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When you sense that the market is going to be range-bound for some time, you have a dilemma. But when the fundamental economic indicators turn wobbly, then your dilemma is compounded. To top it all, if the volume is low, short-term movements give you deceptive trend lead.

According to market experts, this compounded dilemma and deceptive move would be the hallmark of this week, which is going to witness the August futures and options contracts settlement. Experts say the shorts this time are low and most of the calls have been written at 4,400 points on the Nifty. This serves as a short-term resistance. There is a general consensus that the benchmark indices are bound by tight upper and lower limits. At the downside, the support appears at 4,150.

The fear of inflation and rate hike dogs this market. Crucial crude oil price movement being prisoner of geopolitical risk perception lends greatly to the unsteadiness of the market.

Investors are unsure whether this market and the current levels are safe for investments. The hedging strategies have thus been more in need than actual investments and geared to protection of capital.

On Monday, taking the cue from the eastern markets and weekend sentiment on the Wall Street, Dalal Street may open little stronger. But, this may not determine the goings on in the next few sessions of the week.

Friday’s bullish price action in Dow Jones Industrial Average was not followed by an increase in volume ...... why ? Most Wall Street traders are still not convinced (blame the same usual suspects; the Fed, Fannie and Freddie and Lehman Brothers), plus the fact that the 50-day moving average is still pointing down.

Last week’s sudden rally in crude oil prices over fears of extension of standoff between Russia and Georgia and significant decline on Friday indicated swings are no indicators. Despite successful Olympics medal haul, the Chinese equity market finished in the red for the third week and yuan eased against dollar.

In a quicksand situation, long-term investors are likely to remain largely on the sidelines this week. Low volumes are likely to restrict volatility too.

(Responses may be sent to jayanta_mallick@thehindu.co.in)

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