Pullback interrupted; No doubt, market will fall sharply – Buy Nifty Oct 3000 Call Option

We were proved wrong on our market call for Wed; this time also culprit are Wall Street investors who shifted their focus from improving credit markets to worrisome corporate profit forecasts that are raising fears of a deep economic slowdown. What is this? I told you economist are busy finding something which they can term as reason for next sell off.

Snapping the two-day winning streak, Indian markets tumbled on Wednesday as stocks fell around the world on deepening economic concerns. The key indices pared all of the gains of last two trading sessions. Nifty ends 5% lower on weak global sentiments. Weakness in global markets and lack of investor confidence saw the Indian stock market benchmarks wipe off gains made in last two trading sessions on Wednesday.

Markets opened sharply lower, in line with the Asian peers, on concerns of global economic slowdown. Losses widened as the session progressed and indices spiraled lower. There was dearth of buyers and investors chose to remain on sidelines. Expectations of further cooling in inflation rate failed to cheer the market. Inflation rate for the week ended Oct 11 is seen at 11.35 per cent, lower from 11.44 per cent previous week.

All the major global markets were down and we followed suit. There was hardly any buying in today’s trade and foreign investors as well as domestic funds were seen on sell side. There is still some pain left, as market has not yet seen the bottom. Bombay Stock Exchange’s Sensex ended at 10,169.90, down 513.49 points or 4.81 per cent from Tuesday’s close. National Stock Exchange’s Nifty closed at 3065.15, down 5.25 per cent or 169.75 points. The broader index touched a low of 3051.80 and a high of 3235.75.
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HBJ Capital’s View for Thursday:-

• Market is lacking confidence and sentiment is extremely bearish at the moment. No one wants to be caught on the wrong foot. We are still cautious on the markets; you can see the slowdown in companies and economies and this is only the beginning. One may see some more pain.
• Currently we are in the mid of bottoming out and the bottom is likely to come by mid 2009. It is possible that government can step in and support markets in near term. For long term investors it could be a better time for value pick and ones with a larger risk appetite can go averaging out at heavy fall.
• Don’t get panic by the sharp fall in the market on Thursday, in case if market falls 5% or more on Thursday, one must wait and watch. Because if such fall happens our markets will be down 10-12% in just 2 days which gives a scope of bounce back may be small but yes, market will bounce. Since the market will open with gap down so better abstain from shorting the market.
• Sometime around 3-3:30pm one can go for Nifty Oct 3000 Call Option or Long on Nifty future. Pls make sure that you take this position only if European market shows 1-2% fall not 4-5%. It would be better to be in light position in current volatile market.

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Meanwhile, International Monetary Fund has said that more European banks may fail. These banks may struggle to raise fresh capital from investors, it said. Argentina's planned seizure of $29 billion of private pension funds stirred up concern the nation is headed for its second default in a decade.
-HBJ Capital Team