Bulls are back with a bang! - Indian Stock Markets are going to see 2% or more rally on Monday.

The global turmoil took its toll on the Indian bourses with bears reigning supreme for most part of the week. FIIs continued to dump shares sending the indices bleeding.

Thursday saw a turnaround after RBI announced a set of measures to ease the tension in the domestic financial markets. Finance Minister also clarified that there is no cause of alarm as far as the Indian banking sector is concerned.

Finally, the Sensex closed at 14,042 and the Nifty ended at 4,245 ending the week with a gain of 0.3% and 0.4% respectively.

Upswing likely to continue: The SGX CNX Nifty September futures touched an intra-day high of 4,500 and closed at 4,348 on the Singapore Exchange on Friday against the index’s close of 4,273 on the National Stock Exchange (NSE). The world markets closed in the green on Friday, with the Dow Jones adding another 370 points to its 410-point gain on Thursday.

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We expect the uptrend to continue on Monday, with the Nifty expected to cross the 4,350 mark during the early trade on Monday. The upside for the index is capped between 4,400 and 4,500.
The Nifty September series have the highest call open interest (OI) at the 4,500 strike, with the put OI concentrated at the 4,000 strike. This indicates that the index has support at 4,000 and strong resistance at the 4,500 level.

According to provisional figures, FIIs were net buyers in the cash market to the tune of Rs 1,016 crore and net buyers of stock futures worth Rs 866 crore. This shows that FIIs did some value buying in the cash segment and built up some long positions in the stock futures on Friday.

Nifty September future premium widens, Trading volumes pick up, Nifty rollover still poor at 17 per cent shows that volatility expected during expiry.

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HBJ Capital's View for Monday & for the rest of the week...
>>>>> Indian Market are going to see 2% or more rally on Monday, this is due to positive global clue. We assume that Congress passes $700bn bailout plan and no bad news pops out in the mean time. Sentiments will be positive also due to RIL KG Basin Plan.

>>>>> For this week, we expect Nifty to touch 4400-4500 level; on 24th, a day before expiry one can expect selloff or profit booking which will bring down Nifty by 100-120 points. On the day of expiry we expect mixed reaction or range bound with no breakouts.

What do you suggest a trader to do?

1. As of now Nifty is close to 4250 level, assuming on Monday we are going to see 2% gap-up opening, so Nifty will around 4350 level. By the expiry on Thu, we will see Nifty (+/-) 50-100 points to 4350 level. So, we suggest you can buy 1 lot of Nifty 4300 Call & Buy 1 lot of Nifty 4300 Put. This could be the best strategy. Number of lots mentioned is just to give an example.


2. For high risk takers, if Nifty sustains 2% gain on Monday, then Buy 1 lot of Nifty 4500 Call, else if Nifty closes less than 1% gain then Buy 1 lot of Nifty 4300 Put.


3. Sometime due to high optimism traders kept on buying assuming that things are fine and all the problems are solved. In such case on the day of expiry or before one can buy Nifty 4500 Put Option for Oct Series and hold it for sometime.

For Long term investors, do you suggest value buying?

• Since we are not going to see sustained rally even after US bailout package. Even if the market rallies 10% more from here and Nifty touches 4600-4800 level, we are going to come back again and see 4200 level for Nifty may be next month or later.


• So, for a long term investors if one sees value in any stocks he/she can accumulate partly, we will get better opportunity again, but make it a practice to accumulate and don't wait for best time, because timing the market is next to impossible.


• Remember, until we see 6 months of doll drum in the market when most of the short term players gets out of the market, stock market talks dies out from newspaper or from the chit-chat, we are not going to see the base formation or beginning of the next rally.

-HBJ Capital Team