July Series and month ended within the range of 5400 to 5800 predicted at the beginning of the month and a strategy of selling straddle resulted in profit. RBI surprised markets and all analysts with 50 basis points raise in Repo and Reverse Repo rates in its monetary policy meeting on 26.07.2011, which brought our markets into bearishness again. The results season of Q-1 performance was mixed. While the inflation continues to raise, the pass on effect of petroleum products will be felt in the coming weeks, global markets kept their watch on US debt ceiling issue, and the resultant impact on its economy as well as Global GDP performance in the coming quarters.
The news from abroad is not encouraging either Europe or USA., as the economies and governments are battling for recovery, from the slowdown, and to avert recession. Our markets especially Nifty breached 5400 in yesterday's trade and made a low at 5378, before it finally closed above 5400, is well below July settlement closing or monthly closing. August month has no triggers on the positive side, and the Indian Parliament is in session, our markets have always fared badly, while Parliament is in Session, on most occasions, as Government will find it difficult to take any policy decision during the periods, by passing Parliament.
Therefore, I see a narrow range for the nifty, with a downward bias for this settlement, as the participation is low due to 'risk aversion'. Crude cooling off with weakening of US dollar is a good news for our markets, and if it falls further, there could be a relief rally. Gold hitting new all time highs touching $ 1678 per ounce overnight, and analysts predicting it to touch 1800 $ per ounce in this journey, points to lack of interest in equities or risky assets, by investors. I do not see Nifty breaking 5200 in hurry during the month on the down side, whereas 5650 itself will be a big challenge as trapped investors, push sales at every technical level of Nifty..viz., 5440, 5477, 5532, 5580 5612 and 5647.
One Can construct a 'Collar' buy going long on August Nifty at CMP(5430) with a stop loss below 5350, and also hedging with a put option of 5400 at CMP Rs.80/- and also selling 5500 call at Rs.63/- in the opening trade today. This Strategy shall require an investment of Rs.50000/- (approx) for margin initially.
Happy Trading.
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