EOD Analysis for 27th September 2011 and Outlook For 28th September

So Puts bought with high premium got crushed as expected and so many shorts in the system invited this trouble. The upside still remains capped at 5032 IMHO and the larger trend is down. Nifty melts much faster than it rises so there is nothing to be excited about at this point of time. Expiry is expected to continue the trend of close below open. Whilst it is difficult to tame expiry due to the inherent manipulations of the market, one should see stock and sector specific action. IT rising is no big deal as it will be one the prime sectors for a sell-off further to Banking and RIL. Interest rate sensitives that are temporarily showing signs of excitement will also fizzle out but as I pointed out yesterday as well, one should not blindly go short or go Put shopping.

Sell levels continue to be 4944-4911-4880 and the same strategy of hedging with a futures position in the opposite direction with a 25 point stop loss may continue to prove beneficial. With 2 days to go for expiry, there is a high probable chance of a repeat of Feb series action this month and/or August series i.e. when the markets most expect the downside, the expiry may be calm followed by a sell-off on Friday/Saturday [to milk the Sep options premium]. Larger trend is down and these relief rallies in between are good opportunities to short.

The upside can get bolstered through with a close over 5032 and cause some pain to bears.