Market Setup!

Sometimes it becomes difficult to understand why correction happens suddenly. But if there is no correction, there is no growth. It’s important to keep our money protected in the times of distress. Thankfully, day before yesterday there were no positions taken and yesterday even if you have taken a position in NIFTY in 10330-10350 range they will be sitting on a slight losses today. But those losses are just notional and might be wiped out by the end of the day.

Today is the day where fundamentals again dominate. What are they?

1. GST council meet in Guwahati and the meeting is focussing on reviewing the 100 items out of 200 items which are in 28% tax bracket. These include electrical items, ceiling fans and office items. The taxes might go down. FMCG stocks like Colgate, HUL, Cera, HSIL might benefit today
2. Himachal Pradesh goes to election today and by mid day the satta bazar will tell market who is winning the election. BJP is likely to sweep Himachal which is held by Congress. If that happens, Congress will lose one more states. According to opinion polls in 70 member Himachal Assembly BJP is likely to get 47-50 seats while Congress 17-20 seats.
3. The Q2 results of Petronet LNG and Pidilite comes as a positive surprise. Pidilite result especially surprised the market with a double digit volume growth. This is a GST stock, likely to get affected by GST. So that could go well with the market.
4. One big worry still is the Crude oil which is still hovering between 63 and 64. The dollar is still hanging around 65 and 10 year bond is likely to cross 6.95 today. All these might still be worries that the market has to deal with.

Futures and Options!

On the derivatives front, there is a massive selling happening on NIFTY futures in last 2 days and that might come to an end today. The long positions at the beginning of November series were at 72% and now it stands at 58%. That means there are 42% shorts still alive in the market and if there is a rally, there might be rapid bit of short covering taking the markets higher. On the options side, the 10400 and 10500 puts have seen unwinding of positions and 10200 and 10300 puts are seeing short build up. 10500 call added maximum shorts with over 2 lakh contracts getting generated on a single day. 10400 call also has added 1.42 lakh contracts mostly shorts. That brought down Nifty put call ratio to 1.33 from 1.43 seen at the beginning of yesterday. At the beginning of the series the NIFTY PCR was 1.60.

What is the strategy for NIFTY today?

Keep the long position taken yesterday, and if you have not take a position around 10350 levels with a near term target of 10400. Today is the day when NIFTY will try to hold and if it reaches 10350 sometime today, its a positive sign. The fact that it didn’t break 10300 yesterday is a good sign.

Q2 results scheduled today

1. Amara raja batteries
2. Aurobindo Pharma
3. Bajaj Electricals
4. Coffee day
5. Force Motors
6. Heritage foods
7. Jindal steel
8. NHPC
9. SAIL
10. Tata Motors
11. TV today
12. Yash cements