Markets Outlook for the day!

Start of the expiry week, and that’s not starting on a great note. The S&P upgrade or at least a revised outlook to positive was expected. None of these were to come. That would add to the disappointment. Added to that is the weak Asian markets which might keep the markets down. The biggest impact because of the S&P status quo is the bond yield which will be likely to be above 7% throughout the day. Remember, we have compromised 10,000 Crore OMO to keep the bond yields down and now they are again above 7% and that sacrifice of OMO has gone waste. The main reason for S&P to keep status quo on India was the fiscal deficit and the crude oil prices that are fluctuating.
Domestically also things not looking fine. ABVP loses Gujarat university elections, that gives the mood of the state that goes to polls in less than 3 weeks. GDP figures that are going to come later this week on Thursday will have to add cheer to other dull market. No positive domestic cues are there to lift the market. Bond markets and bank nifty are the two main casualties because of these trends.

Futures and Options!

On the derivatives front, there was exact opposite action to the mood now. Everyone was expecting S&P to give a positive outlook at least and were buying hugely. There was a lot of buying in Futures markets and many interesting positions were taken in the options markets. Picture this: 13 calls were bought for every call sold and 5 puts were sold for every put bought. That was a big bullish sign. 10,600 call added 1.17 lakh long positions followed by 10500 which saw unwinding of all previous shorts and 2.46 lakh long positions were added. Now with NIFTY correcting all these positions will see a massive sell off. The put call ratio surged to 1.46 from the 1.34 levels seen at the beginning of the Friday. Maximum positions were the shorts created at 10300 put where 3 lakh contracts were sold at 20 rupees premium. This position will run for the cover today.

What is the NIFTY call for the day?

A gap down is guaranteed. NIFTY will open below 10350 and 10320 is the 20 day moving average. If that is taken out massive downside will open with 10250 being the next support. As the S&P disappointment and Gujarat nervousness weighs heavily on the market, its not going to be a good Monday. Going short anywhere between 10350 and 10330 with a target of 10260-10280 can be looked at for the near term. There will be unwinding of positions taken on Friday, and since most of them are bullish we can see lots of bearish action for the day.