Nifty Trading Ideas

Market Setup 13th December

Markets and News!

A very mixed day today. There are some worries domestically just as global worries seems to have been evaporating. The Fed has started its meeting and will come up with its commentary today late night. There is a 98% possibility of rate hike tonight and we might expect a 25-50 bps hike. If its 25 Asia will be in green tomorrow and if its 50 or more expect a red on the markets. For now, it looks like Asia and India are slowly absorbing the rate hike news. The second fundamental that has improved is a fall in crude. The news of crack in oil pipe off UK coast is warded off for now and with supply not getting affected crude prices stabilized quickly which is a great news for India.

Macro Worries!

The main worries come domestically with CPI and IIP data coming as a shocker. CPI came much higher at 4.9% vs expected 4.5% for November. Food inflation is at 4.4% on the back of 22% vegetable inflation and 8% egg inflation. Housing inflation is at 7.3% and the 7th pay commission worries seem to be coming true. The LPG and petrol inflation is highest at 7.9%. Added to this is the IIP that comes at 2.2% for October vs expected 3%. Last year same month it was 4.2%. The biggest worry is a -7% negative growth in consumer durables and the biggest positive is a 7.7% growth in FMCG products. This will have some impact on the markets and that means we have a global positive and domestic negative today to deal with.

Futures and Options!

On the derivatives front, there seems to be a growing long positions taken on NIFTY Futures. Even though NIFTY fell by more than 80 points yesterday there were more long positions created on Futures than shorts. On the options front however the shorting of 10500 and 10400 calls has resumed one more time. The premium was 85 rupees for 10400 call yesterday and that means market expects a 10500 below expiry for this month.
However there are buyers for 10700 call where the premium held steady and 34,000 contracts got added yesterday. That means the traders are expecting a sharp move on the back of Gujarat results which they will sell into. 10100 and 10000 puts came for heavy shorting. Overall more calls were involved in trading than puts and NIFTY put call ratio came down from 1.30 to 1.26 by the end of the day and volatility went up by almost 8%.

What is the NIFTY call for today?

NIFTY will open flat and 10220 target we had taken yesterday will be achieved. It is wise to exit at this point and wait for the direction. NIFTY might take support at 10200 to 10180 levels and might close flat ahead of Fed policy. So staying out and waiting for the Fed outcome is the best way to deal with the situation.

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