Markets and News
A big fall of 100 points in the last one hour yesterday and we are now below 50dma. But it is because of a fundamental called dollar index. Yesterday afternoon after Europe opened the dollar index started to gain strength and crossed 94 mark. That made many of European indices to fall and their currencies weaken. Turkish Lira was the worst affected and it lost 5% in a few hours and the Turkey central bank had to intervene and increase the rates by 3% to arrest the currency fall. So, as the US is stabilizing, the strengthening dollar is affecting the World and the rising Crude is affecting the emerging economies.
On the domestic front, Karnataka now has a non-BJP Govt and NDA’s rule is now stopped at 20 states. But the main worry for the markets is the Crude prices which are still at 79.5 dollars and for the record 11th day the prices of Petrol and Diesel went up. This will slowly start showing up on the prices of other essential commodities and will show up on inflation. The other important worry for Indian markets is the rising bond yields and now 8% rates seem to be definite possibility. It was in 2014 that we had 8.4% as the 10 year bond rate and after that it was always below 8%. So, we are again at a point where we might have to re-issue the 10 year. Rupee is now touching 68.5 per dollar and that will also put huge pressure on the economy. So, there are many fundamentals that worry the economy now.
On the derivatives front, there has been a massive shorting that happened as the market started to fall yesterday afternoon. The long positions which were at 49.5% yesterday morning came down to 46% by the end of the day and the short positions went up to 54%. 7 short positions were taken in the futures market for every long position. Even the options market also had a similar story to tell as Nifty put call ratio fell to 1.18 from 1.23 levels. At the start of the series the Put call ratio was 1.64 and now its just 1.18. This is due to massive unwinding of put positions. Even yesterday morning traders were hoping at 10430 will be the floor and now that floor is in the danger of breaking.
So what is the Nifty and Bank Nifty call for the day?
Today is the bank nifty weekly expiry so, technicals will take a front seat to the fundamentals. Bank Nifty will open around 25750 mark and a short strangle at 25800 call and 25600 put will work. The premium will have to be worked out when you take this position but as of now you will receive 85 rupees premium. Taking any other position at this point can be risky and you need to keep that in mind that there is always a risk of losing money as fundamentals can spoil the plans at any time.
The Nifty will open positive today after that big fall maybe around 10450-1070 range and it might touch 10520 which might act as first resistance and 10550 being the border for this resistance. There are two trades that you can take. If in the first 30 mins you see Nifty not crossing 10470 and staying below that you can go long with a target of 10520-10530. If in the early morning 10500 is reached then you need to be cautious. Wait for my tweet to take further positions.