Outlook for Tuesday

"Our markets have turned volatile on monday, due to mix of positive results from index heavy weights, and negative overseas cues, finally closed almost flat. While sensex is hovering around 20 DSMA, Nifty is well below 20DSMA and faced stiff resistance yesterday in the final hours of trading, wiping out the gains made during the day. US markets closed positive over night, amidst volatility, and our markets shall open with positive gap due to huge shorting in Nifty futures, which continue to trade at 40 points discount to the spot since the beginning of the series.

 

Liquidity tightening is on cards by Chinese Government by increasing reserve requirements by 50 basis points from August 15th; Our RBI Credit policy and the measures to be announced around 12 noon hold the key for recovery or continuation of correction in our markets for some more time. In our view, the positive performance of bankex and banking sectors shares in our markets and ADRs overnight in US markets indicate the optimism among players that RBI might not disturb the liquidity in a big way, though would like to be cautious on inflation control, exchange risk and M3 management, sustaining GDP growth.

 

The day's range for Nifty shall be 4365 (Support) and 4545 (Resistance); Sensex shall be 15000 (Support) and 15555 (Resistance)

Outlook for the Day and Week

"Market were volatile throughout last week, while July settlement ended quite positive with highest ever closing for Nifty(4619.80), the much awaited correction came on the last day of the week suddenly, on week golbal cues. Many supports were broken in the process in a single day. When such steep correction happens, the usual supports held in the past during the rally shall be the stoplosses for the nimble traders, which get triggered, thus accentuating the fall much more than as it would have been in normal course. This is the nature of bull market correction, the one we are witnessing now is a bull market correction and in sooner than later the markets will concentrate on the fundamentals of economy, performance of individual companies and sectors, and thus bringing stability back.

 

Results of Reliance Industries, SBI, Grasim and HUL are announced on Saturday/Sunday,which have shown excellent performance, and the buy back at aprice of Rs.230/- announced by HUL (formerly known as HLL) is at 17% premium to the CMP of 199 augurs well for the stock, which is an index heavy weight. Now that FIIs becoming net sellers after a long time, gives some relief to the strengthening of rupee, which is continuously appreciating. The Technology sector, export oriented sectors and ecpecially pharma should lend support to markets while the other hot sectors leading the rally so far would shed some more weight, in this correction. Markets need to consolidate in a range for a while before the next larger move unfolds.

 

Owing to the further weakness in the US markets on friday, markets shall be opening weak today and shall be volatile during this week; as one more important event shall be unfold tomorrow., RBI's Credit Policy tomorrow(on 31-07-2007) by 12 noon, which give fair idea on interest rate scenario, monetary measures and out look on the economy etc., Once this information is digested by market players, stability shall return to the markets.

 

August series is very long drawn one so the range on Nifty shall be wide; already it has closed below 20 DSMA, while Sensex is resting on 20 DSMA as at the close on last friday. The next logical supports are placed at 4318.30 (Nifty) and 14640.86 (Sensex) for today and tomorrow as they were June monthly closings, in case of continuation of weakness on further selling by Institutions or margin calls. However, the levels of 4362.95 (Nifty) and 14723.88 (Sensex) which were earlier tops of this bull rally shall usually invite investment by new players as well as long term investors. 50 DSMA are placed at 4329.25 (Nifty) and 14708.57 (Sensex) as of now; investing in performing blue chip stocks around these levels, on observing supports in the markets shall give substantial returns in the medium term.

 

Strategy for the month: Buy straddle of 4450 on nifty to capture the volatility on nifty. If one is a trader can purchase calls of 4300 on weakness and puts of 4600 on rallies during the month, for good returns.

 

The day's range for Nifty shall be 4365 (Support) and 4530 (Resistance); Sensex shall be 15000 (Support) and 15600 (Resistance)

Out look for Friday

" Markets have turned quite volatile during this week as expected, since huge outstanding open interest posititions are to be rolled over to August series. Overseas markets, especially US markets created history, by recording all time highs, are volatile. July series are  behind us now and our markets have crossed 1,00,000 crores total turnover on a single day, due to volatility in the past 3 days. On a closing basis indices have closed at top end of the range, especially nifty closed around 4620 thrice during this week itself, shows strength of bulls who are keeping the indices in bull phase, by rotating sectors and stocks, which is quite heartening for our markets, in spite of heavy melt down in over seas markets.

 

US and Eurpean markets were quite down overnight, which will give phillip to bears and Nifty futures discount in August series now stands at hefty 42 points confirms negative gap down opening for our markets, is a foregone expectation, and what happens in next 15 minutes gives the clues for the day trading and out look on this series. Inflation data shall be released around 12 noon, and Index heavy weight Reliance Industries results are slated for 28th. RBI's credit policy announcement on 31st are the important events to decide the short term of our markets. Previous week closings of Nifty( 4566.05) and Sensex(15565.55) will act as immediate supports for the initial weakness in the markets, and trading below these levels with volumes invite bull unloading and further weakness if any, will invite margin calls from brokers and exchanges, which can cascade the fall, due to large open interest positions and some sort of complacency is setting in, slowly with retail and institutional players too back home, that we are insulated from what happens elsewhere. One thing we need to remember is that we are integral part of world markets, and FIIs are the major players in our markets. Though FIIs are buyers for the past 5 days Domestic Institutions are net sellers, though marginally, gives an indication of distribution cum sideways consolidation scenario for August.

 

In such scenario going long on strangle of 4600 calls and 4500 puts shall be the safe strategy for this series.(August)

 

The day's range for Nifty shall be 4480 (Support) and 4650 (Resistance); Sensex shall be 15200 (Support) and 15900 (Resistance)

Outlook for the Day and Week

"Markets have continued their bull run last week, both indices recording new highs, as they are in unchartered territory, finally closed at all time highs for the day, week on friday. Inflation remained unchanged at 4.27% for the week. Earnings season is proceeding in line with expectation, India growth story and promissing sectors performance is always assuring consistancy, which is giving confidence for FIIs in particular, who have already pumped more than what was invested in the entire year 2006 already, as reports came last week.

 

This week settlement of July series on 26.07.2007 and results of index heavy weights are scheduled. US markets are volatile after touching 14000 + levels on subprime losses which might go upto $100 Billion, as per the estimates by Fed Chairman. The ripple effect of such huge loss to other sectors of US economy, and psychological and sentiment effect on other markets, as most of the markets are moving up on huge FII flows, is the risk faced by world markets at this juncture. 

 

Nifty is likely to close positive on the settlement date this series, over previous month close of 4282, thus, buying calls on every fall, or correction in the money of August Series shall give good returns. Nifty range for this week shall be 4450 to 4650, so buy calls on weakness in the market and puts on rallies for intra day trading.

 

The day's range for Nifty shall be 4515 (Support) and 4620 (Resistance); Sensex shall be 15300 (Support) and 15720 (Resistance)