It was a blood bath on Dalal Street as US financial turmoil sent indices plunging. The markets however erased some of the early losses as falling crude and hopes of a Fed rate cut cheered beleaguered traders. The Nifty closed at 4,073 down 156 points, while the Sensex shut shop at 13,531 down 470 points.
The Nifty breached all the important support levels in Monday's trading session. However, a recovery in the last hour of trading took the index above 4,000 to close at 4,073 after losing 155 points.
Nifty September futures closed with a 20-point premium to the spot market after trading at a discount of 25-30 points in the intraday trade. September futures witnessed short-covering above the 4,000 level, with the last hour of trade clocking almost 20 per cent of the total traded volumes.
HBJ Capital's View.....
>>>>>India Markets are in the oversold zone and therefore one can expect a near-term rebound around 4,150-4,200 levels.
>>>>>As long as the Nifty remains below 4,200, its short- and medium-term outlook remains weak.
Some margin pressures may come in tomorrow morning if the markets do not bounce back. Short sellers will have the upper hand as they are not going to be in a hurry to cover due to the large gap down opening. Those who were not able to sell will start offloading as an when market tries upward move, so one can expect rise and sharp fall and again rise type of movements.
If we look at seven years ago, 9/11 happened and two weeks later the market started rising. If one compares yesterday’s event as unprecedented, there is a good chance that over the next two-three weeks, the markets could form a bottom from where it could rally 25-30%
FII activity.....
Foreign institutional investors turned net buyers in the F&O segment, even as the provisional figure on the cash segment showing net selling at Rs 763 crore. They were net buyers to the tune of Rs 1,156.23 crore.
Crude Update...
Even the continuing collapse in crude prices, as well as other commodities, could not protect the stock market from a poor performance. Back in mid-July, when oil was $147 a barrel, few expected the possibility that it might touch $100 by September. Even as the crude prices declined below $100, the equities have failed to react due to factors such as high inflation, slowing economic growth and the woes facing the financial sector in the US.
Global Update..
One can't imagine so many hot news/events in a single day!!!!
Lehman files for bankruptcy protection in historic collapse
Merrill Lynch to be bought by B. of A. in $50 bln all-stock deal
AIG reportedly seeks $40 billion loan from Fed
Fed adds most cash since September 2001; Treasury’s soar
Lehman folds with record $613 billion debt
The collapse of Lehman Brothers and the sale of Merrill Lynch have left questions about the future of the last two major, independent Wall Street brokerage firms, Goldman Sachs and Morgan Stanley
With Wall Street scrambling to contain a financial crisis, the Federal Reserve on Monday assembled a series of emergency tools to head off panic, expanding its loan programs and accepting a broader range of collateral for its loans.
At the same time, the market's focus quickly turned to what the Fed would do at a formal meeting on Tuesday, its regularly scheduled session to review policy. Prior to the weekend's dramatic events, Fed watchers were widely expecting the central bank to hold rates steady at 2%. But the extraordinary events have raised the possibility of a rate cut in many minds.
The market is going to focus on which banks in the US are likely to go the Merrill Lynch or Lehman Brothers way or whether there are going to be any more collapses.
-HBJ Capital Team
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