Daily Call - Aug 6 2009

The guiding force of this rally has been the Chinese economy. And if any questions are ever raised on the sustainability of the Chinese economic affluence, the world markets, including US and India will get jitters. Today is one such day, when Chinese markets are down 3% on concerns that monetary tightening could be in store after 7 months of easy money policy that has seen banks lending 160% of what they lent in whole of the last year.

Commodity stocks may take a beating and so would banking. So close your longs and take protective measures. Will this be a one day weakness, like the one we saw last week or some thing more enduring? The chances of the markets getting bearish from here are more. So even Hindustan Oil, some thing, which we have recommended in the past may only be a buy at dips story and not a outright trading buy if the 153 level is broken. In order to go short on the Nifty, one will have to first ensure that we trade below the 4600 mark for some 15 minutes. Keep a tight stop loss or simply buy lower puts if the 4600 level does cave in. Till the time this level breaks, there could be long trading opportunities if the Nifty does open sharply lower (more than 60 points) with the three minute low or 4600 as stop loss.