INTRADAY TIPS FOR 04 MAY 2011

GOOD MORNING!!!

MARKETS GOT TREMORS AND SHOCKWAVES ACROSS THE BOURSES AFTER THE RBI’S POLICY WAS ANNOUNCED, THE POLICY MADE DALAL STREET SIMPLY BLEED. WHICH HAS NOT ONLY TRIGGERED LOT OF SHORT POSITIONS IN THE MARKETS BUT ALSO HAS PROVOKED MARKET PARTICIPANTS TO RUTHLESSLY SQUARE OFF THEIR POSITIONS ESPECIALLY FROM RATE SENSITIVE COUNTERS. THIS IS STRAIGHT SEVENTH TRADING SESSION WHERE WE HAVE SEEN MARKETS TRAVELLING SOUTH WARDS IN EVERY PHASE OF TRADING SESSION IT SEEMED LIKE THERE IS NO END TO THE DECLINE IN THE MARKETS, THE RBI’S 50 BPS HIKE IN REPO AND REVERSE REPO RATES MARKED ITS NINTH ATTEMPT TO EASE THE SPIRALING INFLATIONARY PRESSURE ON THE ECONOMY. THE RBI POLICY HIGHLIGHTED ITS WORRIES OVER THE CURRENT LEVELS OF INFLATION WHICH IT FORECAST WILL REMAIN ELEVATED THRU THE FY 2012 AND PEGGED IT AT AROUND 6% WITH AN UPWARD BIAS. THE BANK RATE AND CRR RATES WERE LEFT UNCHANGED BY RBI, HOWEVER IT UNEXPECTEDLY HIKED SAVINGS BANK RATE TO 4% FROM 3.5%, WHICH PROMPTED INVESTORS TO TRIM DOWN THEIR POSITIONS FROM BANKING STOCKS AS THEY FEARED THAT INCREASE IN INTEREST RATES WILL PUT PRESSURE ON THE NET INTEREST MARGINS OF BANKS. MOREOVER, THE CENTRAL BANK HAS FORECAST INDIA’S ECONOMIC GROWTH TO BE IN THE RANGE OF 7.4% TO 8.5% SIGNIFICANTLY LOWER THAN THE FORECAST OF 9% BY PM'S ECONOMIC ADVISORY COUNCIL, WHICH SPOOKED THE INTERESTS OF FOREIGN INVESTORS TOO. THE FII’S CONTINUED TO PLOUGH BACK THEIR FUNDS FROM DOMESTIC MARKETS ON EXPECTATIONS THAT MACROECONOMIC HEADWINDS WILL EAT IN TO THEIR RETURNS IN THE TIME TO COME AND FORCE THE STOCK MARKETS TO UNDERPERFORM. INITIALLY MARKETS GOT OFF TO A PESSIMISTIC OPENING AS LOCAL INVESTORS REMAINED EXTREMELY CAUTIOUS AHEAD OF RBI’S ANNUAL MONETARY POLICY MEET WHILE LEADS FROM THE ASIAN AND OVERNIGHT US MARKETS TOO REMAINED UNSUPPORTIVE. THE FRONTLINE INDICES GYRATED IN AN EXTREMELY NARROW RANGE FOR THE FIRST COUPLE OF HOURS HOWEVER THE BOURSES WITNESSED AN INESCAPABLE FREEFALL THEREAFTER AS THE RATE SENSITIVE COUNTERS LIKE BANKING, AUTOMOBILE AND REAL ESTATE BRUTALLY DRAGGED THE FRONTLINE INDICES. IN A THE ABSENCE OF ANY SHORT COVERING RALLY, THE SOUTHBOUND JOURNEY CONCLUDED ONLY WITH THE CLOSE OF TRADING SESSION AROUND THE LOW POINT OF THE DAY AFTER TAKING A NASTY BLOW. MARKETS PLUMMETED ON EXTREMELY LARGE VOLUMES BREADTH OF THE MARKET REMAINED ABYSMAL

TODAY MARKETS WOULD OPEN NEGATIVE AND TRADE IN A RANGE BOUND. IF NIFTY TRADES BELOW 5560 THEN WOULD COME DOWN TO 5513 LEVELS AND BREACH BELOW THIS POINT WOULD TEST 5466 AND ANY BREAK IN BELOW THIS POINT WOULD WILL FIND SUPPORT ONLY AT 5375 LEVELS. ON THE POSITIVE SIDE IF NIFTY TRADES ABOVE 5585 THEN LIKELY TO MOVE UP TO 5621 LEVELS AND ANY BREAK ABOVE THIS POINT WOULD TAKE NIFTY TO 5657 LEVELS. IF NIFTY RECOVERS ONE HAS TO BEAR IN MIND THAT THE LOWEST POINT OF THE DAY HAS BE BROKEN IN ORDER TO INITIATE FRESH SHORTS, THIS WOULD BE VERY CRUCIAL. THE BIGGEST CHALLENGE IN MARKETS IS, FII’S ARE NOW AT SELLING SPREE TILL THE TIME THEY COME FORWARD TO SHOW SOME INTEREST ONE IS ADVISED NOT TO HOLD TOO MANY OPEN POSITIONS ON THE POSITIVE SIDE.