Expect wild swing (+/-) 4 to 5% on Monday purely based on Lehman's Fate!

HBJ Capital Report...
Once again global factor is weighing in the India Market, Lehman bailout being the single most important news to watch for?

HBJ Capital has gut feeling that Lehman will be bailed out directly or indirectly by US FED only, because if Lehman files for bankruptcy then the effort on the financial derivatives market will be disastrous, in such scenarios we might see 1987 or 1929 type of market crash because if FED or any other banks are not saving Lehman then others like AIG, Washington Mutual etc will collapse sooner or later.

It is the cascading affect which is more dangerous, So, for Indian Investors we would suggest to keep eyes on Monday market, if we open gap down 4-5% or gap up 4-5% then next 4 trading days will see the same trend because we have many good news like Crude cooling down, Inflation and IIP numbers to get factored in the market.

>>>>In case if market fall, all the LONG position should be closed and one should think of SHORTING the market, we might be seeing 3800 level in such situation.

>>>>In case if market bounced back due to positive news from Lehman, one can see short covering and LONG position should be held, no SHORT position. We might see 4500 by this weekend.

Right Strategies in these market situations:-
Go for either 4500 CALL Option if market opens with gap ups; else go for 4000 PUT Option if market opens with gap down on Monday. By Friday we would be at either end, hope we would be at 4500 level by Friday.

Market Wrap-Ups:-

• Markets ended last week in the negative territory on sustained FII selling. There was huge FII stock unloading in frontline counters throughout the week.
• FIIs were continuous net sellers in the week and sold stocks worth $612 mn which resulted in a big dollar demand, putting more pressure on the rupee. Some large FIIs were seen selling to raise cash levels on their entire equity portfolio positions. This was also why one saw a sharp price correction in market heavyweights during the week which contributed significantly to the fall in indices.
• The biggest negative surprise came from the sharp rupee depreciation which breached the Rs 45 level touching Rs 45.75 to a dollar, which is the lowest ever during the last two years. On the positive side, both crude oil prices and inflation numbers continued to be on a downward trend.
• Inflation numbers during the week were lower at 12.10% from 12.34% previously, with crude oil prices also correcting sharply to around $105 (now just $99) a barrel with India’s average oil basket price also moving below $100 a barrel.
• IIP growth numbers during July ’08 were higher at 7.10% against 5.4% in June ’08 and ahead of market consensus expectations of 6.5%.
• Interestingly, the FII selloff and the rupee depreciation saw a huge selloff in frontline counters which pulled down the market indices. However, a major part of the FII selling was seen on the cash side and not on the F&O segment, indicating this was some sort of panic selling resorted by some FIIs in large cap-stocks.
• The crucial factor which would decide the market trend ahead is the extent of fresh FII selling, as this factor dominated last week entirely, overlooking the positive IIP and inflation numbers. It seems that once the FII selloff ends, the markets could witness a sharp bounce back as the supply of fresh stocks gets plugged. The present market conditions offer a good value buying opportunity for long term investors.

-HBJ Capital Team