Monday, April 28, 2014

View on Sensex in Economic Times section of Navbharat Times

Trade cautiously during Election season
Sensex in Election month:
Indian equity markets have showed good performance over past 3 months. The rally is majorly attributed to markets discounting a clear majority or a stable government in the current elections which will help government to take quick and fast steps on increasing the infrastructure spending, clearing the pending projects and brining growth back on track.
On 16th May 2014 the election results for LokSabha will be announced. The volatility can tremendous on that day and one should trade very cautiously. If there is no clear majority we can see a very sharp decline across the board. 
Futures & Options: In the previous expiry on 23rd April, the rollovers of Futures contract were below average and it is clearly reflecting reduction in risk by traders and smart investors. Options are instrument used by well informed market participants to hedge their risk and form risk averse strategies, shows the combined premium of both Call and Put has increased drastically to nearly 500. This reflects that there is a possibility of movement by nearly 7% on Nifty in current month expiry.
Volatility index: Indian Volatility index (VIX) that measures the risk or market’s expectation of volatility over near term. This index in April rose from near 17 levels to as high as 38 few days back. In lay man terms, the index is reflecting a huge fluctuation possible due to Election event in current month so again Trade cautiously!
USDINR movement: Among all this events and wide fluctuations, currency market looks to be in stable mode. The movement of USDINR has reduced over past few months which is a good sign for both exporters and importers. In current month as well we can expect a range bound movement between 59.50 and 61.50 levels.
Sensex path ahead: Over short term the fall of Friday was sharp so in current week some consolidation between 22200 and 22950 is possible. Also momentum on upside has reduced as investors are getting cautious. During times of uncertainty sectors like IT and Pharma has outperformed and so we can expect these sectors can be relatively stable. Banking and interest sensitive sector can show wide fluctuations due to the event. Proper risk management strategy will be important over next few weeks to avoid any major financial loss!

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