Daily Call - Sep 5 2008

Stocks are likely to open sharply lower in the morning as Indian markets react to a 300 point fall in the Dow in sync with the other Asian markets. There is another domestic issue as well. Though the inflation came in lower than the expected number of 12.44%, it was higher than the 12.01-12.10% range that was seen in the whisper numbers. As a good portion of the banking longs had happened based on this expectations, the stocks must now decline as hopes have been belied.

India made some progress at Vienna yesterday, which has improved the odds for a waiver, but a clean waiver is still anybody’s guess. My sense is that if you had heeded our hawkish take on the issue yesterday and accordingly bought puts, it may be time to cover them profitably. If you had shorted the futures, buy an out of the money call to protect your profits from turning in to losses should the markets reverse in the eventuality of the NSG clearance coming.