Buying spree good for rupee

Gold, auto looking strong

The market has depicted a proper example of consolidation. The markets were immensely supported by the buying interest shown by the FIIs who bought shares worth Rs 9433.89 crore from March 6 to April 6 2011. This buying spree and the fund inflow helped the rupee gain against the dollar during this period.


The metal is looking good

Volatility
The Nifty volatility also has dropped around 19 per cent in the last one month, showing less fear on the part of the investors regarding market correction. Midcap and smallcap sectors were the major gainers and gained around 12 per cent each in the last one month. Since the undercurrent was strong, the market never gave in to the bears totally and witnessed minor corrections, even though the crude prices moved past $110 for the first time since September 2008.

Strangle
A long strangle on the Nifty is advisable.u00a0 Investors can buy Nifty 5800 put and 5900 April call at Rs 70 and at Rs 71 respectively. Investors can make a profit if the Nifty moves above 6042 or below 5658.u00a0 Maximum loss is limited to Rs 7100 if Nifty closes in between 5800-5900 levels on expiry. Aggressive traders can create long call on Nifty, and they can buy 5900- 6000 call options.

Gain
On the sectoral front, better auto sales numbers helped the auto ancillary stocks sector to gain considerably. Specifically, stocks like SSWL, Lumax Autotech, Rico Auto and others gave significant returns and are still looking positive. The monsoon is expected to be good this time around and this will have a positive impact on food prices. It may also help in bringing down food inflation. This will make fertilizer stocks dearer in the coming days. Last Friday, one saw the stock Ingersoll-Rand attracting huge volumes. The stock has last resistance at Rs 535, movements above this level will attract further buying interest. Axis Bank and BHEL are looking strong, if there is a reversal in the market, these two stocks are the strongest counters.

Support
Nifty, during its consolidation, may find support at around 5833 and 5743 levels while it has major target of 6000 and 6183 provided other things remain normal. The global markets also show an overbought situation with the DOW Jones having support at 12263 and 12183 levels. Nikkei, though, is looking positive with minor resistance at 9817 above. More upside is likely as the country has taken commendable steps and measures to ensure that the nuclear radiation does not spread further and contaminate the waters.

Record
Gold is looking extremely strong as it has scaled to record highs. Gold has breached its immediate resistance levels and it can move towards $ 1475 to $ 1500 in the short term. The major reason for the price appreciation is partly because of the strong Euro. Whenever the Euro becomes strong, gold will appreciate because gold will become cheaper for the Euro zone buyers. Gold has support at $1436 and $1428.u00a0 Silver, too, looks very strong, the sharp demand can continue and it has immediate resistance at $40.75 and $41.90. Support will be at $38.10. Crude oil has an immediate target of $112.50, if it moves up, further upside is likely. In the agri-commodity space, the Rubber April contract is likely to move above Rs. 248 - Rs.253.

Reverse
The rupee on the other hand, has gained considerably during the past two weeks and may reverse its trend. Economic data too remained a mixed bag. European services PMI rose to 57.2 against 56.9 and the German Factory Orders were at 2.4 per cent against an estimated 0.5 per cent. On the US front, the initial jobless claims declined to 382000 against 392000 but the US chain store sales declined to 2 per cent against 4.2 per cent previously.

The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here.