Markets and News!
Start of the 2nd week of January and things are looking much clearer than what they were looking last week. Last week new year started with a scare of Nifty losing 100 points and then it went into a range and was threatening to go below 10300. Now, things are looking much better and brighter. On Friday, it broke the range of 10400-10500 and closed above 10550. That means we are now poised for that 11000 mark earmarked for budget. Globally also things are looking good with US closing at another all time high and Asia also looking greener today. Brent crude however is moving around at 68 mark and NIFTY is in no mood to look at that now.
On the domestic fundamentals front, we got the advanced estimates of GDP figures on Friday evening after markets closed. GDP is estimated to be at 6.5% which is a 4 year low and GVA is expected to be at 6.1% which is something we last seen in 2013. On any normal day this should worry the market. But what is happening is people are just rubbishing the data. CSO said that its just extrapolating the data it got from April-October to November-March and coming up this figure. Now that simple extrapolation works in normal situations not in the disruption months.
Last November we had Demonitization and that disrupted many things and their base got lower. That includes cement, steel, unorganised sector manufacturing, Q3 and Q4 data of companies etc. On the lower base this year’s figures would look better. So the extrapolation wont work. Second is the introduction of GST in July 2017. That has changed the tax collections a bit and how they behave can’t be predicted through extrapolation. Third is that Govt spending was calculated assuming that fiscal targets would be sacrosanct. But we already know that Govt has exceeded fiscal target to 112% by November itself. So public administration which is put at 9.3% will be higher than that. So, markets are not giving much weightage to these numbers.
Futures and Options!
On the derivatives front, there was a lot of call buying that happened along with put selling. This is a bullish sign. But on the futures side the shorting still continues hoping that something will go wrong and that brings the Nifty premium to 14 points from 47 points seen on 1st January. There was buying happening at 10600 and 10700 call now and the premium surged to 90 and 50 rupees there. And on the put side there is shorting now happening at 10600 put which has a premium of 115 rupees and 10500 put that is at 80 rupees. That puts 10420 as a firm cap. Nifty put call ratio is at 1.58 up from 1.54.
What is the Nifty call for today?
If you have followed my suggestion and taken a long position on Nifty anywhere between 10520 to 10540 you would reap benefits now. Nifty will open gap up and it could open close to 10600 level which is a new all time high and that might present as a temporary resistance. If Nifty breaks that then it can go till 10650 intraday else it will trade between 10560 to 10610 and might close in between. I will give you a call on twitter based on how things work. Till then hold on to your long positions and enjoy the profits!