Markets and News!

Thursday morning and we will see the 1st expiry of the year with Bank Nifty weekly expiry happening today. World is good, but India is confused. The macro numbers in US and Japan are looking good that is pushing Asia up today. US again made an all time high and NASDAQ remained above 7000 mark with Dow touching 25000 levels and S&P 500 touching 2700 levels. All the markets in Asia are up with Nikkei up by more than 550 points and Hong kong and rest of Asia mildly positive. So, it all presents a rosy picture for India.

But India has macro worries to deal with. First biggest worry is Crude touching 68 mark again. Its a very bad news as crude directly impacts the market. Second is the fiscal target that has gone up to 112% in April to November. That means we are already 12% more than what we need to spend till March end and going by this projections we could end up between 128-135% of the fiscal target. How the Govt manages to arrange for the extra money needs to be seen. The demand for bonds is at an all time low and yields are still hovering around 7.35 to 7.4%. There is a news floating that the new 10 yr might come anytime in next few days with a coupon rate between 7.2 to 7.25%. All this doesn’t present a rosy picture.

Futures and Options!

On the derivatives front there are more short positions built on Nifty futures and that is shown by the overall longs dropping from 67% to 63%. The increasing number of short positions slowly stop the NIFTY’s march towards the higher levels. On 1st January morning 11000 was looking a possibility now its totally ruled out. Now the options are mostly at 10500 and 10600 calls. There are aggressive call writers writing these calls at 110 and 65 rupees premium and wants to eat that premium. But at 10500 levels we also saw more calling buying for short term profits from intraday nifty movements.

Another interesting thing is unwinding of long positions at 10700 levels built on the 1st day of the series. All that kept calls having more demand than puts and the put call ratio is now at 1.48 vs 1.52 seen at the beginning of the day.

What is the NIFTY Strategy for the day?

The green on US and Asia might help NIFTY open a bit gap up at 10480 levels and 10500 will come as a big resistance again. With the domestic macros so much against, NIFTY might find crossing 10500 bit difficult. Even if it happens it will hit 10520 hurdle. On the downside there is 10400 and 10370 which will offer some support. Keep your long positions intact and meanwhile you can go for buying a 10400 put which is likely to drop to 85 levels at the open and might look at 115 to 120 as target.

But the more juicy trade is in Bank Nifty which is going for an expiry today. If you go for a put buying at 25300 and simultaneously building a long straddle at 25500 will be an attractive proposition. Risky and try it only if you have ability to take risk.