Markets and News

We approach the midweek things looks more or less settled. World has stabilized. US has become less volatile and so is Asia. Brent crude also has come down and its now trading at 62 dollars the level suggested by Porinju long back. The fall in the demand is seen as a major reason for the crude to stabilize around 62 dollars.

Domestic Cues

Coming to domestics the earnings season has ended and Q3 results look more or less inline with the expectations and we might look at a double digit growth in Q3.The major fundamental news on the NPAs and bad loans resolutions. RBI has scrapped many rejig schemes for the banks and withdraws SDR, S4A and CDR used in rejigging of the NPAs. All this will push up the credit costs of many banks to go up by 10-15%. This is not at all a good news and banks will have some effect.

Added to this is the IIP and inflation which come at a expected level. CPI for January comes at 5% which is definitely a good news and the talk of rate hike will be put to rest for sometime. But the services inflation still continues to be sticky and the food inflation is also touching the uncomfortable levels coming at 4.7%. Housing is a big worry at 8% and fuel inflation is also at 7.7%. IIP on the other hand comes good at 7.1% for December 2017. With this the April-December IIP stands at 3.7% vs 5.1% seen in the same period last year. Manufacturing is a great news which comes at 8.4% and that pushed the IIP.

Derivatives Action

On the derivatives front, selling continued on Nifty futures and lot of short positions were taken bringing down the long positions to 43% which is one of the lowest in the near future. This presents a strange situation where any amount of fall might lead to massive selling and any amount of rise can trigger short covering. On the options front put shorting resumed again and 2.6 lakh contracts got created at 10500 put which is at 20 rupee premium indicating that 10480 might be a floor but 10400 put also saw 2.3 lakh contracts at 75 rupees indicating 10330 as a floor for this series. On the call side 10600 call saw 1.5 lakh contracts at 90 rupees indicating 10700 as the roof for this series.

What is the Nifty call for the day?

Expect a flat opening for Nifty around 10550 levels and expect a resistance at 10580 levels and this will be tough to overcome. If done we might see 10600 today and might go upto even 10630-10650 zone. On the downside 10480 is a strong support. The strategy for the day could be to go long around 10520-10550 levels with 10620-10650 as the target in this week.

What is the bank Nifty call for the day?

Expect bank Nifty to be under pressure because of the RBI action and 25750 could be the resistance. It might find some support at 25550-26000 levels. The strategy could be to see the behaviour before taking a position. It is better to go short at the open with 25500 as target. If you dont get that opportunity than wait for bank nifty to stabilize and go long at 25500-26000