vengabeats
Nilesh Nagdev
F&O settlement may cause wilder swings
Drafted damage and global meltdown in commodities caused a "manufactured" crash in the stock market of a record magnitude. The crash in prices of base metals at the London Metal Exchange and concerns over CBDT draft circular on taxation of business income from stocks triggered the huge fall; it was accelerated by the untimely views expressed by the Left Front over some tax proposals.
Selling was seen across the board in all sectors from all quarters. Domestic funds provided some buying support, but it was insignificant in the face of heavy selling from both FIIs and big market players. Margin pressures from the derivatives trading segment aggravated the crash.
But the silver lining was the weekend statements of finance minister P. Chidambaram allaying fears over the introduction of LTCG and that economic fundamentals are very strong may provide some relief for the beleaguered investors. The F&O settlement in the coming week may see markets continue to swing in a volatile manner.
Chartists expect the high volatility to continue for some more time and predict a wide trading band of 10,500-11,660 for the Sensex and 3,160-3,450 for the Nifty. True to predictions, the Sensex had a free fall till 11,000 levels after dipping below 11,800. Supports and resistances for the Sensex are at 10,800 and 10,560 on the downside and 11,200 and 11,380 on the upside.
Key numbers to watch for on the Nifty are 3,180 and 3,130 for support and 3,345 and 3,490 while moving up. Remember the statement markets are no different to empires. They expand, rise in value, become over extended and eventually collapse. Equity by nature is risky, but if you believe the long-term India story, buy good quality frontline counters in the present downtrend.
F&O SEGMENT
Mayhem and carnage ruled in the F&O segment last week. Cutting of leveraged positions and margin calls were the order of the day. Punters were seen cutting positions ahead of the settlement. Open interest has fallen dramatically by over Rs 8,500 crores. Sentiment indicators like put or call ratio, implied volatility and open interest point to a continued negative outlook. True to our advice, those who bought put options of Nifty 3,550 and 3,500 strikes had windfall profits.
For the week ahead, adopt the "straddle strategy" by buying both call and put options of same strike of the Nifty. Cover short positions if the Nifty moves past 3,380. Avoid metal, pharma and banking stocks till the dust settles. Defensive buying is advised in technology and textile stocks.
The falling commodity prices may prove beneficial to capital goods and infrastructure sectors. Wait for monsoon progress report to initiate longs in FMCG and auto counters. Die hard bulls can attempt buying in June stock futures of Infosys, TCS, Dr Reddy, Indian Hotels, Neyveli Lignite and IndusInd Bank. Avoid fresh shorts in the current month stock futures.
SATTA GUPCHUP
Hit by an unexpected tsunami, markets slumped very sharply, not sparing any sector. Analysts advice defensive buying in frontline technology counters like Infosys, TCS and Satyam for good medium term returns. A sharp rise in export volumes and improved realisations spell good times for integrated textile companies. Pick at lower levels counters like Banswara, Alok, Precot and others.
With $20 billion worth of drugs slated to go off-patent over the next 20 months, the tough US generics market is being given a strong relook by Indian majors like Dr Reddy, Ranbaxy and others. Seven of every ten DMF's or drug master files, required to sell bulk drugs in the US are Indian. Small legal successes in recent times after prolonged tough times have raised hopes for better times.
Moreover, the Indian pharma majors are poised to post good results in the coming quarters riding the consolidation wave in African and European markets by a string of acquisitions. Strong buying is suggested in good frontline pharma counters in the present downtrend for excellent portfolio returns in medium term.
Drafted damage and global meltdown in commodities caused a "manufactured" crash in the stock market of a record magnitude. The crash in prices of base metals at the London Metal Exchange and concerns over CBDT draft circular on taxation of business income from stocks triggered the huge fall; it was accelerated by the untimely views expressed by the Left Front over some tax proposals.
Selling was seen across the board in all sectors from all quarters. Domestic funds provided some buying support, but it was insignificant in the face of heavy selling from both FIIs and big market players. Margin pressures from the derivatives trading segment aggravated the crash.
But the silver lining was the weekend statements of finance minister P. Chidambaram allaying fears over the introduction of LTCG and that economic fundamentals are very strong may provide some relief for the beleaguered investors. The F&O settlement in the coming week may see markets continue to swing in a volatile manner.
Chartists expect the high volatility to continue for some more time and predict a wide trading band of 10,500-11,660 for the Sensex and 3,160-3,450 for the Nifty. True to predictions, the Sensex had a free fall till 11,000 levels after dipping below 11,800. Supports and resistances for the Sensex are at 10,800 and 10,560 on the downside and 11,200 and 11,380 on the upside.
Key numbers to watch for on the Nifty are 3,180 and 3,130 for support and 3,345 and 3,490 while moving up. Remember the statement markets are no different to empires. They expand, rise in value, become over extended and eventually collapse. Equity by nature is risky, but if you believe the long-term India story, buy good quality frontline counters in the present downtrend.
F&O SEGMENT
Mayhem and carnage ruled in the F&O segment last week. Cutting of leveraged positions and margin calls were the order of the day. Punters were seen cutting positions ahead of the settlement. Open interest has fallen dramatically by over Rs 8,500 crores. Sentiment indicators like put or call ratio, implied volatility and open interest point to a continued negative outlook. True to our advice, those who bought put options of Nifty 3,550 and 3,500 strikes had windfall profits.
For the week ahead, adopt the "straddle strategy" by buying both call and put options of same strike of the Nifty. Cover short positions if the Nifty moves past 3,380. Avoid metal, pharma and banking stocks till the dust settles. Defensive buying is advised in technology and textile stocks.
The falling commodity prices may prove beneficial to capital goods and infrastructure sectors. Wait for monsoon progress report to initiate longs in FMCG and auto counters. Die hard bulls can attempt buying in June stock futures of Infosys, TCS, Dr Reddy, Indian Hotels, Neyveli Lignite and IndusInd Bank. Avoid fresh shorts in the current month stock futures.
SATTA GUPCHUP
Hit by an unexpected tsunami, markets slumped very sharply, not sparing any sector. Analysts advice defensive buying in frontline technology counters like Infosys, TCS and Satyam for good medium term returns. A sharp rise in export volumes and improved realisations spell good times for integrated textile companies. Pick at lower levels counters like Banswara, Alok, Precot and others.
With $20 billion worth of drugs slated to go off-patent over the next 20 months, the tough US generics market is being given a strong relook by Indian majors like Dr Reddy, Ranbaxy and others. Seven of every ten DMF's or drug master files, required to sell bulk drugs in the US are Indian. Small legal successes in recent times after prolonged tough times have raised hopes for better times.
Moreover, the Indian pharma majors are poised to post good results in the coming quarters riding the consolidation wave in African and European markets by a string of acquisitions. Strong buying is suggested in good frontline pharma counters in the present downtrend for excellent portfolio returns in medium term.