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.