TODAY’S BETS

DESPITE several attempts to protect 5000, the bulls finally surrendered on Wednesday. The mounting selling pressure in heavyweights, increasing volatility, jittery global markets and the continuously depreciating rupee dampened sentiment. The build-up in out-of-money Put options with increase in implied volatility indicates the panicky situation in the market.
VIX, the investor’s fear gauge, has been consistently trading above 20 in the May series. In yesterday’s trade, it shot up above 30 to close at 32.04. This level of high volatility was last seen in the third week of February 2010 when Nifty corrected by over 7% from January highs. The Nifty has so far corrected by over 9% from its highs of 5400. If VIX moves decisively higher from these levels, the Nifty may be pushed below 4900 levels.
Nifty has consistently traded at a discount for most part of the month. We are yet to witness any short covering in the index. Nifty 200 DMA is placed near 4900. If the index does not hold 4900, it may see further downside. The build-up in the Nifty May series 5000 calls has significantly increased suggesting stiff resistance at this level.
Foreign institutional investors, or FIIs, were net sellers in Nifty Futures since the start of this series. However, they have also started selling in the cash market, thanks to the depreciating rupee and European market uncertainties. Losses incurred due to a strengthening dollar may lead to unwinding of carry trade positions by FIIs. Carry trade means borrowing of funds at low interest rates in currencies like dollar and investing in highyielding assets. Midcap banking stocks are looking attractive and these market dips can be utilised to add positions in this segment. However, the upsides in the market can be used for shorting real estate stocks.
WHAT TO WATCH OUT FOR
INDIA
GRASIM: The board will meet to consider the audited financial results for the year ended March 31, ‘10 and also to recommend dividend on equity shares for the same period.
Wockhardt: The board will meet to consider audited financial results of the for the quarter and fifteen months ended March 31, ‘10.
Jet Airways: The board will meet to consider audited financial results for the year ended March 31 ‘10.
Satluj Jal Vidyut Nigam:
The company will make its debut on the bourses. Priced at Rs 26, company’s initial public offering had received good response from investors, attracting an overall subscription of 6.6 times.