Monday : Opening Bell : Nifty expected to open gap-up >2.5% but higher levels might not sustain, expect some profit booking?

Our Views:-

Looking at the high optimism in Asian markets which are up ~4-5% due to various reasons like FED rate cut, bailout of US automakers (don’t know how long market will continue to cheer for just $15bn bailout package?), it is likely that Indian market will also follow the same suit, expect Nifty to open 2.5-3% but we doubt that such higher levels are sustained considering that we already had pullback of 3-4% on last Friday. 

So, one can expect profit booking when Nifty opens gap-up today, in case if our markets are able to sustain 3% upside by end of the day, we can very well assume that this rally might continue for couple of more days.

One must not forget that the higher we go with no real reason, the shaper we are going to fall. So, one must be cautions in his approach.

News Updates:-

Risk-taking revived but uncertainty lingers, renewed hopes for a bailout of the U.S. automaker industry, improving risk-taking across markets and weighing on the U.S. dollar and Treasuries.

Investors have been funneling capital back to emerging Asia for the last few weeks. Worsening U.S. economic data, a rapidly growing fiscal deficit and the likelihood the Federal Reserve will cut interest rates again this week all combined to push the dollar to a two-month low against the euro.

The main attraction in the region throughout this tough year has been China's high growth economy, even though the last few months have seen a severe slowdown. China-related stock funds have drawn a net $1.48 billion in capital so far this year, the only broad category tracked by Nomura to register inflows.

Too early for recovery:-

With some equity valuations at distressed levels, some investors sitting on cash have begun to think about a recovery at some point in 2009. However, JPMorgan asset allocation strategists said it might be too early to let go of recession trades given the global economy is smack in the middle of the worst downturn since World War Two.

There was limited reaction to the Bank of Japan's tankan business sentiment survey, though the headline index for big manufacturers' sentiment fell to a near seven-year low of minus 24, down from minus 3 in the previous survey in September.

The rally in stocks sucked money out of the bond market, pushing up the yield on the benchmark 10-year U.S. Treasury note, which moves in the opposite direction of the price, to 2.59 percent from 2.58 percent late in New York on Friday.

-Sandeep Jain, Associate, HBJ Capital