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!