Archives : BEARS DOMINATE THE WEEK. - 04/04/2008

BEARS DOMINATE THE WEEK.

– 04/04/2008.

 

Our market registered a fall of over 1000 points; the main culprit was the inflation. With inflation coming over 7%, the alarm bells started to ring and the market fell like nine pins. While going down, Sensex has filled the gap between 15351 and 15612. Market is in a downtrend and so every rise is being treated as a selling opportunity.

 
  • INFLATION SHOCK, RISES TO 7%. 
  • SEBI PROPOSES GUIDELINES FOR MEMBERS WANTING TO DEAL IN DERIVATIVE
  • SENSEX.
  • NIFTY.
  • HOW TO TRADE?
  • THIS WEEKS RECOMMENDATIONS:

INFLATION SHOCK, RISES TO 7%. 

Inflation, which is a major concern, has now raised its ugly head again. Inflation is at a 3 year high. Wholesale prices rose 7.0 percent in the week ended March 22 from a year earlier, faster than the previous week's 6.68 percent. The markets had expected the inflation rate to be around 6.52% and when the figure touched on the psychological 7%, markets immediately tanked by around 500 points. Vegetable prices are up 4.9%. The current hike in inflation is being caused primarily by higher global commodity prices in agriculture, fuel and metals. Currently the whole world is facing the problem of inflation.  Inflation will be the topmost priority for the government and this could not have been more ill-timed, what with the general elections lurking in the background. Now the government will now have to sacrifice economic growth in order to control inflation. A hike CRR or Repo rate will almost be inevitable and that is the reason why the market collapsed on Friday. The government may use price cap on key items to curb inflation. Government will impose price controls on essential commodities like steel and cement. 

SEBI PROPOSES GUIDELINES FOR MEMBERS WANTING TO DEAL IN DERIVATIVES. 

SEBI has laid down certain proposals where brokers are supposed to know their clients and then fix their exposure and turnover limit according to their financial details. Broker need to obtain the investment objectives, past investment experience, risk appetite of the client. Broker will not allow the client to indulge in excessive trading / speculative activities. The client will have to provide certain minimum net worth certificate to deal in derivatives.  The main interesting point according to me is awareness as new products are introduced from time to time, it is imperative that trading members make every effort to familiarize customers about the new products and the risks involved. Here the SEBI will have to make Herculean efforts as knowledge of derivatives products is limited to a fraction of the trading population. Majority of F&O traders are treating derivatives as only a leverage instrument which proves to be their main reason for failure. This can be avoided if they start using derivatives to hedge or reduce their risk. I would like to request SEBI, that trader who want to deal in F&O, obtain a certificate ascertaining them to have minimum basic knowledge regarding F&O.

SENSEX.

 

Sensex opened the week at 16226, made a high of 16236, low of 15297 and closed the week at 15343. Result was net weekly loss of 1028 points. In the process, the gap between 15351 and 15612 was filled. The trendline resistance is at 16235-16520-16944. The long term resistance is now falling at 16590. The trendline support is at 14751. For the week ahead the resistance is at 15544-15897-16002-16235. Support is at 15228-14751-14677-14215. 

 

 

 

NIFTY.

Nifty opened the week at 4942, made a high of 4947, low of 4628 and closed the week at 4647. Thus registering a long black candle. Net result was a weekly loss of 295 points. The trendline resistance is at 4853-5106. The trendline support is at 4603-4474. The Nifty has not broken the previous low of 4448, if that is broken then the market will be flooded with sell orders. For the week ahead, resistance is at 4731-4797-4853-4907.

Support at 4620-4580-4468-4281.

HOW TO TRADE?

 

This week buy ITC 200 ATM or OTM call for a target 216. Or one can make a bull call spread with ITC with the strikes of 200-220 respectively.

THIS WEEKS RECOMMENDATIONS:

 HERO HONDA 759 SL 749 TGT 773-779.

MRPL 84 SL 80 TGT 89-92.

GTL 264 SL 256 TGT 274-282.

TATA CHEM 300 SL 291 TGT 314-330.

BEL 1178 SL 1158 TGT 1215-1248.

SCI 209 SL 203 TGT 217-223.

ITC 200 SL 196 TGT 207-216.

 SCRIP

CMP

SL 

 TGT

 HERO HONDA

 759

 749

 773-779

 MRPL

 84

80 

89-92 

GTL

 264

256 

274-282 

 TATA CHEM

 300

291 

314-330 

 BEL

 1178

1158 

1215-1248 

 SCI

ITC

 209

200

203 

196

217-223 

207-216

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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