Out look for Friday

"Our markets opened with bull gap and traded firm in the initial hours of trade, and were giving the confidence that the worst seems to be over, However, technically July closings offered stiff resistance, as advocated in yesterday's posting, with the overseas news on spreading of US subprime woes to other areas and sectors, markets witnessed volatility once again. When European markets opened in the after noon, the news that BNP paribas has freezed the assets of 3 hedge funds has sent jitters to all markets which are open and trading. While US premarket futures showed heavy negative outlook, European markets opened and traded down 2 to 2.5% in opening trades itself, this forced our indices to give away all the gains of the day, and also slipped into negative territory quickly.

Our indices have closed negative for the day, which is unexpected by many, the triggering of stop losses around 4420 -4430 being suggested by many technical analysts, aggravated the fall in the vee hours of trading. Our suggestion to buy 4500 puts on rallies must have given the needed hedge, and if followed as intra day strategy also would have given substantial returns.

Those who are still long can hold till next week, since Nifty is in no hurry to climb 4500 till 15th August. Bearish cross over of 20DSMA over 5DSMA is still intact; currently indices are resting around 5DSMA placed at 4392.54(Nifty) & 15076.51(Sensex). Today being the last day of the week, and since indices have posted losses for two weeks in succession, an attempt shall be made by bulls and index funds to close the week on positive to flat note. Every thing depends on the inflation data to be released in the noon, and the pep talk that may come from RBI, FM and SEBI etc., before or during the market hours, as the authorities of EU and US FED taken steps to calm the markets yesterday on knowing the potential problem.

One important point to be remembered is that both India and China which are fast growing economies in the world are mostly insulated from direct impact of the US subprime vows; though indirect impact can be there, as is being witnessed, since major investors and players are FIIs in both markets. Contrarian view is, in case of serious problem in US and Europe on growth, corporate performance,

India is the safe destination, where the corporates are performing well, and the currency is also stable, and being an internal looking economy, with vast domestic consumption, which is also growing at rapid pace, any sudden falls like one we are witnessing is a gold opportunity to pick up Blue Chip Stocks, with proven track record of performance. To mention few, Wipro, Tcs, Infosys, Ongc, Reliance, Bharati, Reliance Communications, Itc etc., Though the construction sector, and engineering sector are favourites of all during this year bull run, the valuations look overpriced on current earnings.

Markets are likely to open in negative territory, based on overseas cues, but might get support at the lows posted during this week on 6th, which is the monthly low too, in case of steep fall. Trades can go long on 4200 calls in this series for quick returns, in case of nifty opening and trading below 4300 and can book profits on 4500 puts purchased yesterday.

The day's range for Nifty shall be 4364 (Support) and 4484 (Resistance); Sensex shall be 14845 (Support) and 15333 (Resistance)