Daily Call - Sep 23 2008

The Dow gave up all of its Friday gains as the enormity of the task at hand and the inability of the rescue package to really bail out the financial markets sank in. While the details of the rescue package are being chiseled in the Congress, the markets swooned on its own assumptions and the news that two large surviving Investment Banks, Goldman and Morgan will become bank holding companies.


Our markets are likely to open lower, striking off around 50 points from the overnight Nifty. Crude has spiked $ 16 a barrel and is now back at its $120 perch. The surge came on an assumption that the rescue package could rekindle demand for Crude. The equity and the commodity markets have different perceptions about the potency of the rescue package and one of them is wrong. But if you ascribe this logic that Crude has risen sharply because you expect the Dollar to plunge as Uncle Sam takes on additional $ 2 trillion of debt after the extended package, the move becomes understandable. Nevertheless, a Crude surge to $ 120 , even if temporary, could seriously alter inflation calculations. Buy the 4200 Sep 25 Put at a premium of Rs 49.25.