I was always talking about the dangers of trading in this dangerous market. Friday was a day when Nifty moved more than 700 points intraday and it was used by many to take long positions. The number of virus cases was around 200 at that time and it was looking as if things are going to improve. But suddenly, over the weekend things changes drastically and now it’s close to 400 Corona cases now.
What is worse is the US reported 9000 cases yesterday itself and New York City alone reported 5000 cases on a single day. Now New York has close to 16000 positive cases. All this had a big impact on the market and Dow Futures is down 800 points to the already 900 points fall on Friday. The result is almost all of Asia is in deep-red except Japan which is in the mild positive. Brent Crude is back to 25 dollars again.
Domestically, lockdown is the thing that is happening across India. More than 50% of India is locked down till 31st March and economic activity has come to a standstill. What will be the impact of all this in Q4 of this fiscal and Q1 of next fiscal needs to be seen. Relief to daily wage workers was announced by many Govts to the tune of 1000 to 1500 rupees and that is going to put additional pressure on fiscal balance. The biggest worry now is the extension of the lockdowns if cases don’t come down in this week.
Technically, Nifty is now going to break the 8000 mark and go below that. There are no technical markers here except 6400, the point from where the 2014 Modi rally started as well as it is the value achieved on 8th January 2008. If it doesn’t hold then we are on our way towards 5000, the 60% correction.
On the derivatives front, Friday was a day of hope and revival as there was a talk of India containing a virus, as well as economic stimulus coming during the weekend. The result was Nifty Futures premium expanded from 56 point discount to 22 point premium and took the overall long positions in Nifty futures from 35% to 41%. The Nifty options also saw some bullishness and the PCR went up marginally from 1.15 to 1.18.
For the monthly expiry 9000 call has the highest OI followed by 9500 call and 8500 call. There was open interest built all across from 8500 to 9500 in small measures. On the put side the spread was, even more, wider with 8500 put having the highest OI followed by 8000 put and 9000 put. There is a lot of open interest building up around 7500 put also making 7500-9500 as the expiry range.
What is the Nifty call for the day?
What happened on Friday, 13th March has also happened on Friday, 20th March and Nifty closed almost 500 points higher. Today, Nifty is going to do what it did two Fridays ago. SGX Nifty is showing an 11.5% down and that means we are going to hit the 10% circuit at the open itself and we will have a 45-minute trading halt. There is talk of closing down Indian stock markets and that is also going to add to selling pressure.
So, when market again opens after 45 minutes we can have the 15% circuit hit, leading to a trading suspension again and if 20% circuit is hit then trades will halt for the day. In such kind of scenario, taking any trades will lead to nothing but disaster. These are the days for learning and till we have some stability, let’s step aside and see what all markets can teach us.