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!


Market setup 14th September

Record high close for US markets with S&P 500 touching 2500 mark and Dow above 22150 and Asia is in mild green and India is likely to open flat with slight negative bias above 10,050 levels which is a strong support. If NIFTY takes support there then move towards 10,100 is possible through the day. Else the next big support comes at 10,020 levels and that means another red closing for NIFTY.
As I told yesterday, any dip towards 10,050 or below should be used as an opportunity to buy. The mild correction is also due to overheated Put call ratio of 1.52 vs 1.50 yesterday. In the F&O markets FIIs sold nearly 800 Cr and DIIs bought 700 Cr making a net deficit of 100 Cr which took the market down. Plus the action of shorting the put went to 9950 and 9900 levels from the 10,000 levels and unwinding of long calls was seen at 10300 levels.
That’s a bearish sign and NIFTY has to overcome all this to start moving up. The last thing NIFTY wants is shorting of 10,200 or 10,100 call. If that picks up NIFTY will get arrested this series between 9950 and 10,100 and that will be a disaster for any plans of a 10,200 expiry.

On the macro front

Crude prices have been shooting up with two Hurricanes hitting US and brent is well above 55 dollar mark. Prices in India are skyrocketing and Mumbai is likely to touch 80 rupees today for Petrol and in Hyderabad the prices are likely to touch 75 rupees for Petrol today. Govt. has stepped in and wants the OMCs to absorb the losses and that has given a negative reaction yesterday. Petroleum minister clarified that no such move is expected to happen in near future, but the worry will remain.
So, it’s uncertain. WPI inflation data will arrive by midday and it’s likely to come at 3.1%. That means finally CPI and WPI are merging.
On the IPO front Capacit’e first day went very well with IPO getting subscribed 1.3x times. QIB and RII are over subscribed while the NII remain undersubscribed. Tomorrow is the day for another IPO ICICI Lombard. Its coming up with 8.62 Crore shares with a price band of 651-661 rupees. I am neutral on this.

Market set up 13th September

Market Setup

US saw its all time high yesterday, is it our turn today? NIFTY is just 45 points away from the new all time high! Will it conquer today? NIFTY will be flat at opening around 10,100 mark and 10,120 is the mark NIFTY has to cross and the new all time high will happen! If its stuck there then the chances are 50-50. It’s not wise to take long position today after 2 days of rally. Any dip to 10,050 levels should be used to buy with a 10,150 target and that means a 8000 profit, roughly!! If we look at the F&O set up the NIFTY put call ratio is at 1.50 and this so early in the series is not a great sign.
This surge happened because of indiscriminate shorting of 10,000 put. 10 puts were shorted for 1 call at 10,000 level and that’s staggering! Infact hungry traders are eating 10,100 put also and call buyers are getting ambitious and are buying 10,300 calls!!
All this means 10,100 might become a base if shorting continues and NIFTY might go to 10,200 and stay above that!

On the macro front

Slight disappointment continues on IIP front as July IIP comes at just 1.2%. Analysts were expecting it to be between 1.5 to 1.7%. The worrying point is Manufacturing that comes at flat 0%. Electricity grew at 7% giving some hope. Even the CPI inflation for August was bit higher at 3.36% though food inflation was below 2%. Now RBI has to do something. In the other news, bank recapitalization is on the cards with RBI issuing bonds to mop up excess liquidity in the system. Hopefully that should create some demand!
On the stock front the mega IPO is coming on September 20th! I am telling you well in advance so that you don’t miss it! SBI Life is coming up with an IPO in a price band of 685 to 700 rupees per share! Dont miss it!!

Market set up 12th September

Chasing momentum is not always a good idea, however good the macros maybe. There will be a slight gap up around 10,030 levels and that is the resistance level. 10,050 offers another stiff resistance and with two big resistances around NIFTY has to negotiate a lot to cross these levels. Dont be surprised if there is some selling as soon as NIFTY reaches any of the above levels. On the downside 9970 offers a strong support and NIFTY might test that level if there is excessive selling. There is a strong activity in the options market where there is heavy put selling at 10,000 level. There is a call buying happening at 10,200 level also and that is the only indication that NIFTY might close flat today around the 10,000 level. So its a day where NIFTY has to negotiate some strong technicals and the story is how it negotiates that.

On the macro front

Korean fears are behind, Hurricane Irma was not as destructive as expected so its acting positive. The IIP and CPI numbers are expected today evening and that’s a fundamental to watch out for. CPI is expected to come at 3.2% and IIP at a 1.3% which is a very low number. So not much is expected till RBI gathers some courage to cut the rates on 4th October when it comes out with its next credit policy!

Market set up 11th September

The first thought that comes across is, “Is it the 10,000 day? That 10,000 that we lost a month ago on 8th August is most likely to be touched today.

What are the reasons?
1. North Korea did nothing foolish on 9th September, its foundation day. Markets across the World closed nervous the previous day thinking that North Korea will test one more missile and Korean peninsula will be tense. Nothing of that sort happened.
2. Hurricane Irma was much much weaker than it thought out to be. It was not a Category 5 but it made a landfall last evening as Category 2 hurricane with wind speeds around 120-140kmph vs expected 300-320kms. That will keep crude prices under check and lot of relief across commodities market.
3. On the domestic front the GST council meeting at Hyderabad on 9th September kept the cess on luxury cars between 2%-7% vs expected 10%. Small cares and Hybrid cars were not hiked while the medium cars cess went up by 2%, luxury cars by 5% and SUVs by 7%. This will act as a positive and will keep the markets in good cheer.

How will the NIFTY open?

Asian markets indicate a huge gap up for NIFTY above 9950 barrier and we could see a open around 9980 levels. That gives the real hope of NIFTY touching 10,000 again somewhere in the morning itself! What happens after that needs to be seen. Today’s opening means the range of 9850-9950 will be decisively broken. Now will it close above that? Doubtful. If buying happens and NIFTY stays above 9980 then it could stay and close above 9950 levels. The other scenario is once 10,000 is reached then selling starts and NIFTY comes back to 9950 levels and close. That is indeed a big negative for a market that’s starting on this note.
On IPO front, Bharat matrimony after failing once is coming up with an IPO again. The IPO has 37.6 lakh shares on offer with price band between 983-985. Too costly for my liking and AVOID! On stock picking front, IGL is one stock that caught my attention and which has some legs to go up.

Monsoon update 8th September

Monsoon active in South India and Maharashtra while it was weak in rest of India. Monsoon wont withdraw on 11th now, because West Rajasthan and Jammu Kashmir got some rain last night. India on the whole got 5.4mm rain vs normal of 6.6mm which is a deficit of -19%. That takes the total seasonal rainfall to 729mm vs normal of 769mm which is 95% of LPA. South India improved to 97% of LPA from 82% seen a month ago. Central India worsened to 91% from 108% seen 6 weeks ago. North western India is at 94% and Eastern India for the first time this season dropped below 100% and now stands at 99%. Now for the first time all the 4 regions of India have rainfall less than 100% LPA. Eastern India 99%, South India 97%, North western India 96% and Central India 91%.

Following are the top 5 wettest states in India.

1. Karnataka +467%
2. Maharashtra +270%
3. Kerala +101%
4. Assam +54%
5. Andhra Pradesh +42%

Following is the ranking of different states on the deviations from the normal.

1. Tamil nadu +46%
2. Gujarat +29%
3. Rest of North east +27%
4. Andhra Pradesh +25%
5. Rajasthan +21%
6. Jammu kashmir +12%
7. West bengal +3%
8. Goa 0%
9. Bihar -2%
10. Uttarakhand -2%
11. Jharkhand -4%
12. Arunachal Pradesh -7%
13. Maharashtra -8%
14. Orissa -9%
15. Himachal Pradesh -10%
16. Telangana -10%
17. Karnataka -11%
18. Assam -12%
19. Chattisgarh -13%
20. Punjab -15%
21. Kerala -19%
22. Haryana -25%
23. Madhya Pradesh -26%
24. Uttar Pradesh -27%
Now only 7 out of 24 states have more than normal rainfall while 16 states have less than normal rainfall. 1 state has exactly normal rain.
Outskirts of Hyderabad got some rain last night whereas most parts of the city remained dry. Shamirpet got 11.2mm rain and Hakimpet 5.0mm. Rest of the Hyderabad got no rainfall. Telangana on an average got 5.4mm rain vs normal of 5.5mm which took the total seasonal rainfall to 576mm vs normal of 639mm which is still a deficit of -10%.

Following is the break up of percentage deviation from normal.

1. Khammam +9%
2. Hyderabad +8%
3. Warangal +6%
4. Medak -8%
5. Nalgonda -8%
6. Mahbubnagar -10%
7. Rangareddy -14%
8. Karimnagar -21%
9. Nizamabad -21%
10. Adilabad -26%

Market set up 8th September

Market Setup

Weekend is here, a forgettable week finally coming to an end. This was the week that gave lot of hope but delivered very little. The NIFTY has gone into a range and it looks like as if NIFTY is going to spend rest of the series in that range. Now that would waste the entire September series, if and when that happens. But for today, NIFTY for a change will not play one day up one day down game. It will open flat to positive around 9940 and will encounter that 9950 resistance. Then one more resistance comes at 9980 and if NIFTY negotiates both, then 10,000 is in sight. Having said that 10,000 turned out to be a big deal and will it be achieved on the last day of the week?
Yes, things look positive start will be at the top of the range and if NIFTY finds resilience at 9980 then 10,000 looks possible. Else we would see usual Friday afternoon selling and NIFTY might go back and close again in that 9850-9950 range. After all, nobody wants a weekend risk in the World which is so volatile.


Even the derivative markets are giving confusing signals. NIFTY futures long positions dropped to 61% but the last one hour trade showed NIFTY falling but futures premium shooting up. That means when NIFTY was falling people were going and buying futures. But at the beginning of the day yesterday they sold so much that the last 1 hour buy didn’t matter much. However long positions at the close of the day is always a positive signals. The options market also saw Put Call ratio go to 1.35 from 1.33 indicating that some put shorting is happening at higher levels, especially at 9900. Maybe if that moves to 9950 then we can look at the range getting broken.


On fundamentals front, nothing is happening in Korea but tomorrow is Independence day of North Korea so weekend might see some action. So, the ideal thing would be to close the positions and don’t take much to next week. Hurricane IRMA is making erratic moves just like stock markets. Yesterday everyone thought it will miss Florida but now it looks as if it will hit Florida head on. Now it’s located north of Cuba and moving rapidly towards US coast. At 300-320kmph wind speed it might make a landfall in Florida on Saturday evening US time and Sunday morning India time.
Crude oil prices surged because of this and brent crude crossed 54.50 dollars posing a real threat of 60 dollars in case IRMA leads to large scale destruction!

Market set up 7th September

As expected today is going to be the green day after a red day yesterday. Today we will have a positive start above 9930 and 9950 comes to question again. If NIFTY takes out 9950 before 10.30 then we might go towards 9980 levels by the time Europe is ready to open. Plus today is the Bank NIFTY weekly expiry day and that might spike up NIFTY also and if there is a 3PM move on upside we can have a 10,000 today. Today I will put a probability of 70% for achieving 10,000. This is the highest probability for 10,000 in last 3 weeks! On the other hand if NIFTY gets stuck between 9950 and 9900 which looks very unlikely, we might see a dull boring day that might end flat. But I would still see NIFTY closing above 9950 and even 9980!!
Another technical reason that might keep NIFTY in green today is the way options data is stacked up. There was a lot of shorting of calls yesterday and some short positions taken in Futures. If that has happened in Bank NIFTY then today is the expiry. So, if markets go up then there will be lot of pressure on these short calls to get covered and covering them would mean there will be a rally. Plus on a green day, there will be more shorting of puts and buying of calls that will anyways keep the markets up. I expect Bank NIFTY to react more sharply and with high volatility than NIFTY today just because today is the expiry day.

News and News!

On the macro front, Government has taken a huge leap on shell companies by freezing the accounts of 2 lakh shell companies. That would put a big stop to the black money generation as most of the black money is originated from these shell companies. Another point to be considered is that these shell companies have not declared returns for the last 3 years and action is being initiated against the directors o these shell companies. There are around 3 lakh directors of these shell companies and that means 3 lakh bank accounts would be frozen and that money will be investigated apart from the accounts of the 2 lakh company accounts. Thats more than 5 lakh accounts that will be investigated and looks like huge amounts of black money will be unearthed. Who says the fight on black money is over?
In the other news, the hurricane in Atlantic is named as “Irma” and its hitting Caribbean Islands one by one with speeds ranging from 280-300kmph. This is dangerous and the Irma is moving towards US now. Initially it was supposed to hit Florida but now they are saying that it might hit Georgia or South Carolina by sunday night or monday.
On the stocks to watch out for Shankara build pro and Bharath forge will be the stocks to watch out. Plus the NBFC micro financing companies might be in profits.
Coming to bad news, Tata Motors workers of Jamshedpur plant are on strike which is seriously affecting the production. They are protesting demanding in an increase in their base salary and HRA.

Market set up 6th September

Market Setup

Trump made noises again this time threatening military actions against North Korea and supply of missiles to South Korea. This triggered a 200 point fall in Dow jones and that caught up with Asian markets with Hong kong down more than 250 points at the opening. Other Asian markets are also in red. NIFTY will again open low today probably below 9930 and immediately 9900 will be tested. If the day is really bad 9850 might be tested and all the gains made yesterday would disappear. This is going to be a weak day and even on the upside 9960 to 9980 could be a big resistance.
Even the F&O cues also pointing to a down day with put buying resuming at 9900 levels and call shorting continuing at 10,000 level. All in all expect a negative day and close below 9900 unless Europe gives a positive signal and that might take NIFTY above 9900.

Rajan in the news

Crude oil has surged today and crossed 53 dollars. After Hurricane Harvey another hurricane is developing in Atlantic and its likely to move towards Florida. It is one located in West Indies Islands and has winds speeds gusting at 80km/ph. Its likely to intensify and touch florida by Sunday or monday. This will put pressure on crude exploration leading to a surge in crude prices. And in the other news the book written by Raghuram Rajan “I do what I do” is released in Chennai last evening. If you want to get some interesting insights from the World’s most popular Central bank governor do grab a copy of this book! Am going to do it soon!

Market set up 5th September

Market Setup

As predicted,NIFTY broke 9900 yesterday but later recovered to close above 9900. That’s a huge positive. As the tensions ease along Korean peninsula there is a chance that today might be a day of recovery. Asia is looking much better today, trading flat to positive. That will have its impact on India and NIFTY might open at around 9920 levels. It has a leg to go up to 9980 and make an attempt or two to break into 10,000.
Infact there is a 50% probability that NIFTY might cross 10,000 today. On the downside 9850 will be a strong support to work with. Yesterday could have triggered a lot of short positions and if the NIFTY goes up these shorts might run for cover and that is one singular factor which will take the NIFTY up today. So, today could be the day when NIFTY will take a big step towards regaining the 10,000 mark. Will it succeed or not is 50-50!

News Leading Market

Reliance Capital will be the stock of the day with some company fundamentals getting rejigged. Gujarat Govt’s textile policy giving relaxations and subsidies means textile stocks might see some green. Also another positive is Govt has decided to postpone the additional GST cess to be levied on luxury cars till the festival season is over so that it doesn’t affect the demand for these cars. This will have a different impact on different 4 wheeler car manufacturing stocks.