Outlook for Wed : Expect shortcovering & Index 2% up; Cautious optimism will continue as the bears are likely to be on the defensive in the near term.

It was a strong Muhurat trading session for the Indian market. Benchmark indices have rebounded sharply in the Samvat 2065 and have broken four-session losing streak. The positive trend in global markets also helped our markets. Buying was seen in the most beaten down sectors namely realty, metal, power, capital goods, oil and auto stocks. Midcap and small cap stocks also followed the same trend.

HBJ Capital's Views for Wednesday:-

• The outlook for the coming session is that of cautious optimism as the bears are likely to be on the defensive in the absolute near term. Declines, if any, will be calibrated and less sharper than the recent weeks. Long-term players may commence bottom-fishing with a two-year horizon.
• Due to expiry one can expect shortcovering which might lead to 2% or more upside. One can go Long on Nifty Future, but don't expose yourself to Nifty Option Call/Put for Oct. Once the direction is clear, fresh position in Nifty Nov Option will be taken.
• Upside is limited and not to get mislead by this bounce assuming it as start of recovery. Anyone doing value buy should wait and buy only when Index falls 5% or more.

Earlier in the day, Hang Seng rockets 14.4%, Nikkei spikes 6.4%. Most Asian markets survived early volatility to end higher Tuesday, with Hong Kong stocks spiking more than 14% to claw back from some of their steep losses in the previous five sessions.

The Fed's interest-rate setting committee begins deliberations on Tuesday, with expectations for a half-point cut to bring the Fed funds rate to 1%. The U.S. central bank rarely makes announcements on the first day, but after this month's global coordinated rate cut, traders are especially on alert for an early move.

European Central Bank Jean-Claude Trichet said on Monday that another Europe rate cut was "possible" and Bank of England Governor Mervyn King recently admitted for the first time that the U.K. was likely in recession.

Hedge funds, insurance companies and turmoil in emerging economies still pose threats to Britain's financial system, the Bank of England warned in its twice-yearly report on financial stability Tuesday. Troubled Iceland on Tuesday hiked its interest rates by 6 percentage points to 18%.

Wall Street took a dose of bad economic news with relative calm Tuesday, rallying sharply even as consumer confidence plunged to its lowest levels in 41 years. The Dow Jones industrial average rose nearly 270 points, leading the major indexes with a gain of more than 2 percent.
-HBJ Capital Team