News and Events!

Winter Solstice day and start of the Christmas season and holidays and already we started noticing them in the market. US passes the tax bill, markets were expecting it and as soon as it happens there was a sell off. People are booking profits and heading for holidays across the World and by tomorrow evening everyone is gone!

December expiry will be a local event for us with cues from global markets almost absent. But one worry that never goes is the ever increasing crude oil prices which are marching towards 65 dollars again. With rising inflation this crude price increase is a double blow for the economy.

Another major fundamental is the monetary policy minutes released by RBI. The tone of the RBI is extremely hawkish with serious inflation concerns being raised. Finally all the wait that RBI had for inflation to go up above 4% and crude to go above 60 dollars has come true. Now RBI is talking like a pundit, foolishly forgetting the fact that too much of caution in the beginning also contributed to this situation. Now that the situation has come, nobody can do anything. We all have to face it. The inflation forecast for December is above 5% and Crude forecast between 63-66 dollars. That would surely impact the growth and market will surely worry about it.

Futures and Options!

On the derivatives front, one thing which is not worrying are the ultra bullish cues coming. Nifty put call ratio reached 1.50 and that is a worrying sign. People are easily shorting puts and making money.

This is a dangerous scenario and the first sign that market is due for another correction. 10500 put saw shorting yesterday and the volume is close to 2 lakh contracts. Its trading at a premium of 73 rupees and how conveniently people are eating that premium. They expect expiry to happen above 10425 levels and so going and shorting that put. This is dangerous and should never be attempted. On the call side 10600 and 10700 calls are being shorted but the premium there is just 7 rupees and 4 rupees. So put premiums are making more money than call premiums but this scenario could change in the coming days.

What is the NIFTY strategy for the day?

NIFTY is likely to open flat and 10400 might come as a bit of support at the lower end and on the upper end 10490 might act as a temporary resistance. There is no fundamentals to take the market above 10500 but there are some worrying fundamentals that could bring markets down.

Keep your longs and try taking them to next week. Probably 10500 might be hit momentarily anytime and as soon as it happens exit the positions. But the bigger and better trade is in Bank NIFTY which has its weekly options expiry today. 25600 call can be shorted and that has a premium of 70 rupees and you could think of eating it. Else you can short 25700 call which is much safer and that has a premium of 35 rupees. On the other side 25600 put can be bought to see where it goes as Bank Nifty could correct a bit today. But approach this more cautiously.