Category Archives: Market Setup

Trade Setup/Market Setup

Visit this column every morning on weekdays to know how Indian markets will fare and read the predictions on market behavior. Nifty, Sensex and Bank Nifty and many more important news will be discussed in a short 200-300 word post. Predictions are all based on my own learning and perceptions. The information posted should not be used by others for wrong reasons.

Happy Investing!

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Market Trade Setup 8th February 2019 #Nifty

Market Trade Setup 8th February 2019

Yesterday’s 25 basis point rate cut by RBI had triggered a short term rally that took Nifty to 11,120 mark but it couldn’t sustain. You wouldn’t have had any chance to take a position as Nifty was always close to 11,100 mark from the time it opened. So, no positions would’ve been taken yesterday. The USA markets were negative with Dow closing 220 points lower and NASDAQ nearly 100 points down. Today Asian markets are trading mixed with Japan and Hong Kong down 350 points each, while China and Singapore are trading in mild green. Brent crude has fallen below $62 and is trading at $61.4 now which is a positive sign for India.

Coming to domestics yesterday’s monetary policy has evoked mixed reactions where there was a 25 basis point rate cut bringing down the repo rate to 6.25% and MSF and Bank Rate to 6.5%. The inflation forecast was also lowered to under 3% for first half of 2019 and the tone of the policy was also changed to neutral from calibrated tightening. Though markets liked it initially, it couldn’t sustain as there were some growth concerns with services inflation still at 5.8%. So this 6.5% Bank Rate would effectively yield 70 basis points margin for banks which is much lower compared to 125 to 150 points margin kept during the Rajan’s time.

Coming to derivatives there was a mild buying seen in futures market where the overall long positions still stand at 52%. On the options side the Nifty put-call ratio has come down to 1.78 from 1.83 seen at the beginning of the day. On the put side 11,000 put added maximum open interest of 5.3 lakh positions followed by 11,200 put which added 4.2 lakh positions. From 10,700 the floor for the market has shifted to 11,000. 10,700 now has the second highest open interest. On the call side 11,400 call added 4.2 lakh positions and 11,500 call added 3.7 lakh positions. 11,000 call still has the open interest but there is a lot of open interest building at 11,400 and 11,200 which might emerge as the roof going forward.

What is the Nifty call for the Day?

Yesterday there was no chance to take any positions and today Nifty might open slightly gap down between 11,030 to 11,060. On the downside 10,980 is a big support and it might face resistance at 11,080 to 11,100. Today is the last day of the week and some profit booking is expected at any time. So, I would advise to stay out from Trading and look at the Nifty from a fresh point of view as we get into the second half of the series on Monday.

Market Trade Setup 7th February #Nifty

Market Setup 7th February

Yesterday I was talking about whether the Nifty will break the 10980 resistance or not which Nifty tried 11 times before. Finally, it was broken and broken emphatically. Now 10980 will be a support to watch out for. But the point is the break out has to sustain and today is the day we will see that. US markets closed flat last night with Dow Jones falling 20 points after a 170 points up on two days. The Q4 data is coming positive in US with important companies like General Motors coming with a good results. Asian markets are shut even today on account on Chinese lunar new year and Japan which is the only trading market is 100 points down. Brent crude is still at 62 levels. 

Coming to domestics, today is the monetary policy day at the mid day you will have market reacting in full measure to the policy. This is new Governor’s first policy and three things are important. First is the rate cuts, second the tone of the policy and third are the forecasts. On the rate cuts there is a very slight chance of a 25 bps rate cut, coming now or in April policy. The tone of the policy is going to be changed from calibrated tightening to neutral. And third the inflation forecasts are going to be revised to 4% for first half of 2019 and if all this happens markets will surely rally. Today’s Q3 results include Aurobindo pharma, Britannia Industries, Cadila health, Coffee day, MRF tyres, Suzlon energy and Tata Motors.

On the derivatives front, yesterday saw a fantastic action in the Nifty Futures market where a plenty of long positions were added as Nifty climbed the 11000 mark. There were 34 long positions taken for every short position and that brought the Nifty futures long positions from 46% at the start of the day to 52% by the end of the day. Now we have more longs than shorts in Nifty futures. On options front also the Nifty put call ratio surged to 1.82 from 1.68 level with 10900 put adding 12.2 lakh contracts and 11000 put adding 13.8 lakh contracts. 10700 put has the highest open interest and its closely followed by 11000 put. On the call side 11400 call added 2.2 lakh positions and 11300 call added 2.1 lakh positions. 11000 call still has highest open interest and we need to see whether 11200 call can gain some open interest today or not. 

What is the Nifty call for the day?

Today we will have a flat opening to Nifty around 11030-11060 kind of opening and with the put call ratio in over heated zone of above 1.8 we need to see if this level can sustain or not. 11000-11020 is a crucial support level and if it holds then we can look at Nifty going up to 11100 level. So, I would suggest you to wait for a dip to come around 11020 levels and take a long with 11100 mark as the target, either today or in the coming days. Understand that monetary policy is coming at 11.45 and if required wait till that point to see if 11000 holds or not before taking the long position. Don’t rush into it and get trapped, even if you take a position before 1PM also it is fine. The targets can be extended to tomorrow also if required. 

Market Trade Setup 6th February #Nifty

Market Setup 6th February

Yesterday was a narrow day with Nifty closing up 20 points higher and we are right now inside the big resistance zone of 10920-10980. Nifty has attempted to break this level at least 11 times in last 6 weeks to break this level only to go back and touch lower levels. Today we have again crawled back to this level and we need to see how the market behaves now. Globally things are looking very positive with Dow Jones gaining another 170 points yesterday on the back of some good Q4 earnings in the US. Most of the Asian markets are shut on the back of the lunar new year. Japan which is the only market trading is in green. Brent crude has dropped a bit and has gone to 62.1 dollars which could be a piece of good news for India. 

On the domestic front, the new RBI governor has postponed the monetary policy. Previously monetary policy committee would meet for 2 days, the first Tuesday and Wednesday of the month and would come up with the monetary policy on Wednesday afternoon. Now the monetary policy is going to meet for 3 days and the monetary policy announcement will happen on Thursday. The timings also changed from 2.30PM to 11.45AM. So, we will not have the monetary policy news. The Q3 results yesterday were below average for most of the stocks but Tech Mahindra came up with Fantastic number and that would remain as the good news. Today’s Q3 results include Adani Ports, Adani power, Archies, Cipla, Cummins India, JSW steel, Lupin, Sharp, Siemens India, TBZ Jewellers and Vodafone Idea. 

On the derivatives front, there was a lot of bullish action seen yesterday, especially in the options market. Futures market had an almost equal number of buys and sell but the Options market saw a lot of bullish action. There was a huge buying in calls and selling of puts which kept the Nifty put-call ratio almost constant at 1.68 vs 1.67 at the beginning of the day. 10900 put added 2.9 lakh contracts while 10700 put added 1.1 lakh contracts. 10700 put still continues to have the highest open interest. On the calls side 11300 call saw a lot of buying adding 1.7 lakh positions, 11200 call added 1.3 lakh positions and 11100 call added 1.1 lakh contracts. 11000 call still has highest open interest but 11200 is picking up a lot of open interest. 

What is the Nifty call for the day?

Yesterday I stopped you from taking any positions and predictably, Nifty was in a narrow range and closed mildly higher. Today we might have a slight gap up move and Nifty might open around 10940-10970 level which is the resistance zone and if Nifty crosses 10980 within first 10 minutes and stays above and crosses 11000 mark then only we can think that Nifty has broken the resistance. But the possibility of that happening is less. If Nifty corrects at 10980 or after touching 11000 and goes into the resistance zone again then there is no point trading today also. So, today also I advise you not to go for any trade and wait for Nifty to take out the resistance zone or fall below 10850 to look at a meaningful level to enter.

Market Trade Setup 5th February 2019 #NIFTY

Market Trade Setup 5th February 2019

A good Monday which saw the Nifty climbing the peak of 10900 and closing above that gives way to a challenging Tuesday. Today is all about whether the momentum gained late in the afternoon yesterday will sustain or not. The global cues are looking very positive with FAANG (Facebook, Amazon, Apple, Net Flix and Google) close 2% higher on New York Stock Exchange last night and Dow Jones closed 170 points higher. Today is the lunar new year for China and Korea and most of Asia except Japan and Singapore are shut. Those markets are absolutely flat. Brent crude is touching 63 dollars and that is a bit of a worry for our markets. 

On the domestic front, the Political factors are going to play their role as the 3 judge bench led by CJI is going to hear the CBI plea of contempt of court against the commissioner of Police, Kolkata. That will keep markets on tenterhooks and apart from that focus has now shifted back to Q3 results. Today’s Q3 results include Aditya Birla Capital, ACC Cements, Adlabs, Apollo Tyres, BHEL, Bombay Dyeing, Century ply, Dish TV, DLF, HPCL, Inox Leisure, Kamat Hotels, Punjab National bank, Sobha developers, Tata global, Tech Mahindra, Torrent power, United bank and Zen labs. So far the Q3 results have been average and we need to see how today, which has the core economic stocks come up with their numbers.

On the derivatives front, there was an equal amount of buying and selling that has happened in the Nifty futures market and the overall long positions in Nifty futures still remain at 45%. The futures market contributed 61,900 Cr turnover yesterday while options contributed 5.46 lakh crore turnover taking the total to 6.08 Lakh Crore. The Nifty put-call ratio also went up to 1.67 from 1.63. 10800 put added 5.3 lakh positions while 10900 put added 4 lakh positions. 10700 put still continues to have the highest open interest. On the call side, 11100 call added 3 lakh positions while 11000 call added 2.1 lakh positions and 11000 call still has the highest open interest. So, today is going to be interesting where we have to see if 11000 will be touched or not.

What is the Nifty call for the day?

Yesterday, Nifty behaved as per the script and if you have taken a long at 10840-10850 you are now sitting on a 60-70 point profit. Today will open between 10920-10940 range which is the resistance zone. The resistance goes all the way up to 10980 and there can be a correction at any place between 10940-10980. Unless it is crossed there is no point in taking fresh long positions at these levels. If you still have yesterday’s positions open close them between 10930-10960 levels and exit. No trading today and we will have to wait till the Nifty crosses 10980 and closes above that. Till then we have to wait and watch.

Market Trade Setup 4th February #Nifty

Market Setup 4th February

The February series had started on 1st Feb but little attention was paid on it as that was a big budget day and everyone was taken over by that big fundamental event. The budget came, the market liked it and we had a big rally of over 100 points for Nifty and it closed close to 10900 mark. Now the action is back on February series and if we look at the last four years February is negative in 3 out of the 4 years. 2015, 2016 and 2018 saw declines in February while only 2017 saw February month going up. Last year was very bad with an 800 point fall. There was always a post-budget sell-off seen and last year it was on the LTCG while this year it could be other factors.

If we look at the events this month, we have a lot of political events taking place and West Bengal already in a mini-crisis, many such events can be expected. Apart from that, the Q3 results will continue for another 10 days with many important companies like SBI coming up with numbers. We also have the first monetary policy of the new RBI Governor scheduled for 6th February, which will be closely watched by the market. Then we also have the IIP and CPI inflation data for December and January that comes will throw further light on how Q3 GDP is going to be. Then we have the Q3 GDP numbers coming on 28th of February that will be on the expiry day of February series. 

How is the February series placed?

February series has started on Friday with just 41% long positions on Nifty futures. But the positivity of the budget had led to a lot of buying on Nifty futures and now the overall long positions for Feb series is at 45%. These 45% positions are open positions on Nifty futures which were not closed. On the options side also, the series started a bit heavy with a lot of rollovers and the put-call ratio was 1.65 which eventually decreased to 1.63 by the end of the trade on Friday. The 10700 put has the highest open interest followed by 10400 and then 10500. On the call side 11000has the highest open interest followed by 11200. 

So, one view is Nifty will remain in a narrow range of 10700-11000 throughout this month and if 10700 is broken on downside then we can test the 10400-10500 range which is bearish and can happen if things go wrong politically. On the other hand 11000 is very strong resistance and a very positive political event if at all occurs can break this and in that case, Nifty might go to 11200. So, safely 10700-11000 is the range for this month with a 40% chance of Nifty doing down to 10400-10500 levels and 20% chance of Nifty breaking 11000 mark and going towards 11200 levels. Only political events can break this 10700 and 11000 mark on either sides

What is the Nifty call for the day?

On Friday, you had a profitable day and now we are starting the new week with new cues. A mixed Asian market means we will also open flat between 10870-10900 mark and we are going to see the resistance again at 10920-10940 zone and on the downside, support will come at 10850 levels and another at 10800-10820 levels. We are at the top end of the range and this is just a 300 point range so trading is tough. Wait for a fall and if Nifty falls to 10850 mark and takes support there then go long at 10850 with a 10900 as the target coming today, tomorrow or day after. If Nifty breaks 10820 and goes down, don’t take any positions and just wait for Nifty to find the base. If Nifty doesn’t go to 10850 then also, don’t trade. So, today’s trade opportunity is very specific and it comes only when Nifty goes to 10850 mark and finds support there and doesn’t fall below 10820.

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Market Trade Setup 1st February #BudgetDay #Nifty

Market Setup 1st February 

The month of February is here and 2019 is not a new year anymore! What February kicks in is a very important event of Budget and for the last 3 years, Govt has kicked in the practice of presenting the budget on the first day of the month instead of the last day of the month, which was a practice till 2015. Today is the budget day but this year will have two budgets one now and another in the month of July. This is going to be an interim budget which will be applicable for the first 5 months of this fiscal. Interim finance minister Piyush Goyal will present this interim budget which is likely to bring in a lot of sops for every segment of the population in India.

What are the challenges in today’s budget?

This budget is coming at the back of a dismal jobs data of NSSO that got leaked to a Business standard that has put the unemployment rate at 6.1% which is the highest since 1974. This was countered by Govt which said that this data is incomplete but that’s too little too late. The CMIE which is a private body that the measured unemployment in households has come up with a data that in the year 2018 we lost 1.8 Crore jobs and that will add to unemployment and they put the unemployment at 5.5%. Another big problem that Govt needs to look at is the fiscal deficit targets that Govt has been missing. Govt, when it took over in 2014 had a fiscal deficit of 4.9% of GDP and they brought it down to 3.5% by 2017 but after that the road has been rough.

What might go wrong for Govt?

The Demonetization which served no purpose, GST which hit the MSME sector very strongly has affected the economy as well as the fiscal deficit. The fiscal deficit for 2017 and 2018 remained at 3.5% and for 2019 Govt has aimed 3.3% fiscal deficit but looks like this target will not be met. Govt also has the practice of presenting annual economic survey one day budget but this year Govt has done away with that practice. All this will cast a shadow and the behaviour of the opposition also will be a crucial factor in presenting the budget. The opposition is very vocal and any attempts by the Govt to announce any sops will be met with a lot of noise and disruption and the Govt’s ability to manage the floor also will be a crucial factor to observe in today’s budget.

What to expect from the budget?

This is an election year and every Govt has the practice of presenting something for the poor and marginalised. In 2014 Chidambaram also brought in food security bill just before the elections but that simply did not work. This time Govt will be much wider in the spectrum as well as spending with big announcements expected on the tax front. A huge relief is expected to be given to the middle class and working class. Apart from that farm loan waiver or direct cash transfers in line with Rythu Bandhu scheme of Telangana and KALIA scheme of Orissa is likely to be announced. Added to this some sops for the business class which is the core voter for BJP is also expected. All this might put pressure on fiscal targets and market might not like them.

Budget 2019!
What is the Nifty call for the day?

We have closed our positions yesterday at 10750 and today we are expected to open around 10840-10870 range and that is a situation where we will encounter with the resistance zone of 10950. This is a macro event and only macro events can make markets to break the resistance. If the budget has the strength it will take the market above 10950 and will make it touch 11000. If it is bad then we might break 10700 and might go below that. This is a binary event and involves a lot of risks. Today my strategy is going to be different. I advise you to go long as soon as the market opens at 10840-10870 levels with 10950-11000 as the target. Keep watching the budget moves carefully and try to exit if that range is reached. If there is a fall then keep 10800 as stop loss and exit if things start to get adverse. Budget trading is a professional trading and you need to do it carefully and professionally.

Market Trade Setup 31st January #NIFTY

Market Trade Setup 31st January

Finally, the expiry day to the longest series which had full 25 trading days is finally here. We have started the series almost at 10800 level and now we are 128 points down for this series. Will this first series of 2019 goes to bulls or bears needs to be seen. Last 2 January series was very positive with over 500 point gain, so in that way, this is going to be a bit of a disappointment. Globally things are looking bright as US jobs data showed some positivity and Fed also said that it would be “patient” in looking at rate hikes. That pushed markets up and Dow gained 400 plus points. The Asian markets are in green with Chinese manufacturing data coming slightly better than expected. 

On the domestic front, the big relief came for the market yesterday with ICICI bank coming up with a good set of results in Q3 and that augers well for the entire banking sector. Added to that was the Sri Krishna committee report that said Chanda Kochhar was at fault and she broke the code of conduct of the bank. Immediately the ICICI board distanced itself from her and sacked her and took away all her post-retirement perks and bonuses. But with no adverse financial implications on the bank because of the fraud, it’s a huge sigh of relief for the bank. Today Apollo Tyres, Airtel, Dabur, Dena Bank, Emami, Hero, India bulls housing finance, Petronet LNG, Power grid, Vedanta and V guard are coming up with their Q3 results.

On the derivatives front, today is the expiry day and if we look at the moves yesterday there was a massive selling on Nifty futures as the market was going up and from 13 point premium, Nifty Jan futures moved into the discount. Yesterday there was a lot of action on Index options and we saw 8.98 lakh crore turn over there itself and the total F&O turnover was 11.19 lakh crore. So, as I said the turnover has crossed 10 lakh crore. Today we might see it crossing 16 lakh crore. The contours are now placed at 10600 put and 10580 is a strong support and on the upside 10800 call has the maximum open interest and so today’s broad expiry contours will be 10580-10800 which is a 200 point range and Nifty put-call ratio is at 1.20 and that means there can be some movement over 10700 for Nifty today to make the PCR adjust upwards.

What is the Nifty call for the day?

Yesterday, I asked you to take long positions if Nifty goes to 10620 mark and if you had taken then you would be sitting on a mild 20 point profit. Today there will be a gap up open for Nifty between 10700-10720 mark and when that is reached you will have an 80-100 point profit. This is your final bonanza for the series and exit around 10700-10720 mark and book profits. 10720-10750 will be the resistance zone so don’t take any risk. On the downside, 10650 will be the support and I would expect the expiry to happen anywhere between 10680-10750 mark with a mild 3 PM move. We have already seen the 3 PM move yesterday also so don’t expect anything great. Be safe and tomorrow onwards we have a lot of cues to deal with including budget so keep your money safely in your pocket.

Market Trade Setup 30th January #NIFTY

Market Trade Setup 30th January

Penultimate day for the expiry, and what a day we had yesterday! There was a time when nifty broken 10600 and that gave shivers to bulls but then there was a dramatic recovery in the latter half of the day and we had conquered 10650 and just closed above that. This is one positive signal for bulls going into the expiry. Global markets were almost flat with Dow gaining just about 50 points but NASDAQ lost 70 points. The Asian markets are trading in the mixed terrain today with Korea and Singapore in positive while Japan, Hong Kong and China in slightly negative territory. Brent Crude again climbed to 61 dollars, trading at 61.3 dollars per barrel.

On the domestic front, there is a lot of politics playing around with Rahul Gandhi coming up with a minimum guarantee scheme for the poor. That would approximately work out to 650 rupees per month per family and that would cost 2 lakh Crore for the Govt. BJP fired the Ram temple salvo by requesting SC to handover the undisputed 67-acre land to Ram Janmabhoomi trust. Amidst all this, there was a positive cheer on Q3 results, with Bank of Baroda and HDFC coming up with a very good set of numbers. This is a huge relief. Today’s Q3 results include Bajaj Auto, BEL, Castrol India, Heritage foods, ICICI Bank, Indian Oil Corporation, Jubilant food works, LIC housing finance, NTPC, Tata communications and Torrent Pharma.

On the derivatives front, the put-call ratio of Nifty remained more or less intact at 1.21 vs 1.23 at the beginning of the day and there was the unwinding of positions that was seen both on the call side as well as the put side. The index options saw 6.55 lakh crore turnover and that took the total F&O turnover yesterday to 8.55 lakh Crore and we are looking at a 10 lakh crore turnover today. 10650 put added 2.9 lakh positions while 10800 put saw 6.3 lakh contracts unwinding. On the call side, 10600 call added 4.3 lakh contracts while 10700 call added 4.2 lakh contracts. 10500 put still has the highest open interest, close behind are 10600 and 10700 put. Today will be an interesting day where we will see where we could see some decisive open interest build up. On the call side, 11000 call is firmly placed at the roof.
What is the Nifty call for the day?

Two days running you were not doing anything and I will surely give you some options strategies to work with once the markets open and premiums settle down. Watch out for my calls on Twitter. Coming to futures trading, there could be a flat open for Nifty between 10640-10670 zone and 10720-10750 can be the destination today. On the downside, 10580-10600 will be strong support. There is a 30 point additional premium on Feb futures and I suggest you to take a long position on February futures as January expires tomorrow and you would be taking a huge risk if you play with Jan series. Enter a long between 10620-10650 spot and keep a target of 10720-10750 on spot prices. That would give you a profit of 60-80 points. 

Market Trade Setup 29th January #NIFTY

Market Setup 29th January

The first day of the expiry week went to the bears where Nifty saw a fall of close to 120 points and now we are back to 10650 levels and the crucial support level of 10700-10720 was decisively broken. Now the downside is open to 10500 now and that looks bit scary. Not only India even US markets fell yesterday where Dow lost more than 200 points and it was on the back of bad numbers from Caterpillar, which is one of the bell weather stocks in the US. The data that is coming is negative across the globe and that is worrying everyone. Today Asian markets are all in red with Hong Kong down 250 points and Japan by 200 points. The only positive is the Brent Crude which fell to 60.1 dollars from the 62 dollars we saw a few days ago. 

Coming to domestics, there are plenty of worries that Govt has to deal with. Rahul Gandhi has announced minimum job guarantee for poor if voted to power and BJP now is on course of making bigger announcements. This will surely put pressure on the fiscal situation in India. The Q3 results continue to be disappointing with Bank of India coming up with a very bad set of numbers. The last 4 quarters have seen a loss of close to 10,000 Cr and that’s a lot of money. Other companies that came up with their numbers is also not very encouraging. Today is a very important day for Q3 and many financial sector companies are coming up with their Q3: Axis Bank, Bajaj Fin services, Bank of Baroda, Godrej Consumer products, HCL Tech, HDFC, Oriental Bank and Tata coffee. 

On the derivatives front, yesterday was a fall day and in Nifty futures market there was some buying initially hoping that market will be taken support at 10700 mark but when it was broken then rollovers started. The first-day Nifty futures rollovers were at 22%. In the options, the index options saw 1.12 Crore contracts with a turnover of 7.09 lakh crore and the total turnover was at 8.98 lakh crore. 10500 put is back as the put with the highest open interest and that added 1.3 lakh positions and 10400 put also getting a lot of open interest with 3.6 lakh contracts added. 10600 put also added 3.6 lakh contracts. On the call side, 10700 call added 16 lakh contracts and 10800 call added 10 lakh contracts. As a result, Nifty put-call ratio plunged to 1.23 from 1.37 seen at the beginning of the day. Now Nifty can gravitate between 10500 to 11000 levels.

What is the Nifty call for the day?

If you are a bull, yesterday was a perfect time to take a break and we have taken a break as I avoided you from taking any positions. Today is a no different day with the opening expected between 10620-10650 levels and we have downside open till 10480 levels and on the upside 10720-10740 is a big resistance. So, today also I would wait and watch to see where Nifty will settle down. I would closely watch 10600 to see if it holds or not. If it holds and Nifty closes between 10600-10650 then we can look at some trade happening tomorrow. But for today, it’s going to be a wait and watch.