Outlook for Friday

"Markets have opened gap down as expected, on weak global cues, and recovered within minutes as done by asian peers, on emergence of buying at lower levels. Though the indices traded for most part of the day alternatingly in negative and positive territory heavy short covering lead to sensex closing above July closing, though nifty is just shied away from closing above it. Nifty futures discount reducing from 45 points to just 17 points due to addition of some long positions too. Generally it is being believed that some sort of decoupling of asian economies is beginning to happen from US; However, the issue of credit issues and subprime, economic slow down which are main worries being faced by US, shall also affect the Global economy too.

Our markets are showing a divergence, as Sensex with change in composition due to addition of NTPC in its composition is able to move above July closing of 15551 where as nifty is yet to clear 4529 and close above it. Today is the decisive day, being week end where inflation data shall be released at 12 noon, whether followup buying lift the indices firmly above July closing and give a firm closing of the day/week so that the break out can be confirmed for initiating confident long positions on Nifty in this series as the markets would confirm coming out of trading range since the correction began on 25.07.2007. Domestic political situation is once again getting warmed up with NDA insisting on JPC on Indo-US Nuke deal issue, while UPA lead government saying no to it. The discussion is on in Rajya sabha today and it will be on 10th in Lok sabha. We feel volatility shall continue till 18th and there after what FOMC decides to do with interest rates, as the current stability witnessed in US markets is based on expectation of a definite rate cut of 50 basis points now total 100 basis points by year end.

The subprime issue is not resolved completely, and the credit issues are yet to be addressed, the financial companies performance in this quarter and statement of losses they might post on these issues will make markets to adjust to the reality situation by October end, when the performance of all these companies will be known, from the quarterly performance results made public.

Strategy for the day: Buying 4500 straddle on October Series and selling 4300 put and 4700 calls (strangle) will give opportunity to catch the volatility in either direction with minimum investment.

The day's range for Nifty shall be 4420(Support) and 4550 (Resistance); Sensex shall be 15055 (Support) and 15777 (Resistance)