India Morning Report: Rail Budget strike brings market to pliable levels

Markets may likely try to hit 7800 again given the more specific positive impact expected from Budget measures as BJP gets into gear for its first Budget as a majority government. The optimism in the Rail Budget was rewarded sharply negatively by markets as markets too the hot air balloon opportunities to spring a surprise exit from the blue sky 7800 levels reached at the end of last week. The new government will be under pressure, The DTC for example is unlikely to be implemented and subsidy reduction measures likely to continue in Diesel if not in Gas as Gas pricing and Poverty line debates bring back the realities of a Fiscally responsible India required at the Centre. Banks and Cyclicals incl. Autos remain safe buys.

Auto industry sops have already been extended in advance , raising chances that markets will feel cheated during budget day proceedings which means that market watchers will indeed sharply follow up on over expectations factored in as likelies in the budget to an even 7500 level before assessing the final impact of Budget measures. However, it is still more than 65% likely that markets will keep 7650 levels and end the day on a positive note. Markets did not provide any real shorts opportunity to build on Monday before springing a weary budget day negative rush for 600 Sensex and 165 Nifty points, before ending at the lowest levels for the Nifty, leading bulls to losses as they headed for a swift exit on the low interest in taking markets higher from 7800.

The Rupee’s bullish trades, brought down the house for IT sector’s inopportune gains in the week, perhaps cornering cash speculators trying to build a chimera of hope. The Sensex used the last 10 trades and assigned minutes of recon to average out the 600 point bit to 517 levels it closed at the end of day. Equities have been trading at extremely low global volatilities and a breakdown in the Dow followed by the sea of red in Asia this morning would also impact dodgy sentiment, the speed of the correction indeed limiting gains for bears who did not have time to build positions in this market. The US dollar is back on a strong run and the on again off again news of a mass exit from US bonds, triggered off the sharp reaction in US equities.

Sold Puts are not safe above 7500 and would likely see some more exits at all levels in the hope of finding a safer entry point for bulls to come back in morning trades.


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