Extreme volatility will continue in Indian Stock Markets

US subprime market crisis is spreading its wings from one country to another and creating tremors in the stock markets. Central Banks are releasing more money to protect financial markets from liquidity crisis. But no one is giving clear picture on the magnitude of this crisis. Unknown devil is more dangerous than known one. So fear will cause more danger than real problem. This uncertainty and volatility will continue until the magnitude of this crisis will be revealed. Stock Markets are now only for speculators not for investors. Don’t do technical trading, just depend on news based trading in these volatile times.

Global Markets: US markets like Indian Markets ended with minor loss after sharp recovery in the late session on Friday due to pumping of funds by Central Banks to curtail liquidity crisis. Asian Markets are in positive momentum with sharp volatility.

Market Movements: Volatile trading with more than 100 points intra-day swings.

1. BSE Sensex:
CMP: 14868.
Resistance: 14980
Support: 14660.

2. NSE Nifty:
CMP: 4333.
Resistance: 4400.
Support: 4250.

Significant Views:

1. S&P included IT giants, Infosys, Wipro and Satyam, in Warren Buffett model portfolio.
2. Indian Stock Market is the most expensive one in Asia-Pacific region. India is the least attractive one for Investments – Citi Group.

Positive News:

1. JSW Steel acquired 2.5-acre property of Orbit Corporation in Mumbai for Rs 800 crore.
2. ONGC-Mittal won gas block in Trinidad-Tobago.
3. TTML won bid for coin operated telephones.
4. Government will sell 10% stake in Oil India to Oil refineries.
5. Wipro is in JV with Boeing MRO facility.
6. Government will announce new Aviation policy in this week.
7. Bisleri will enter into International markets by September.

Negative News:

1. More delay in Tata Motors 1-lakh car project due to problems in Singur project.
2. Hindustan Oil Exploration shut down well at PY-3 field.

Stock Market Analysis:

1. Central banks are pumping more money into the financial markets to save from liquidity and credit crisis in the short term but it will have negative implications in the medium to long term.

2. IFCI stake sale news will continue to give strength to this stock. Be cautious around Rs 68-69 level. IFCI should break its strong resistance level of Rs 68-69 for the future rally.

3. Reliance Communications will bounce back at any time. Accumulate this stock in SIP way.

4. Nifty may bounce back today but short term target is 4100.

5. Biggest problem is no one exactly knows the severity of Subprime market crisis. Unless this is solved, markets will continue this current volatile run. Domestic Financial Institutions are saving the market from collapse by buying in equities. Will this continue?

6. RNRL and JP Hydro will consolidate in the short term due to their vertical run-up.

7. Banking Stocks: Benefits of new ECB norms are nullified by Subprime crisis.

Best Stocks for Day Traders:

1. IFCI:
CMP: 65.3
Target: 68.

2. Reliance Communications:
CMP: 520.8
Target: 529 and 536.

3. Reliance Energy:
CMP: 748.
Target: 760.

4. Most stocks will open on positive note but gradually move down due to profit booking. Real investors should stay away from Markets up to August 16. August 15 is the last date for current hedge withdrawals.

My opinion is implications of subprime crisis are more severe than analysts’ estimates. But strong economic growth is saving the markets from melt down. It will be better to stay away from Stock markets for some more time. Short term spikes are not sustainable. August, 2007 will be remembered forever in the Stock Market history due this crisis. Sit on cash for better opportunities in blue chips in the coming days.

Note: I hve holdings in some of the stocks discussed here.

Please share your views and Stock Recommendations.