G20 to push for regulation of hedge funds : Massive hedge fund fire sales likely to begin on Monday.

Unfortunately there were no final conclusions made during G20 meet, the fact is that anything big will necessarily have to wait until the next administration. The purpose of the meeting was to lay the foundation for reforms, but not necessarily the exact structure. This undertaking is too large to be accomplished in a single discussion. Another G-20 meeting to take place sometime in Apr’09.

One could make a good case that it would have been preferable to delay holding a G-20 financial summit until early next year when a new US administration would be in place and when there would probably be greater agreement on what caused this crisis, how to get out of it, and how to prevent the next one.

Indian Market Update:-

Though the Nifty November future opened the week on a positive note, lack of buying support pegged it down during the week. It tumbled 5.4 per cent over the week and closed at a marginal discount over Nifty spot, which ended the week at 2810.35.

Three successive losing sessions have triggered a downside breakout from a trading range. The Nifty closed at 2,810.35 points for a loss of 5.47 per cent. The Sensex was down 5.8 per cent closing at 9,385 points.

India VIX or Volatility Index, which indicates the expected immediate volatility of the market, has been hovering around 70-95 point range throughout last week. Volumes rose as the market fell, which reinforces the feeling that there has been a decisive downwards breakout.

HBJ Capital's View for Monday:-

• Nifty may be set for heightened volatility both during the week and intra-day trades. We suggest traders to exercise caution this week.
• Also due to G20 decision on regulating hedge funds, one can expect many hedge funds to dump hundreds of billions of dollars-worth of stock beginning tomorrow, the impact could be huge. Massive hedge fund fire sales likely to begin on Monday … with most U.S. sectors starving for customers and profits … and with global stock markets set to be crushed yet again …
• We strongly reco traders to avoid trading for first couple of days starting from Monday, let's see the market mood and then decide. Market is expected to be very volatile hence it would be better to keep off the market for at least couple of days!!!
• As per our last reco if someone has small position in Nifty Call Option, just hold it on Monday, we will keep you posted on this.
• The Nifty future is likely to open on negative note on Monday. Traders, with a high risk appetite, can go short on Nifty future if it dips below 2700 - in that case the stop-loss should be kept at 2700.
• Given the current market situation, the index is likely to drift lower at the start of the week and test its weekly and monthly support around the 8,600-level. A break of 8,600 would ensure us of a re-test of the recent lows.

-JK, Equity Research Analyst