FOMC two day meet did not bring any positive indications or road map to solvage either the US economic or fiscal problems, which most of the investors and traders world over were watching keenly. In fact the head room for any step on monetary measure by Fed is already exhausted long ago as the interest rate is quite low for considerable time. Fed Chairman in his last meeting has already announced that there will be freeze on the interest rate movement till mid 2013, was a clear indication of his helplessness. What the US Government can do is to be only will put their house in order, bringing stability to global economy and world markets in times to come.
The reaction on US indices was reasonable as expectations were buil7 a head of FOMC meet. However, the strengthening of US $ has lead to weakening of currencies world over, and the rupee breaching 49 levels, has caused havoc for Indian equities, where FIIs and Hedge Funds investment will have double whammy with prices falling and rupee weakening simultaneously. Nifty Futures opening with a price of 5010 as against 5133 closing previous day, clearly confirms that these category of investors, have thrown their towel and ran away from our markets. The huge gap down on both the indices, continued the bear grip through out the session and once Europe opened with losses ranging from 3 to 5 %, there was breach of psychological level of 5000 on Nifty too. For yesterday, 4910 was defended intra day, which is tested the third time already in recent past, and the closing of 4923 was positive for the day.
With US markets tanking further 4 % down, and the Rupee likely to touch or breach 50 levels today, SGX Nifty is already indicating breaching of 4900 at the opening itself, however, whether 4800 will be held and closing happens above 4845 today, needs to be watched closely, as it is week end session too. In my view, this level will be held for today, as we move into the settlement week later. Nifty September derivatives settlement which happens on 29th should be around 5000 levels and 30.09.2011, the last day of the month, quarter and half year should see better closing.
With all the events behind, markets will concentrate on local issues while keeping watch on global developments, however, higher volatility in the range of 4800 to 5200 is a positive sign for base building for any further rally post Diwali. Domestic situation is also clumsy with Government caught up in number of scams, and lack of authority and will to move a head firmly, from PM is a main cause of concern for our economy and markets.
It is confirmed that our markets will continue to offer only trading opportuniites in 2012 too.
Trading Strategy for the Day and Month: Buy 4800 Calls and hold till expiry, if the market opens below 4900 today at the opening.
Happy Trading!
2 comments:
You are putting your neck out and calling for a close above 5000. Given Eurozone problems and especially EFSF (European Sovereign Fund) to be passed by Germany by 29th September. Bears wouldn't let go off the current stronghold. Implied vols of 50% on the october series puts is again very bearish.
ECB on one hand is preparing for orderly default of Greece. In these situations given the volatility, one should sell the entire portfolio and stay cash.
- You know who!
thanks sir for your blog... i am following since 6 months...sir no update for oct and nov..please update for dec.thanks in advance
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