Markets and News
Dow Jones shows a positive close of just 46 points but the volatility was way too much. Dow at one time was up almost 350 points and from there it lost steam and lost all the gains. China issued a series of statements saying that US is escalating the trade war and taking steps that are not good for the global economy. Those statements made markets move down but Asia today looks green. Slowly the correlation between US and Asia seems to be ending. This is primarily due to different domestic cues that you see in US and other markets which are becoming significant market drivers. Brent crude continues to be up and again crossed 68 dollars.
Domestic Cues
On the domestic front, things are getting uglier for the banks with Chanda Kochar and Shika shrma in the dock. After lot of negativity surrounding ICICI bank now its time for Axis bank. Shika sharma its chairman is going to vacate her office by December 2018 as against her retirement in mid 2021. The other news is RBI getting tougher on NPA provisioning rules and are not in a mood to relent. On the technical side Nifty is now close to its 100 day and 50 day moving averages. 100dma is at 10430 and 50dma is at 10460 and Nifty at 10387 is just few points away. Bank Nifty has decisively crossed the 200dma and now it all looks like we are entering into the bull phase again.
Derivatives Action
On the derivatives front however this trend is clearly not visible. At higher levels there are short positions taken on Nifty futures and that seems to be the big worry for the market to cross 10450 levels. The FII long exposure in futures market still stands at 20% and this is not a great news. On the options front, the Nifty put call ratio came down to 1.42 from 1.43 primarily due to increased positions taken on call side. 10700 call is seeing a lot of buying and around 4 lakh positions mostly long, were taken there. The 10300 and 10400 call also saw 3 lakh contracts each taken. 10200 call however saw almost 2.9 lakh contracts disappearing due to Nifty crossing 10350 mark. When there was shorting at this strike the premium was between 150-180 points and those are giving huge losses now. 10300 put is most active with 3.1 lakh contracts and so is 10200 put.
What is the Nifty and bank Nifty strategy for the day?
The markets will open close to 100dma of 10430 and then you have a 50dma of 10460 and that should be a big resistance zone. Yesterday’s positions taken at 10350 levels will give you close to 100 point profit if Nifty touches 10450 mark and it is better to exit this and wait for a dip to take fresh positions. If 10460 is taken out easily and Nifty stays above that by afternoon and doesnt fall then it is a bullish trend and you need to wait. But if Nifty corrects at 50dma and moves towards 10400 then in that case re enter at 10400 levels with 10460 again as the target for second time.
Bank nifty today will be more volatile than Nifty primarily due to the Axis bank and RBI rules on NPAs. You have reached the targets of 25000 on bank nifty and today it is better to exit at the open when it hits 25150. Bank Nifty has its 50dma at 25230 mark and that might present as a huge resistance. For today it is better to wait for a dip in the bank nifty probably to 24900 before taking any fresh positions. If the dip doesnt happen, then wait for the dip. Dont rush into any positions now.