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Friday, March 02, 2007

Edelweiss - Daily Market Outlook 2nd March, 07


Market Snapshot

Yesterday, markets made further inroads into the positive in the final trading hour backed by sustained buying activity across index heavyweights to close well above breakeven. While software, steel and telecom stocks led the rally, FMCG and cement stocks lost ground. Global markets, while the Asian indices closed a mixed bag. The BSE Sensex closed at 13,160 (up 222 points) while the NSE Nifty closed at 3,811 (up 65 points).

NSE cash volumes were slightly lower compared to the previous day at INR 81 bn while BSE cash volumes were marginally better at INR 40 bn. The F&O volumes were also lower at INR 315 bn

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has reduced to 26-27% levels. The WPCR of Nifty Options decreased to 0.89 compared to the previous day while the 5 day average is 0.90.

Outlook

Yesterday’s pull back happened on low volumes and the market breadth remained largely in favor of the declines. The market is expected to be range bound in today’s session, taking cues from global indices. A lot of market players are waiting on sideline for clear signal to emerge. With concerns of a slowdown in the US economy, market participants are jittery to take fresh positions in the short term.

Nifty, which saw significant short buildup in the previous few trading sessions, saw the OI remaining unchanged in yesterday’s trading session. However there was significant activity in the Nifty futures during the day signaling participants riding on intra day movement without taking directional call on the broader market movement.

IT, FMCG and select pharma stocks such as Auro Pharma are expected to outperform the broader market. However we suggest the investors taking long positions in the market to hedge their positions by shorting Nifty futures.

Nifty’s support levels are at 3757 and 3702. The resistance level for Nifty is at Nifty at 3853.

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Thanks Yash