Market Update: Expect "U" shape movement on July 23rd.

Finally it is done, game is over; UPA govt proved their majority with 275 votes in their favour. Indian stock market was expecting this news and during last 4 trading session, Sensex has moved up by 1500+ points, I don't know if this news is factored or not? But tomorrow, Indian market as expected by most of the analyst will open with "gap ups"..........HBJ Capital's earlier prediction proved to be wrong.

Now question is what next?

With UPA winning the confidence vote and Crude falling by $5 to $127 per barrel, Indian market is going to open with gap ups, but there will be lots of profit booking in the 1st half and value buying in the 2nd half.

These are the 4 sets of people in the market & how they will react with the market tomorrow...

• People willing to buy fresh equity - They will wait because market has moved up 1500 points in last 4 days and expected to open with large gap ups on Wed. So, they will wait till some profit booking takes places. Action: These folks will wait and watch, if market comes down then buy, because trend is still upward.
• People willing to sell fresh equity - Since market has not corrected from long time and core weakness in economy like inflation, interest rate, global issues etc are still there. So these set of people will try to Short the market by selling equity or future. Action : They will prefer to Sell.
• People who are holding shares (Net +ve in number) - They will book the profit because such gap ups are might not come again. Action :They will Sell.
• People who are holding shares (Net -ve in number, means they shorted shares or future earlier) - These people will be loss, because market opens up with gap and they have net short shares, so they will wait till market comes down a bit so that they can square off, means they can buy the shares or future. Action: They will wait for sometime, if market comes down a bit, square off/buy.

So, HBJ Capital feels that, market will opens with large gap up & during the 1st half market will fall due to profit booking but one can see buying interest coming up again in the 2nd half because short term trend is still up. Market will be in +ve zone throughout the day.

So, what should a trader do tomorrow?
1st half - Buy PUT Options in the early trade and square off by end of the day.
2nd half - If market corrects due to profit booking then buy Call Option during late trading hours and hold it for next day.

-HBJ Capital Team