Nifty View - 23 Jun 08

Dear Friends,
The inflation numbers or the WPI numbers on Fridays took the best of the Bear/Bull by surprise.The Nifty tanked immediately after the unexpected numbers and the markets took a 500+ points beating.The markets are expected to react to Bsp support withdrawal and the Left-UPA Nuke tussle stated for 25th of june starting tomorrow.Moreover the Repo or the reverse repo rate hike by Rbi should also be a matter of days now seeing the unacceptable levels of Inflation.The FOMC meet will have a strong view on Inflationary trends and the fall in dow can be related with the occurrence of the same event.The primary reason for the inflation as of now is Crude hike must have been the headlines of any newspaper.The truth remains in the fact that the present government did not take any measures to hike prices of fuel and to curb inflationary trend that was seen in last 8 months.I believe that traders should remember that markets react at a later stage to any economic event.What the ministers did was curbed the rise in prices of cement and metals without noticing the fact that there was a demand driven price rise.Once there is an external force that limits the functioning of a free market.The market breakdown is bound to happen.
With the hoarding of food grains and expectations of even higher inflation.Occurrence of higher inflation can not be unexpected as of now.Moreover the instability of the government in the centre will be the last nail in the coffin for tired bulls as of now.Tsr Research team expects elections to be held in next 6 months.We expect that the government will try and call early elections when the inflation will be manageable.Any snap polls before this outcome will lead to clean sweep by erstwhile NDA.Moreover even after support of S.P one cannot expect that the government will have a clear majority as it will fall short of 2 vital members (UPA-LEFT+S.P)
If there are announcement of any snap polls in next two months then it will be blessing in disguise for stock markets.We can expect a very sharp recovery as Poll pundits will predict a clear majority for NDA.Moreover the stock markets want reforms at the end of the day and the present government has been a Reform sans government.Stock markets wants divestments,Ipo and less interference of state in free market mechanism.If only the present government would had increased the prices as per the rise in international markets till last year.Inflation figures would had a higher base and the markets would had heaved a sigh of relief.The government is paying its own price by being associated with forces who are more committed to China being the only super power in Asia then India being one.
Coming back to Nifty the charts have become so ugly that its better to talk about the political scenario then talking about Nifty.The closing witnessed in nifty on Friday coupled with the weakness seen in the Dow .One can assume a weaker opening for Nifty.The million dollar question now is that whats next.For me i will try and give trade s on pivots coupled with the news flow to make the most of the Nifty moves this week.Going ahead support zonbe for Nifty will be 4231-4254 if 4194 holds on the downside one can expect an upmove in Nifty.We will face good amount of selling pressure and all leveraged trades should be limited to Intraday.One can go for value buying below 4200 levels.We had given 3 stocks(take solns,oswal chem and diamond cables) and booked 2 of them approx 10 days back with 12-15% capital appreciation in four days.One stock diamond cables is up 12% from recommended levels but is still a Hold as better rates are possible.

Weekly Nifty supports :- 4185-4205

Nifty resistances -4451-4538