Markets and News
First day of May series, and the famous behavioral finance quote “Sell in May and go away” comes to mind automatically. But if we see India the last 3 years May series all had a positive close, though it was a growth between 1.5 to 2.5% which is good enough if not great. So will this May be another month following up 2015, 2016 and 2017 or will it be a different year this time. There are lot of markers that points to a better May if we look at it technically. The Nifty roll overs from April to May has been at 72% which is higher than the average rollovers of 65% for the first 3 months of this year.
Not only that, the open interest for May is also starting at higher than average. May is starting with 2.2 Cr open interest which is higher than the average of 2 Cr open interest in the first 3 month. Also what you need to focus is on the long positions in the Futures market. It is starting at a healthy 54% compared to dismal 18% in April. Though it is lower than Jan, Feb and March, a 54% long means a healthy start to the series. April series ended with a positive of 504 points and now we have 2 red series and 2 green series this year and all this points to an exciting May.
What are the fundamentals that will affect the May series?
Q4 results is the answer. So far, April has seen 85% above average to good results and that presents a bright picture. But with just 10% of companies declaring results so far, this number should not be taken seriously. So, a good Q4 means market will have legs to go up. The other big fundamental is the Karnataka election results that will come at right in the middle of the month on 15th May. A victory to BJP or even a coalition govt of BJP with JDS will take the markets up. A congress victory means a huge red. Apart from that global actors like Crude prices and FOMC meeting on May 2nd will have limited impact and also the CPI and IIP data that will come in the 2nd week of May will also add to the momentum or take away the momentum.
Derivatives Action
On the derivatives front, the 10500 put and 11000 call is having the highest open interest as we start the series. That means 10500 will act as some support on the fall and it was 30.6 lakh open interest at the start. 11000 call is much more active with 43.8 lakh contracts and that means initially the tendency will be to move towards 11000 and 10800 will be the first major resistance as it resumes its journey towards that point. At 27.5 lakh contracts 10800 will be one call where profit booking might happen. Above all the nifty put call ratio ended at 1.70 which is kind of over heated zone for the month of April.
What is the Nifty and bank Nifty call for the day?
The first day of the series is either the day to relax and watch the market or look at going for a long straddle or a strangle. If you are thinking so, I would suggest a long strangle at 10500 and 11000 put and call respectively and you spend 130 rupees roughly. If you feel you need to look at it more take a break, watch how May goes and then enter it on Monday. Ditto is the call for bank nifty.