>TRADE WINDS (KARVY)

08 June 2009 to 14 June 2009

Sectoral merry-go-round…

Global stock markets rallied sharply during the week on optimism over the slowdown in the pace of the economic recession as well as the scope for economic recovery in the global economy. The data points in the US, such as jobless claims, productivity, pending home sales, construction spending, and vehicle sales have triggered a rally in global equity markets.

In the domestic markets, both the Sensex and Nifty gained 3.1% and 3.29%, respectively, during the week. Positive global markets and pre-budget expectations in the domestic markets have helped the Sensex to close on a positive note for the 13th straight week. Continued buying interest from FIIs and selling by domestic institutions induced heavy intra-day volatility in the markets. However, due to the dominant FII infl ows, the indices managed to close in the green.

The week witnessed sectoral rotation with the few sectors that enjoy high weightage in the Nifty underperforming, while majority of sectors constituting a lesser proportion outperforming the index. Auto, cement, construction, capital goods, FMCG, metals, software, telecom and power sectors outperformed the broader market, whereas BFSI and energy sectors underperformed the index. The sectoral rotation was due to profit booking in sectors where there was a sharp run-up in the penultimate week, while buying interest came into other sectors due to pre-budget expectations. The trend is likely to continue during the week.

The Nifty is expected to trade in a broad range of 4450-4650 levels during the week. However, a breakout or breakdown is likely to trigger a 150-200-point movement in the Nifty on either side. The F&O traders can utilize the opportunity by designing covered call, bull-call spread, collars, short straddle and short strangle strategies.

To see full report: TRADE WINDS