share guru

WEEK AHEAD
The way the market picked up steam Friday, it augurs well for the market. Foreign institutions have turned buyers once again. Also, domestic funds as well as LIC were active today, which gave a fillip to trade.
NIFTY RANGE
4100-4500
CRUCIAL
SUPPORT 4180 & RESISTANCE 4470
APPROACH
CARE & CAUTIOUS
STRATEGY
ANY UP-MOVE WILL BE USED TO COVER THE POSITION, OR
ANY CORRECTION WILL BE LOOKED AS A TIME TO BUY.
MARKET TREND
VOLATILE
MARKET OUTLOOK
MEDIUM TO LONG TERM PRESPECTIVE ARE PRETTY MUCH BULLISH
EXPECT
VOLATILITY MAY RISE AHEAD OF UNION BUDGET
SECTOR TO WATCH
IT, BANKING & INFRASTRUCTURE
FACTORS MONSOON & BUDGET
· TECHNICALLY:
The markets have shown remarkable degree of resilience at the 4200 levels. In the last few days also, despite all the selling, every time it went below 4200, it actually bounced back. So it’s this 200 point band that we believe it will trade in.
The charts are telling us to take a great deal of care and caution because there has been a sharp rise earlier in April-May, then a retreat then a rise through to 4700 and now the current retreat. The danger is that this has potential to create a head and shoulders pattern which gives us a short-term reversal and a retest of support at around 3900.
So what we are looking for is the potential for a right hand shoulders to develop and that could be a rally up-to 4400-4500 followed by a retreat and a fall below 4200 confirms that head and shoulder pattern development.
The Nifty has a benchmark support at of somewhere around 4200. It is bouncing back from that level so we assume that the uptrend is intact, until and unless that 4200 level is not broken down decisively which usually means on the close. Searching for individual stocks becomes much more difficult. We have seen small rallies but impression is that these rallies are primarily small upswings after that sharp correction. So the idea is go long. The Nifty has a trading range between 4100 and 4500. You should be aggressively on the long side only above 4400.
· STRANGLES AND STRADDLES:
Two of the most commonly used options trading strategies by these traders are strangles and straddles.
The participation of retail investors in such strategies is minuscule, as they seek trading strategies to bet on the market direction rather than implied volatilities (IVs). The expected volatility in an index or share price is a key aspect of pricing of options premium (when IVs rise, premiums rise, and the converse also holds true).
Buying straddles would not be wise at this juncture, as option premiums are expensive. Higher premiums offer very little scope for any sharp upsides. Buying strangles, which is again betting that, there will be a jump in IVs ahead of the Budget. But, in this strategy, a trader buys an out-of-the-money call and put option. If the index is at 4300, the trader can buy a call option at 4700 and a put option at 4000.
If the premium charged for the call and put option is Rs 50 each, then the trader will gain only if the index crosses 3900 on the downside and 4800 on the upside. But, advised to square up the strategies just before the Budget. Traders need to buy these strategies around five days before the Budget and square it off one hour before the Budget starts, as IVs will start dipping just after the event. As uncertainty recedes after the event, IVs dip. The main risk to these strategies is if IVs do not rise ahead of the Budget, traders lose out on the premiums.
· SECTORIAL:
From medium to long term view. bullish on IT stocks. For last several days, Nasdaq, which comprises many IT companies, saw a lot of accumulation indicating that worst may be over for the IT industry. Banking sectors is another space that looks positive. Banking stocks are now in a continuation of bullish pattern.
· UNION BUDGET:
The market could be volatile ahead of the presentation of the Union Budget 2009-2010 on 6 July 2009. Stock specific activity may rule the roost based on budget expectations. The Annual Economic Survey will be presented on 2 July 2009, a day ahead of the Rail Budget on 3 July 2009. Investors will track global cues for a direction
The next major trigger for the market is the Union Budget 2009-2010. Many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will provide thrust on the infrastructure sector and push economic reforms to boost growth. Citigroup expects the economy to grow by 6.8% in the year ending March 2010 (FY 2010) and 7.8% in the year ending March 2011 (FY 2011).
The Union Budget 2009-2010 attains significant importance in the wake of the global financial crisis. Despite the country being relatively unharmed compared to the West, the UPA government will have many tasks on its to-do list, which includes boosting growth and demand, continuing to maintain liquidity, balancing inflation and also containing the country's worrying fiscal situation.
· RAIL BUDGET:
Railway Minister Ms Mamata Banerjee will present the Rail Budget on 3 July 2009. As per media reports, another fare cut is unlikely because Lalu Prasad's Interim Railway Budget in February 2009 has already strained the Indian Railways' finances. Lalu Prasad had announced a 2% reduction in passenger fares. Similarly, any increase in freight rates looks unfeasible because of the current economic downturn. With the present economic conditions not providing much scope for either large-scale fare concessions or an across-the-board increase in freight rates, the highlight of the Railway Budget for 2009-10 is likely to be a big push to public-private partnership (PPP) initiatives to enhance the Indian Railways' capacity to earn higher revenues on a sustainable basis.
· REFORMS & DISINVESTMENT:
The Government has made its intention clear to push for reforms and pursue the disinvestment agenda, which was met with stiff opposition in the UPA's previous stint when the Left parties were members for a major part of the five-year tenure. The Congress party had in its manifesto released before polls promised to go ahead with disinvestment while retaining a majority holding in the state-run companies. Disinvestment programme was earlier put on backburner due to stiff opposition from the Left front.
· BILL TO AMEND THE INSURANCE ACT :
Also the passage of the Bill to amend the Insurance Act, 1938 is likely to be touched upon in the budget. Apart from raising the foreign investment ceiling to 49%, from 26% at present, the Bill had proposed to do away with the stipulation on Indian promoters having to mandatorily sell a part of their holdings after 10 years of operation.
· DREGULATE FUEL PRICING:
The Indian government may unveil a roadmap in its 6 July budget to deregulate fuel pricing and give leeway to state-run oil refiners to fix petrol and diesel prices within a band. If the reform proposals are approved prices of petrol could rise by Rs 5.1 a litre and diesel by Rs 2.6 a litre. After the ruling coalition was re-elected in May with a stronger mandate, Oil Minister Murli Deora had said the government was considering a proposal to free state controls on transport fuel prices.
· PPP:
With infrastructure bottlenecks plaguing the economy, expectations are rife that the upcoming Budget will provide a big stimulus to this core sector, particularly roads and ports. A big push to Public Private Partnership (PPP) projects in infrastructure may be also on the cards.
For the power sector, the Budget may contain significant increases in spending, including for generation, rural electrification, and for minimising transmission and distribution losses. Other measures which the Budget may announce on infrastructure would be to give greater flexibility to the Infrastructure investment and Financing Company (IIFCL), which has been set up as a refinancing facility for infrastructure projects, to deploy funds.
· FII ACTIVITY:
Meanwhile, foreign funds activity will be closely watched. After aggressively buying during the past three months or so foreign funds sold shares totaling Rs 3,168.40 crore in eight trading session from 15 June 2009 to 24 June 2009. FII inflow in June 2009 totaled Rs 2,964 crore (till 24 June 2009). FII inflow in calendar year 2009 totaled Rs 24,283.40 crore (till 24 June 2009).
· MONSOON:
Investors will also closely watch the progress of India's annual monsoon. Prithviraj Chavan, the Minister of Science and Technology, said in a press conference, on Wednesday, 24 June 2009, that India's monsoon, which runs from June to September, will be below normal this year. Monsoon rains will be 93% of long term average. Rain in the crucial sowing month of July will be 93% of long term average. The rains are likely to pick up in August in which month rains will be 101% of long term average, the minister said.
The June-September monsoon rains are a major influence on the economy, as two-thirds of Indians depend on agriculture and large areas of the vast south Asian country suffer from a lack of modern irrigation facilities. Poor monsoon rains could dent rural demand, hurt corporate profitability and undermine sentiment in financial markets.
IN-A-NUTSHEL:
Open interest has risen, volumes were high and Nifty futures were in premium. If Nifty manages to break above 4470 we’ll witness a pre-budget rally up-to 4800-5200. Cues from the US markets are also positive. Dow Jones and S&P 500 Indices suggest that up-move is likely to continue for sometime.

Posted by SRIKRISHNA TIPS at 2:18 PM