BEST Strategies for today

The trust vote scheduled for Tuesday has interesting implications.

If the government wins, there is likely to be a knee jerk rally of
about 400-500 points on the sensex.

The sensex will hit crucial resistance area in 14100-14200 and would
correct somewhat from there.

The sensex has risen without a pause from its bottom of about 12590.
This would be a typical bear market rally fast and furious. Definitely
not a time to buy but book profits.

If the government loses, there would be a free fall. It would mean the
end of the nuclear deal which may not be a bad thing at all.

Nuclear energy is expected to support just 10 pc of India's energy
deal.

Nobody knows the other implications of going with nuclear energy.

If the government survives, there would not be any major reforms,
because still the government would just have a wafer thin majority
and the new allies will have their own demands.

It would be better if the government falls, a new one is elected with
a clear mandate.

Oil has corrected, but it looks quite likely that Israel will attack
Iran when Bush is still in office.

The logic for this is that, its all about oil. Bush attacked Iraq with
the lofty aim of liberating it, the real reason was the large Iraq oil
reserve.

Bush is the oilman from Texas and in his regime oil has risen from 20
dollars to 147 dollars a barrel.

Even when addressing the media on Fannie Mae crisis, Bush was urging
the people that Congress should remove legislation banning oil
exploration in Alaska. His stand was US consumers need cheap oil.

The oil companies benefit by this. No where was mentioned, the need
for conservation or using alternative fuel.

The next administartion in US may not be supportive of Israel
attacking Iran especially if its a Democratic admin.

US Elections are on Nov 5 after which Bush loses Moral authority for
major strikes.

So an attack if any should come between now and September end.

The US econmic woes are still not over.

The upside to any rally is therefore capped.

For investors, the best course is to sit on the sidelines.

I would look at Praj Industries on falls.

The most likely scenario is the government squeaking thorugh.

For traders, one could buy a couple of put options with August expiry and
twice the amount of call options with half expiring in August and half in
July.

The logic I have used is:

1. If government stays in the ensuing rally, sell the calls at profit and
exit pulls during the pullback as the upside is limited.

2. If the government falls, there would be massive crack, the puts would
generate huge profits, the July calls almost worthless and the August calls
would still have time premium.