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.