October Derivatives settlement of Nifty( September Closing was 4986.55) is crucial apart from the monthly closing for October(September Closing was 5083.95) on the last day of the week on 30.10.2009. Monetary Policy statement on 27th, Derivatives Settlement on 29.10.2009, on which date results from Oil Sector Majors like RIL,ONGC and Cairn will be announced, will bring in the much expected volatility. Dow was unable to sustain above crucial psychologicl figure of 10K though it was trying to climb and close above it on select occasions.

 

I was observing whether the Nifty movement around 5000 level is a consolidation phase or distribution phase, where clarity will emerge by this week end. If the Settlement  is below 5000 level coupled with October monthly closing, then it goes to confirm that a top for this entire bull rally in the strong bear phase at 17494 (Sensex) & 5182 (Nifty), and markets will go in to deeper correction during November and December 2009, as the complacency levels among the put writers is quite evident from low put call ratio and CBOE and VIX indices are at normal levels. Higher volatility intraday coupled with inability to post gains will be one of the indication of top formation at the levels mentioned above.

 

I refer to my posting dated 15.10.2009 where in I have indicated that 17489 could be decider level on sensex, which was touched exactly and the current profit booking commenced from then, also support my above observation of formation of a top for this bull phase. High risk traders might buy 5000 straddle of October series and monitor the same for quick returns, since time value for money will be changing rapidly in consonance with Nifty movement.

 

Happy Trading!

 

 

Holding 5000 on Nifty and 17000 Sensex on closing basis crucial for further upside!!!

Inspite of outstanding results from Tech heavies, assured GDP growth @ 6.5% from Government Of India, profit booking has set in from Diwali Muhurat Trading. Crude touched $ 82 over night however cooled off to 80 levels. Dow though opened in positive territory overnight closed with losses on profit booking. The overall sentiment in global markets also is turning out to be cautious, since valuations are prohibiting further investments by even institutions.

 

Inflation data will be released during market hours, which shall show an uptick, forecast by RBI and GOI is that it would be 5% by March 2010. Inflation data base being shifted from 1993 to 2004 and the data will be released once in a month from Nov onwards. Poll results of Maharashtra, Haryana and Arunachal Pradesh will be known today, where UPA is likely to hold its strength and improve, which if happens, might infuse confidence among overseas investors, as they look for continuation of policy initiatives.

 

Disvestment by PSUs viz., NTPC & SAIL through FPO and other corporates planning for raising capital in the coming months, shall keep interest of investors bifurcated between primary and seconday markets. Keeping all these aspects in view, indices will go into consolidation phase for some time, and look for positive cues like settlement of RIL-RNRL gas price dispute which is being heard on daily basis at Supreme Court might push markets above recent highs Nifty(5181) & Sensex(17493) alternatively, raise in petrol and diesel prices by month end and any monetary tightening measures by RBI in its mid term appraisal on 27th, shall bring in more correction. RBI's advise to banks to declare "Base Rate" instead of BPLR which in vogue if adopted will be positive for banking sector, which need to improve their margins to meet the impending cost increase due to possible wage revision agreement of 17.5% hike for employees and officers, before this financial year.

 

The long term story of Indian Stock Markets is in tact, as GDP is registering good growth, inspite of recession in major developed economies, and excellent corporate performance, as most of them depend on internal consumption unlike other economies like Japan and South East Asian Countries.

 

Watch 5000 on Nifty for clues of reversal of trend upwards, since I feel that Nifty has consolidated well in the zone of 4500 to 5000 and moved in to the band of 5000 to 5500. If this thesis becomes real investing around 5000 levels in Nifty will fetch huge returns by December' 2009. However, volatility shall increase from now on, as the fight between long term bulls and short term bears heats up!

 

Range for the Nifty today: 5000 - 5050- 5080 - 5120.

Break Out of Indian Indices on upside - Diwali Lights on Dalal Street!

Weakening of US Dollar for the last two weeks, coupled with market positive news like, RIL Bonus Offer, Infy's outstanding performance and upping the guidance, finally confirmation of economic recovery by strong IIP numbers, lead to a strong bull charge on 12th and the same continued yesterday, resulting in both Nifty and Sensex making new 52 week highs and also closing around the same levels. US markets also are on strong rally Dow has crossed 10000 afer an year and closed above it, inspite of raising crude prices and other troubles of economy not waning out. Japan has left the overnight rates unchanged, and RBI and Governemnt of India are not much worried about appreciation of rupee till it breaches Rs.45 level, as being observed, is allowing FII inflows in markets at their peak in the recent times.

 

All the cautious words by various fundamental analysts, technical analysts trying to fix the top and predict the reversal of trend or a correction at least 10 to 20% which would be healthy for the markets in the long run, are making fence sitters restless, as the indices and stocks are posting gains, and they are afraid to enter at these levels. In my view markets have their own mind and do what ever they wish to do and not listen to all the talk what is happening! Today is 'Dhan Therus' a day which is treated auspicious by most of the indians, who will buy and buy only, thus, we can expect buying to continue today also in our markets. Diwali muhurat trading is there on 17.10.2009 (Saturday) from 06.15 p.m. to 07.25p.m. where all world markets will be having holiday, might invite some profit booking as investors feel it is good to take some profits home on the 'Lakshmi Puja Day'.

 

NIfty might face resistance at 5154 - 5180 - 5200 levels today. 17489 on Sensex is crucial trend dicider, if Sensex is able to cross it with volumes and close above it this week, certainly indices will gradually post further gains to challenge the all time highs too!

 

One can buy 5100 Straddle of November at current prices, and hold till November Expiry for good returns.

 

Happy Dhan therus!

Nifty closes at 5000 level in volatile trade! Infosys results and guidance will decide the breakout/down now!

Markets have opened in positive territory, with the help of RIL however, volatility witnessed through out the day, finally Nifty managed to close at 5002 level on adjustment basis. It was clearly visible to see that markets entered indecisive zone, and wait for the results of Infosys and its guidance, in the background of rupee strengthening. ECB left the rate unchanged at 0.50% overnight, which brought some cheers amongst European and US Markets, which posted gains. Korean Central Bank also has left the rate unchanged, as reports pore in today. Chinese markets open after a long holiday, and are catching up with global uptrend currently. Rupee appreciated to 46.35 levels due to weakening of dollar, and selling by exporters, who are fearing further weakening of USD, RBI intervention in purchasing Dollars protected the rupee to breach 46 levels.

 

SGX is currently trading in positive territory flat currently cannot give any indication today, as Infosys results will be announced around 09.30 a.m. before market opening. Nifty which is moving in the band of 4910 to 5110 has given a sell signal for short term, and whether it is consolidating here for the next upmove, which takes nifty beyond 5250 or breaks down for going into deeper correction will be known once the range is broken with large volumes(participation).

 

In my view, appreciation of rupee coupled with gains in stock prices, will be double whammy of profits for FIIs to exit at current levels, which they have been doing. So there is necessity to watch Exchange movement, FII activity, to correlate the Nifty movement from now, which is little complex, for an ordinary investor or trader to cope with.

 

Nifty Range for the Day: 4950 - 5020 - 5050 - 5080.

Reliance Industries announces 1:1 bonus after 12 years and Rupee touches 46.50 level!

While levels of Nifty and Sensex are important to be discussed, few events that have happened during market hours and after market hours will influence movement of indices today. Nifty opened with positive gap and touched 5077 where selling emerged and the same accelerated in the last half an hour due to rupee strengthening, and also on concerns of FII + DIIs selling on 05th and 06th. Nifty closed below 5K but above Sept settlement level. Nifty futures which opened with premium of 15 points have gone into 10 points discount, indicates short build up in the last one hour of trading, as traders and investors were preparing for results season, and inflation data.

 

Surprisingly RIL announced 130% dividend for 2008-09, and 1:1 bonus after a gap of 12 years, after market hours, which is very positive for the market leader which is languishing for the past 10 days. It will give the required phillip to the markets today in the opening trade, which is already indicated in SGX trading with a premium of 40 points. The provisional data for 07th from FIIs and DIIs was net buy which should force short squeeze, where indices should post much gains, however, volatility will be very high, as inflation data will be released in the afternoon. Tomorrow being the last day for week, Infosys announcing Q-2 results, on the back drop of $ weakening investors are expected to be cautious in the last one hour of trading.

 

I feel that Infosys results for Q-2 are already seized as the strengthening of rupee is recent phenomenon, and will effect Q-3 performance, and all major tech companies have full fledged hedging mechanism, in place now, should not hurt the bottom line in general. The loss, if any, on operations will be offset by raise in other income, when hedging is done, while concluding the deals.

 

Nifty Range for the Day: 4950 - 5000 -5050 - 5100.

 

Strategy for the Day: Buy October Nifty futures around 5010 level and duly hedge it with buying 5000 put option and selling 5100 call option for funding the cost of put option.

Nifty holds 5020 level on closing amidst high volatilityand large volumes !

Bulls have held the 4920 level during the carnage yesterday, and pushed for short squeeze, which lead our indices to climb back above crucial level of 5000 and also ensured closure above 5020. This happened inspite of Telcom stocks under severe selling pressure due to the proposed TRAI guidelines, which will directly hurt their bottom lines. The strength in FMCG stocks contributed to the recovery. The news that Australian Government deciding to raise rates infused confidence among global investors that the first signs of recovery may be on cards. The US dollar weakness helped all markets including US markets to post substantial gains.

 

SGX is currently trading with 21 points gains and our markets too will open in positive territory. However, uptick in inflation and Infosys results to be announced on 09th instant, might keep the markets subdued till tomorrow. Nifty if holds yesterday's low of 4920 on any weakness one can go long on markets for higher targets like 5150 - 5250 by next week. The initial hurdle shal:l be 5060 and then 5080 which was previous week closing. once these levels are taken out and protected on any selling Nifty will challenge 5110 and post fresh highs.

 

Nifty Range for the Day: 4980 - 5020 - 5060 - 5100.

 

 

Volatility should increase from now on!

Much awaited correction resulted yesterday, nifty going down with gap, whether is a result of profit booking or extension of global weakness, will be unfolded in the coming 2 to 3 days movement of indices. US markets bounced back overnight with 1% raise and SGX is indicating opening of Nifty in positive territory.

 

Nifty having created a gap down and broke important supports like 5020 and closed below it, though on closing basis held 5000 psychological level, shall turn volatile from now on. Watch level of 4904 for larger support in case of any further or sudden weakness, from where it turned up and made a new high for 2009 at 5110. As long as 5000 is held on closing basis the bullishness continues, with a possibility of Nifty making fresh highs, as Higher Highs and Higher Lows structure is not disturbed in the entire rally till now.

 

Nifty Range for the Day: 4950 - 5000 - 5050 - 5100.

Markets entered Over bought Zone - Formation of Short Term is round the corner!

Out performance of Indian Stock Markets, inspite of truncated week, defying the global weakness, cannot be overlooked. Return of agressive confidence of traders and retailers in shorting 5000 and 4900 puts might lead them in to a trap, as our markets are waiting for an event, information for going into deep correction, as they have achieved short term top at 5110 (Nifty) 17195(Sensex). Exact top or bottom prediction by any analyst may be a conincidence, in general, however, time cycles generally answer the trends and reversal of trend, with some margin.

As we enter into results season with Infosys coming out with Q2 performance on 09th October' 09 could be one trigger for correction, as there is consensus on improved performance which is already built in current price, as the stock is trading at its all time high. Few economic issues like fiscal deficit, weakening of US dollar, fall in Exports and Imports and the cautious note from Fed Governor Mr.Bernarke that all is not well with US economy sent shivers to investors which resulted in 2% fall in US indices. SGX Nifty already indicating 70 points discount to our earlier close, as our markets escaped the effect of US fall on01.10.2009, to be reflected in our indices on 02.10.2009, as it was a holiday, on account of Gandhiji Birthday.

Nifty Range for the Day: 4980 - 5020 - 5060 - 5090 - 5110 - 5140.

Return of Higher Volatility indicates formation of Short term Top!

September Series ended on positive note and gave 7% gains over August Series. Settlement Day witnessed highseer volatility after a long time. Global markets enered correction cum distribution pattern, thus our markets too shall follow suit. October Series being very lengthy, and expectations on results will be analysed all fund managers, run away posting of daily, weekly gains on indices shall take a pause now. Infosys will come out with 2nd quarter performance on 09.10.2009, which might be good, but, might invite much awaited correction. Another important event to be watched during October is 'Diwali' which is considered very auspicious by most of the business community and trading community in most parts of the country. Markets might hold uptrend with volatility till  then and might go into correction of larger magnitude.

 

US markets tanked last night due to disappointing housing data, and Singapore Nifty futures indicating negative opening with 65 points gap suggests that we will have rough day today. Today being the last day of the week and monday our markets are closed for 'Vijaya Dasami' holiday, naturally force traders and investors to take profits home.

 

Nifty might move in the range of 4880 to 5020 today. Bear Spread strategy is suggested in view of short term bearish view explained above.

 

Happy trading!

 

 

Re: [Trading for Profit on Nifty (India)!!!] New comment on Outlook for Friday " Infosys delivers what promise....

Dear Rajesh,

First thing is you have sold shares of Hindalco which are assets and will move in value in tandem with markets or company performance.

Later bought 5300 Call Option(CE) on the advise of broker, which is a derivative instrument where the underlying is Nifty Index, the value of the option moves based on movement of price of underlying i.e., in this case Nifty, the value of premium will move on the principle of 'time value for money' and also based on cost of carry.

Selling the options held also invites another leg of brokerage, usually, which if you can avoid pressurising the broker, then you may be able to recover at least current value.

Nifty moving to 5300 before this expiry i.e., 24.09.2009 is impossible.

with best wishes,

bkvrkrao

On Wed, Sep 16, 2009 at 10:42 PM, Rajesh Haldar <rajeshrocks.kolkata@gmail.com> wrote:

Hi,

Thanks for your kind effort and reverting back to me. Actually I am absolutely new in this stock market. What happend is, I was holding 19 Hindalco shares, suddenly the my RM from the India Bulls called me and told me to sell the Hindalco when it was going @121/share and also instructed me to buy 500(quantity) of Nifty 5300CE-Sept-24-2009 @ 2.10/share. I did not have any idea about the CE & PE shares. So I purchased that. My RM said that this share will reach by Rs.7 to 9, so it will result a huge profit. But when they sent me the electronic contract note then I found a double charge. Here goes the details:
500 shares @2.10= 1050
Service Tax =153

So total price was 1,153. But at the end of the contract note I found a charge of Rs.1000 extra and they mentioned that I need to pay 2153.

As on date this call is going @1.75. So I don't find any chance of profit. So what should I do now?

Please suggest.

Thank you inadvance.

Warm regards,
Rajesh Haldar

On Wed, Sep 16, 2009 at 10:52 AM, vrk rao <vrkr4u@gmail.com> wrote:

Dear Rajesh,

Your querry is not clear, since u have posted it on an old article written by me.

Please read the latest posting and give full details of the strategy whether it is for this month expiry and quantity bought etc., for enabling me to give my view.

Thanks

bkvrkrao

On Tue, Sep 15, 2009 at 10:04 PM, Rajesh <rajeshrocks.kolkata@gmail.com> wrote:

Rajesh has left a new comment on your post "Outlook for Friday " Infosys delivers what promise...":

Hi, I am new in your blog. I desperately needyour suggestion. actually I am very new in stock trading. Yesterday my RM from IndiaBulls gave me a call and suggested me to purchase Nifty 5300CE @2.15 and I did so, he told me to sell it within next few days and the price is expected to rise by Rs.8. So please suggest me what should I do now? Please help me. My email id:rajeshrocks.kolkata@gmail.com. Thanks..



Posted by Rajesh to Trading for Profit on Nifty (India)!!! at September 15, 2009 10:04 PM

An upward breakout on good advance tax data!

What a out performance of Indian stock markets!!!!!!! Everyone on the street was caught unware of what was coming on 15.09.2009, thanks to the robust advance tax(income tax) payment, known from sources, gave phillip as relentless buying by all round participation, lead for posting new 52 week highs on both Sensex and Nifty.

 

US markets too have closed with gains overnight and SGX Nifty is indicating positive opening for our markets. No doubt the abundance of liquidity chasing Indian Blue Chips is making the indices move upward, as every dip/weakness is immeditely being bought.

 

The mute question is whether this bullish ness continues like what we have seen in 2007???? The answer is strong No according to me, as the economic indicators do not support this time around. The irony is one cannot be too bearish also at the current juncture, and certainly this is not the time or level at which new entrants to begin port folio building.

 

One should be cautious when consensus builds up in one direction, because trend reversal takes place when every one is 'off guard'.

 

In my view increase in volatility shall be first sign of big fight to unfold between bulls and bears. Watch for indications.

 

Trend for the Day: Nifty might trade in a band of 4840 to 4940 today.

Government of India announces Austerity Measures!

Finance Minister has announced austerity measures to control and cut non-plan expenditure. All the Ministers and M.P.s cutting across party lines welcomed the measures and started implementing too immediately, is a welcome measure. Monsoon reported to scanty in some parts and agcultural product prices not cooperating to come down, poses greater threat our country which has to fed second largest population in the world. Raising inflation will pickup further in the months and higher inflation will hurt the recovery of economic growth which is showin signs of stabilization.

Today is the last day for depositing 'Advance Tax' ...by Corporates and the figures will be available to market players and analysts, who would like to guage the profitability for this quarter and the performance of economy for the first half of 2009-10 will be known. Coming to Stock markets, OIL stock is allotted at Rs.1050 (higher end of price range). Nifty is holding 4780 in a tight range of volatile trade on monday if making lower tops and lower bottoms since last tues day, indicating lack of conviction to move on after huge rally from 4580 levels to 4890 at a stretch.

With US markets closing in positive territory, after initial weakness overnight, confirms that liquidity strength pushing the indices world over, with no real palpable positive economic news being visible, is to be taken note. One interesting feature is US Dollar is weak in general and INR also showing weakness makes things complicated for predicting the trend. However, our indices are moving a narrow band and it could be consolidation or distribution by large players, as indices have doubled from march lows. Break out or Break down requires one external factor which will confirm the formation of intermediate top and reversal of the trend. Many analysts voicing that new bull market has started since a bottom was in place, reminds me of 'consensus theory' generally markets ignore and surprise every one moving in opposite direction.

Be watchful and careful if you are a day trader. It is not a bad idea to take some profits out of the markets and increase cash levels.

Are we at the end of current Bull Run ???

Well all readers should be wondering why I am absent for such a long time! I am back now, having completed some project on hand. Recently all stock markets have broken out of trading range and are inching up where many analysts are confirming that a bottom was formed already. The hope is again building up that inflation under control and fears of recession fading out in developed economies, equities as an asset class are  being looked by small and retail investors.

 

No doubt that our markets are in firm bull grip, thanks to the liquiity flowing from developed economies long only funds, indices are moving up. Well are we into a new bull phase?? My answer is strong 'No'. The previous highs are not going to be taken so easily, as lot of pit falls and land mines are on way down. One interesting and wondering feature, I notice is Rupee is weak, in spite FII flows and markets doing well, suggests that the fiscal position of Indian Economy, interest rate scenario in future might be a cause of concern.

 

However, if one wishes to have some risk taking appetite, can play with Nifty  Options. One can buy 4800 Straddle of current month (September) and try to make some money, as volatility sets in from now on.

 

 

Indian Economy - Global Markets

Hi readers!

I have been away from the markets since engaged in project consultancy work for quite some time, was not updating the blog. Much water has flown down the stream in the past 3 months, since I wrote last time. There is a stable progressive looking Government under the dynamic leadership of one of the most revered economist Dr.Manmohan Singh on firm saddle as Prime Minister of India. The blackmailing and back seat driving forces of earlier coalition government are out, was a big relief to investors and markets, which saw Indian bourses locked up in upper circuit during May'2009, for the first time. In fact when circuit filters were introduced I was wondering whether the upper circuit could be seen??? But it happened so easily, that is the power of money, confidence and sentiment.

This brings us to the basic fact of investing in stocks...how and why stock prices move up or down. It is the sentiment, power of money (liquidity) and confidence of the investors which move either way. Investing is an art and to some extent is science but not mathematics.

Indian Economy has been stable, though slowed down from the growth path, did not suffer from the danger of recession etc., as being witnessed in developing economies. When the correction started in January 2008, I was writing in the blog since then, that March' 2009 would be the deadline for completion of correction, which also happened on dot. Well the bear phase has ended by March, but it does not guarantee the "Bull Run" witnessed in 2005-2008, immediately. Markets are adjusting to the new dynamics, and the stocks and sectors will have the reasonable, realistic valuations. The next bull phase shall be after 2011 or so., Till then the markets will be in a large trading range of 7000 to 21000, which itself will give huge bull rallies and bear hammerings, which only professional technical experts will be able to catch and trade.

It is wise to pick up dividend paying stable infrastructure stocks, banking, commodities stocks etc., in these uncertain times. People started wondering whether 21000 could be taken in this bull run? There are people arguing that Crude which bottomed out at $ 34 and hovering around $68 currently, would again challenge previous all time high of $144???? If that happens, when ever, certainly Sensex will challenge 21K too, since Oil is a major component of our indices.

For now, the fears of prolonged recession in US and UK appearing to be waning away, if that is true, shall be good news for Global markets. As far as Indian Economy is considered, the fiscal situation is worrisome, and how fast the government tightens its own belt and manages the deficit, will show its impact on every walk of life. What has been shattered in a period of one year cannot be built in months. Naturally, time is the essence, and I am confident that things will improve with times, and only patient investors will get most benefit in these uncertain times.

Happy investing!

Infosys performance and guidance indicates a road block, which invited the profit booking!

Infosys performance for 2008-09 is in line with expectations of the street, despite uncertainity all around, huge volatility in exchange rates during last year. A cautious guidance from the company was also expected by analysts, since the management is always conservative about their performance. It is the reading between lines on the post results announcement by management on the future for tech sector etc., kept the mood 'cautious'. First time, infy also reports strain on margins, due to increasing costs, and vendors looking for cost cutting. This is a double effect on the top line as well as bottom line of the market leader in the sector. 2009 year shall be challenging for all economies and companies, cost cutting, re-organisation, financial prudence etc., will be looked at by all.

 

Technically 3500 proved to be selling point either for profit booking or bear hammering, as indicated in my previous posting, since 200DSMA also is hit in the strong rally witnessed for the past 5 weeks. What will happen from here on is again the question in the minds of investors and traders. The answer is quite simple. Markets need to consolidate in the range of 3000 to 3500 for some time at least election results and government formation in India happens by 3rd week of May' 2009, with huge volatility, as idle cash is chasing beaten down stocks, as long term funds have started building up portfolios and weak hands and traders exiting booking profit.

 

The volume on the bourses crossing One lakh crores of rupees for two consecutive days, is a good sign of return of more participants, and larger moves on either side will be seen, as the fight from long term bulls and short term bears intensifies. Satyam Computers moving into the hands of Tech Mahindra is good news for the company, sector and government too, which will boost the confidence of investors in Indian stocks, as while the wrong doers are punished quickly, the innocents are protected by government of India sent an excellent message to long term investors world wide.

 

I wish to discuss few stocks from now on for long term port folio building in the next posting, since the markets seemed to have found a bottom in the immediate short term.

 

Happy investing and trading! 

200DSMA will offer stiff resistance to the current rally! Time to book profit!

The current rally in stock markets in India and world over are 5 weeks old, the indices are approaching 200 DSMAs, where stiff resistance will be encountered. DFIs have become sellers already in our markets marginally. It is not a bad idea for positional traders to exist the stocks at least 50% at current levels, if one has entered markets few weeks ago or around the crucial levels of 10000(Sensex) and 3000(Nifty) suggested in the last posting. The strategy of straddle also is in profit.

 

The first phase of election campaign has come to an end by yesterday evening. Infosys results and reading on tech sector will be available today during market hours. Flat guidance also will be welcomed by market players. Any negative guidance or indications during the interaction with analysts will certainly affect the sentiment. Remember that Tech Sector is the largest employment creator for Indian Economy, and forex earner too. The period from now on till the election results are out by third week of May, 2009 and formation of government at the centre will be influencing the markets, where huge volatility can be expected.

 

Only professional traders can take advantage with strict stop loss in place. However, any deep fall in prices of Blue chip stocks shall not be missed for long term portfolio builders, as this might be the last opportunity, before markets consolidate and move up again once the government policy is clear some time before end of July, 2009 where full year budget shall be placed before parliament.

 

Happy trading!

Sensex and Nifty finally cleared 10000 and 3000 levels! What next?

World markets seemed to have found a bottom finally, with the bail out package in place as announced by Obama, for the US economy's revival, and a strong relief rally has set in, all around, which made Sensex to clear and close above 10000 level and Nifty 3000 which I was watching since December'2008. As far as indian markets are concerned, they over reacted both in bull phase and naturally on the downside too, due to 'beta' being high. Inflation touching 0.44% last week and RBI indicating further softening of interest rates naturally equities become preferred assets for interest savvy investos and funds. Heavy short covering on settlement day, and since banking sector has paid higher advance tax by March 15th, encouraged that Indian Banking has withstood the tsunami of financial crisis and scams of US, and came out as strong winner.

Though there is global slowdown, which is evidenced by the fall in demand reflected in lower GDP figures, including India and China, since ours is more domestic oriented economy, the demand shall pick up once a stable governement is in place by May end. Thus, Indian markets will be better off with good news flowing around from corporates, with the announcement of Infosys results, and its reading on 'Tech Sector' for the ensuing year. Reliance Gas Production and Oil production reaching the end users, will improve the energy situation and production of fertilizers, which are vital for our economy. A good indication about the onset of Monsoon, normal, in time, will encourage participation of more players in equities. Equities are offering better returns in down ward trend of interest rates, world over, but making profits out of investment in right stocks at right timing has been the art of handful few.

Technically, all indices have pierced 100DSMAs from below, is a bullish sign. The next big hurdle shall be 200DSMA, if the 100DSMA is held on profit booking or selling from here on. Until markets clear 200DSMA with volumes and all round participation, it cannot be construed as beginning of 'new bull phase'. It will be a trader's market for some more months and quarters. Currently, 200DSMA is placed at around 12000(Sensex) & 3500(Nifty) as far as our markets are concerned.

Strategy for April'09: Consider going long on 3100 straddle. Buy both Call and Put Option at 3100 Strike Price and book profit whenever they give 10% profits, watching the trend on daily basis.

Happy Trading!

How long this bear phase continues?

Year 2008 was disastrous for all investors in stock markets, commodities( excepting Gold) and the troubles in US economy and financial system have affected safe economies like China and India too. 2009 has confirmed the global recession by now, thus, the government and RBI have initiated several steps to help the demand in the economy, but still the light at the end of the tunnel is still eluding. Technical analysts, are trying to fix the bottom of this bear phase taking into consideration of Dow Theory, Elliot Wave Analysis etc. 7200 is what some look at and 6200 in worst scenario on sensex with another unexpected 'catastrophy'. Just as no one can exactly predict the top of a bull phase, equally bottom prediction too is difficult. Bottom formation is a process and time consuming, tests patience of investors.

 

These bear phases are excellent trading opportunities for professional traders, with strict discipline. Coming to stock picking...these are the times for long term portfolio building, which institutions like DFIs have already started. The time horizon should be 5 to 10 years. Inflation is below 4% according to Government data, but in reality, essential items like grocery have not become cheap, hurting middle and lower class people in the country. Repo is now 5% and reverse Repo 3.5%, PSU Banks are flushed with funds with reduction in CRR, but preferring to invest in Government Bonds, which are safe rather than lending.

 

NPAs will be raising in the coming quarter, as the excesses in Realty sector and Personal loans will cause number of defaults raising, which is already discounted in banking stocks. General Elections notification is already out, thus, the government at the centre cannot take any policy decision, till the new Lok Sabha is formed and full fledged budget is presented, which might happen before 31.07.2009. The news from US is disturbing, as Obama tries to revive the crippling economy, decision to stop H-1 Visas completely including renewal and extension of existing ones, force, Indian Tech companies relocate their personnel elsewhere or bring them back to India, hurts major employer sector of Indian Economy, and contributor to GDP all these years.

 

Ending of the current bear phase, and onset of new bull phase shall be few years away from now. Theoretically new bull phase will be after previous all time highs are cleared. But, once the current bear phase ends, some time during 3rd quarter of this financial year, the long term bear phase will have few bull cycles, which should not be missed by traders and investors. The formation of Lok Sabha by the end of May 2009 will give first indication whether the bear phase found a bottom as far as Indian Markets. We need to wait and see, but accumulating quality stocks,especially PSU banks and PSU stocks on every dip or any fall shall not be a bad idea.

 

Will update the blog frequently from now on new features like currency futures too hence forth. Happy trading and investing!

Happy New Year 2009

At the outset let me wish all readers of the blog a "Happy and Prosperous New Year 2009". Last year all markets have seen their all time tops, heaviest falls and highest volatility amidst the confirmation of Global recession too. Rupee gyrating between 39.70 and 50.70 is another feature catapulted Indian Economy, businesses and Industry too, due to huge surge in Crude Prices to $ 147 and the steep fall to $ 37 recently. Evey thing happening in just a matter of year goes down the history as some thing phenominal, leaving every one guessing how year 2009 will unfold?

 

Well I said that let us see How Dec' 2008 closes..Sensex above 10000 and Nifty above 3000. It missed by few points as on 31.12.2008. However, today Nifty managed to close above 3000, though Sensex failed to even touch 10000 level today, leaves some hope for minor rally from here on! The worst for markets is over, however, some base building - cum - consolidation has to happen during the first half of this year, flushing the excesses in the system, leaving the economies to recover, and businesses to adjust to the new challenges.

 

When Obama takes over as president of US on January' 20th this year, he has lot of problems to address for US economy and on global front too, as the tension in middle east might once again disturb the crude prices, which have raised 14% in just a day. Our country will face general elections to Paraliament, where whether UPA or NDA will be able to muster strength to push through the economic reforms azenda, without hinderance from leftist parties, will give push to the confidence of markets. For the present the inflation, interest rates, commodity prices and real estate prices have cooled and we can expect some better conditions from second half of this year.

 

The issue of outstanding Participatory Notes issued by FIIs winding up by 31.03.2009 will give one more steep volatility for our markets, which might force them to revisit the lows made on 27.10.2008. Barring this, our markets should perform well but in side ways mode during the first half and some bullishness can be expected in the second half.

 

One thing is certain to be remembered is that equity markets world over including ours are in deep bear grip and any rallies will be sold into, by the trapped investors and bulls. The next bull market is quite far away! Careful systematic investment in to blue chips on every dip from here on with a view to hold for 5 to 10 years will give substantial returns patient investors.