Whether Bulls win over Bears now?

The trading pattern since the financial year ending 31.03.2008, is influenced by number of factors. The abstaining of trading fraternity, protesting STT revised treatment brought down the volumes drastically. Gap up and Gap down openings, influenced by overseas cues, are due to FIIs control over the markets. DIIs, HNIs and Retail investors, are watchful since lot of noise is made on TV channels, suggesting that further serious meltdown is on cards, once results season unveils. In this back drop, the pattern developed is bulls are defending 4740 level(closing of March,2008), where as bears are ensuring that the level of 4831(March settlement price of 27.03.2008) is not lost, inspite of gap up openings and markets clearing this level on few occasions in the past few days of trading in April'2008. Thus, the battle lines between bulls and bears are in a striking distance of 100 points (4840-4740). The volatility has come down, as overseas markets, especially US markets are stabilizing, and lack of participation by traders, HNIs and retailors who create liquidity for our markets, brought down the volatility and range for our markets, specifically. Nifty has closed above 20DSMA (4758.17)yesterday, and a marginal cross over of 5DSMA (4788.37), tilts in favour bulls, who are waiting to take the lost fort from bears.

The mute question is who will win from now on? No doubt that markets are in firm bear grip, as they need not exit till 200DSMA is cleared with large scale participation and volumes. Few Developments taking place are of interest to markets.

RBI allowed MFs to invest upto 7$ billion in overseas assets(an increase from 5$billion dollars existing);

BSE Sensex futures will be listed and trading from 04.04.2008 on USFE(United State Futures Exchange), Chicago and will trade for 23 hours, giving arbitrage opportunities to FIIs and ADR investors.

SEBI permits FIIs to punch their orders directly on indian exchanges, instead of routing through registered broking houses, helps FIIs to reduce their cost, and trade freely, without allowing Brokers to do any front running. Certainily, broking companies who are having this business will get affected, who are already suffering due to low participation by retailors, will have loss of earnings.

SEBI proposed to allow Short selling in our markets, including Stock lending & Stock Borrowing by Institutions from 21.04.2008, will change the trading pattern of our markets.

Today's trading and final closing after knowing the inflation data latest, will decide the break out in either direction of the markets from next week. Singapore Nifty futures are trading at 15 points premium currently.

Range for the Day: Nifty might trade in the range of 4650 to 4950 today.

Fighting between Bulls and Bears intensifies!

Taking the strong closing of Overseas markets, our markets opened on strong note, gap up and traded firm, inspite of profit booking by traders and trapped investors at high levels, for most part of the trading. When European markets opened in negative territory and US futures indicated weakness, a head of Fed chairman Mr.Bernarke, before congress, traders became nervous and cautious, as gap up and gap down openings are hurting retail investors, thus, resulting in indices giving away entire gains, by the end of the day, however, closing flat to marginally positive, holding the gaps created in the opening of trading. Though Mr.Bernarke made confession about the problems being faced by US economy, and steps taken to save the Bear Stearns from bankruptacy, investors are enthused by raise in private jobs data which showed + 8000 as against economists expectation of -40,000, made indices to trade in narrow range and close flat to marginally negative.

In this back drop our markets will now concentrate on domestic issues, expectation of performance of companies as results will start trickling in from next week, and the guidance for the coming financial year, will give reaction to stocks and sectors. US markets seem to have bottomed out, and will be on the verge of break out as expectations of another rate cut being expected in ensuing FOMC meeting on 30.04.2008. Nifty has closed around 4740 levels on both negative opening day and positive opening day, which is above 'march closing' gives an indication that the consolidation in the range of 4550 to 4950 for few days, will give a break out on upside to challenge the 200DSMA too. CBOE volatility index has dropped to 22 indicate reduction in volatility for the present, and markets might get into no interest zone, as investors, funds look for real cues on performance of Indian Economy from now on. Singapore Nifty futures are currently trading at 15 points premium.

Range for the Day: Nifty might trade in the range of 4650 to 4850 today.

Government initiates measures to fight inflation - Commodities markets crash!

Our indices opened with posititve gap and due to short selling breached 31.03.2008 lows, and by mid afternoon, when asian markets closed firm, and European markets opened in positive territory, short covering and fund buying lifted the markets from lows, finally Nifty ended flat to marginally positive and sensex closed marginally negative. Trading community abstained from trading on 01.04.2008, protesting the change in treatment of STT in this financial year which eats in to their margins, and threatens their survival, lead to low turnover, inspite of huge volatility. Government of India has announced several measures to increase the supply side of commodities, which immediately effected the commodities markets to crash and some commodities have hit lower circuit. This action coupled wtih steel ministry asking the industry to voluntarily co-operate to reduce prices, should show effect on steel companies shares today. The effect of these measures on containing inflation or bringing it down will be known after few weeks, but markets always discount the future, so banking and financial stocks to do well from here on.

 

US markets had spectacular rally overnight, on the news that UBS and Lehman brothers are raising fresh capital to shore up their balance sheets, and the march manufacturing data shown marginal improvement over february, enthused investors to lap on to equities that some calmness is returning to the US economy which is threatening to have one of its worst recession. Whether it is a one day affair or a fresh rally began will be confirmed if follow up buying emerges for few more days. Singapore Nifty futures are trading with 200 points premium currently, and gap up opening for our markets is a foregone conclusion, as there would be short squeeze, since many players are short on 4800, 4900 & 5000 calls of current series, expecting further down side. How Nifty behaves around 4950 to 5050 level is the important observation which gives clue for future course of our markets.

 

Range for the Day: Nifty might trade in the range of 4750 to 4950.

 

Strategy for the Day: Go long on April Futures above 4825 with a stop loss at 4770.00 duly hedging with 4900 put option.

How April unfolds and the challenges for fiscal year 2008-09!

Ending of March'2008, the last day of the monh, quarter and the financial year 2007-08; surprised every one, including me, due to sustained selling from the bell rung in the morning till end of the session, the small hope that fund buying shall help indices stabilize or recover from the bottom, when belied, traders who have built long positions have no other way except to cut the positions and book losses, which brought the indices much below the anticipated support level of 4850-4800-4750 etc., on Nifty. Nifty finally closed in the lowest point on monthly basis in 2008, and what happens from today being the first day of April'2008, where number of developments on global as well as domestic front will confront the economy, corporate performance, liquidity, inflation and naturally our markets too. US markets closed in positive territory, and Singapore nifty futures are trading at premium of 60 points, while asian markets are postive and firm, before opening of our markets.

RBI governor expressed concerns on inflation reaching unexpectedly high levels and said that prepared to tackle the situation, if required instantly too. Government has announced number of measures to allow imports and curb (remove the incentives) the export of commodities and items, which are components of CPI and WPI to tackle the inflation. The clarification from ICAI on treatment of mark to mark losses on derivatives exposure by corporates for this fiscal and qualification for previous financial year(year ended on 31.03.2008) caused good amount of panic among even institutional investors yesterday, who have dumped stocks. SEBI's draft proposals released yesterday evening, shall dampen the sentiment of retail investors and broking community further, as minimum networth of Rs.5 lakhs (duly certified by a CA) has to be obtained from client for allowing derivatives transaction. Ofcourse these are draft proposals, market men must be having some clue about its coming, thus further liquidation of positions in momentum stocks too was witnessed.

I have indicated that 4800 to 5800 will be the range for March, but Nifty has closed below 4800 on the last day at 4734.50, which is the lowest closing during 2008. While sensex breached January low of 15332, nifty has held above 4448.50 during march. RBI credit policy announcements on 07.04.2008; and unfolding of results season starting with tech bellweather "Infosys Technologies" and its guidance, and views on the prospects for the tech sector, which can indicate the effect of US economy on Indian tech sector to major extent, will decide the major trend of the markets for the month and this quarter too.

Technically, Nifty can break the level of January low, during April and can go to 4296.97 on any panic day, which is 38% retracement level of entire bull market from 935.70 to 6357.10; Yesterday's closing below 5DSMA doesnot augur well for the markets in this month, until 200DSMA placed at 5100 is cleared with volumes and participation of all players and majority sectors, long trem trend of the market is also in question now.

Range for the Month: 4300 to 5300 on Nifty.

Strategy for the Month: Buy 4600 calls on weakness