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Market Setup

Market Trade Setup 20th February #Nifty

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Market Setup 20th February

After a great start, when we all thought that we might escape a fall and close at 10700 level we saw the classic last hour fall of nearly 120 points that took Nifty to below 10600 and due to the averaging of values we closed just above 10600 mark at 10604. This marks the 8th consecutive fall and we have not witnessed it for a long time, not in last 4-5 years! Are we going to see another one today or is the pain over for now? World markets are mixed with Dow Jones closing totally flat with a gain of just 8 points while Asian markets are showing a lot of positivity with Hong Kong up close to 350 points and Japan up 150 points and other markets in 0.5 to 1.5% up. 

On the domestic front, Crude seems to be emerging as a worry as Brent is now at 66.5 dollars. This will put some pressure on the rupee and in the domestic market also the petrol prices are being revised on the upside. Last 4 days saw 60 paise rise in Petrol prices in Hyderabad and Petrol now stands at 75.34. On the macro front, GDP figures are going to be out in a week’s time and going by the Q3 results things look bleak and there is a fear that GDP which grew at 8.2% in Q1 is likely to drop below 7% in Q3 and that will act negatively on the market. On the political front, the developments on Pulwama and the political statements that the leaders make will have to be watched very carefully. 

On the derivatives front, yesterday was the story where neither in futures nor in options we went anywhere. The Morning saw a lot of buying in Futures but everything changed as Nifty started to fall. The long positions still remain at 45% and the Nifty put call ratio fell a bit to 1.11 vs 1.13 seen at the beginning of the day. This is a level where puts will get demand and that means markets should go up. Tomorrow is the weekly expiry of Options and on the put side 10600 has the maximum open interest and 10800 call has the maximum open interest which means that there is some scope for a rally. On the monthly contracts however 10400 put and 11000 call has the highest open interest. 10700 put and 10800 call are also gaining open interest and we need to watch them. 

What is the Nifty call for the day?

Yesterday, if you have thought that you missed a good chance to make money, you would have heaved a sigh of relief by evening that your money is safe in your pocket. This is the nature of the market now and taking risks comes at a huge cost. With a 10670 open and 10710 seeing selling you really wouldn’t have any chance to enter or exit. Today we will see a positive start again due to positivity in Asia at around 10630-10660 levels. What happens after that needs to be seen. If 10620-10650 range is protected in the first hour, then take a small risk and go for a long position with 10700-10720 as the target, whenever it comes. You might take it to tomorrow also if targets are not met today. Make sure that your entry point is between 10620-10660 mark so that the profit you get is meaningful and take this position only if 10620 is not broken. If it is broken, and Nifty goes below 10580 then stay away.

Market Setup

Market Trade Setup 11th February 2019 #NIFTY

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Market Trade Setup 11th February 2019 #NIFTY

We are back to the 2nd week of this shortest month after a big 125 point fall on Friday, erasing almost all the gains made during the week. This week starts off with a big warning from IMF Chief Christine Laggard saying “When there are too many clouds it takes one lighting for the storm to commence”. Added to that fact state, an economic monitoring agency has forecasted a contract of earnings of more than 1% in the 1st quarter of 2019. All that has started to impact the market and the US-China trade talks not going anywhere, there is dullness all over. Most of the Asian markets that were shut for one full week on the back of Lunar new year of China have opened today and are trading mixed. 

Coming to domestics, there was a big fall on Friday on the back of disappointing news from the Q3 front. Tata Motors was a big disappointment and things are looking very bad for many companies. Debt has become a bad word today and any company which has more debt than it can manage is seen collapsing. The classic example is the pack of ADAG stocks and stocks like Escorts, Tata Steel, M&M etc. Almost all the auto stocks have cut their guidance and this spells doom to the automobile sector. The Q3 results are in its last stage and following are results expected today: Amararaja batteries, Andhra bank, Century textiles, Eicher Motors, Hindustan copper, Max retail, Motherson Sumi, Spicejet and Virinchi.

On the derivatives front, there was a huge selling in the Nifty futures on Friday and that took the overall long positions to under 50% again and now they are at 49%. On the options front also, lots of short positions were unwound on put side taking the Nifty put-call ratio to 1.59 from 1.82. 11000 put shed 7.3 lakh positions while 10900 lost 7.2 lakh positions and 10500 put lost 6.4 lakh contracts. 10400 now has the highest open interest which is scary. 10700 is close behind it. On the call side, 11000 call added 6.7 lakh positions and it has the highest open interest. Another news is weekly options will kick off from today and Nifty and from today we will have the first weekly options opening for 14th February.

What is the Nifty call for the day?

This is a very uncertain market and Friday’s fall has established that strongly. I cautioned you from trading on Friday and am sure you would be feeling happy about your money being in your pocket. Looks like even today you have to keep your money in your pocket itself. Nifty is likely to open around 10920-10950 zone which is the previous resistance and now support. We need to see if that is taken as a support and move up. Even if it does 10980 is another resistance and we need to see where the Nifty closes. If Nifty closes above 11000 then we can have fresh trade opportunities from tomorrow. Else, it’s going to be another long wait for an opportunity to emerge.

Market Setup

Market Trade Setup 5th February 2019 #NIFTY

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Market Trade Setup 5th February 2019

A good Monday which saw the Nifty climbing the peak of 10900 and closing above that gives way to a challenging Tuesday. Today is all about whether the momentum gained late in the afternoon yesterday will sustain or not. The global cues are looking very positive with FAANG (Facebook, Amazon, Apple, Net Flix and Google) close 2% higher on New York Stock Exchange last night and Dow Jones closed 170 points higher. Today is the lunar new year for China and Korea and most of Asia except Japan and Singapore are shut. Those markets are absolutely flat. Brent crude is touching 63 dollars and that is a bit of a worry for our markets. 

On the domestic front, the Political factors are going to play their role as the 3 judge bench led by CJI is going to hear the CBI plea of contempt of court against the commissioner of Police, Kolkata. That will keep markets on tenterhooks and apart from that focus has now shifted back to Q3 results. Today’s Q3 results include Aditya Birla Capital, ACC Cements, Adlabs, Apollo Tyres, BHEL, Bombay Dyeing, Century ply, Dish TV, DLF, HPCL, Inox Leisure, Kamat Hotels, Punjab National bank, Sobha developers, Tata global, Tech Mahindra, Torrent power, United bank and Zen labs. So far the Q3 results have been average and we need to see how today, which has the core economic stocks come up with their numbers.

On the derivatives front, there was an equal amount of buying and selling that has happened in the Nifty futures market and the overall long positions in Nifty futures still remain at 45%. The futures market contributed 61,900 Cr turnover yesterday while options contributed 5.46 lakh crore turnover taking the total to 6.08 Lakh Crore. The Nifty put-call ratio also went up to 1.67 from 1.63. 10800 put added 5.3 lakh positions while 10900 put added 4 lakh positions. 10700 put still continues to have the highest open interest. On the call side, 11100 call added 3 lakh positions while 11000 call added 2.1 lakh positions and 11000 call still has the highest open interest. So, today is going to be interesting where we have to see if 11000 will be touched or not.

What is the Nifty call for the day?

Yesterday, Nifty behaved as per the script and if you have taken a long at 10840-10850 you are now sitting on a 60-70 point profit. Today will open between 10920-10940 range which is the resistance zone. The resistance goes all the way up to 10980 and there can be a correction at any place between 10940-10980. Unless it is crossed there is no point in taking fresh long positions at these levels. If you still have yesterday’s positions open close them between 10930-10960 levels and exit. No trading today and we will have to wait till the Nifty crosses 10980 and closes above that. Till then we have to wait and watch.

Market Setup

Market Trade Setup 29th January #NIFTY

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Market Setup 29th January

The first day of the expiry week went to the bears where Nifty saw a fall of close to 120 points and now we are back to 10650 levels and the crucial support level of 10700-10720 was decisively broken. Now the downside is open to 10500 now and that looks bit scary. Not only India even US markets fell yesterday where Dow lost more than 200 points and it was on the back of bad numbers from Caterpillar, which is one of the bell weather stocks in the US. The data that is coming is negative across the globe and that is worrying everyone. Today Asian markets are all in red with Hong Kong down 250 points and Japan by 200 points. The only positive is the Brent Crude which fell to 60.1 dollars from the 62 dollars we saw a few days ago. 

Coming to domestics, there are plenty of worries that Govt has to deal with. Rahul Gandhi has announced minimum job guarantee for poor if voted to power and BJP now is on course of making bigger announcements. This will surely put pressure on the fiscal situation in India. The Q3 results continue to be disappointing with Bank of India coming up with a very bad set of numbers. The last 4 quarters have seen a loss of close to 10,000 Cr and that’s a lot of money. Other companies that came up with their numbers is also not very encouraging. Today is a very important day for Q3 and many financial sector companies are coming up with their Q3: Axis Bank, Bajaj Fin services, Bank of Baroda, Godrej Consumer products, HCL Tech, HDFC, Oriental Bank and Tata coffee. 

On the derivatives front, yesterday was a fall day and in Nifty futures market there was some buying initially hoping that market will be taken support at 10700 mark but when it was broken then rollovers started. The first-day Nifty futures rollovers were at 22%. In the options, the index options saw 1.12 Crore contracts with a turnover of 7.09 lakh crore and the total turnover was at 8.98 lakh crore. 10500 put is back as the put with the highest open interest and that added 1.3 lakh positions and 10400 put also getting a lot of open interest with 3.6 lakh contracts added. 10600 put also added 3.6 lakh contracts. On the call side, 10700 call added 16 lakh contracts and 10800 call added 10 lakh contracts. As a result, Nifty put-call ratio plunged to 1.23 from 1.37 seen at the beginning of the day. Now Nifty can gravitate between 10500 to 11000 levels.

What is the Nifty call for the day?

If you are a bull, yesterday was a perfect time to take a break and we have taken a break as I avoided you from taking any positions. Today is a no different day with the opening expected between 10620-10650 levels and we have downside open till 10480 levels and on the upside 10720-10740 is a big resistance. So, today also I would wait and watch to see where Nifty will settle down. I would closely watch 10600 to see if it holds or not. If it holds and Nifty closes between 10600-10650 then we can look at some trade happening tomorrow. But for today, it’s going to be a wait and watch.

Market Setup

Market Trade Setup 21st December #Nifty

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Market Trade Setup 21st December 

Winter Solstice day and today is the shortest day in the Northern hemisphere. Shortest and forgettable day as the cues across the world looks horrible. The news of the impending recession has spread so fast across the world that everyone today is waiting for the great depression to arrive. Just 3 months ago we were seeing crude almost touching 90 dollars on the back of increased demand and sharp growth that is seen for the world? What changed in this 3 months? China has started to slow down significantly and the US has not been growing the way it should despite so many rate hikes by the Fed. All this means 2020 will be the year of recession. 

The news of recession has sent the whole world into a deep red. All the European markets have crossed with losses ranging from 1.5 to 3% and the US has corrected 2% or 440 points yesterday and now the US is at its 17 month low. This is all driven by the talk of the impending recession and in last two days, Dow Jones has lost more than 900 points. Bank of Japan has kept the rates unchanged and are seeing their 10-year yields close to 0% and the deposit rates are at -0.1%. Japan is reacting very badly to US fall and its down more than 350 points now. Shanghai is also down by more than 1.5% and all this will surely put pressure on India today. 

On the domestic front, we have the PSU banking recapitalization that will infuse huge liquidity into the system. Now liquidity is picking up in the market and on top of that Brent and Rupee are acting favourably. Brent Crude is trading exactly at 55 dollars vs 56 dollars yesterday and Rupee saw a huge recovery yesterday to go below 70 per dollar and ended the day at 69.7 per dollar. This followed up by falling yield rates is all looking good for India. But with so much of global growth scare how far can India sustain and gain? 10000 put still has highest open interest now followed by 10500 put. On the call side, 11000 call still has the highest open interest followed by 11500 call. This is an interesting thing to see if the base moves from 10000-11000 to 10500-11500 in the last week of expiry.

What is the Nifty call for the day?

Yesterday’s call of staying away worked perfectly as we saw Nifty moving in a narrow range of 40 points not allowing any meaningful trade. Nifty just managed to close at 10950 and today again a gap down to 10900-10920 level is expected and that means the support of 10880-10900 will be immediately tested. If that doesn’t hold then it’s the 200dma of 10760 and 20dma of 10740 which will be strong support. A short trade also might not be possible in this kind of situation. Going long at lower levels also might not be a great strategy as global cues are looking bad. So, being a weekend, it’s better to stay out of the market today and watch what happens.

Market Setup

Market Trade Setup 3rd December #Nifty

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Market Setup 3rd December

The last month of the year kick starts in a mixed way. There is a huge cheer in the global markets as the outcome of G20 summit is heartening for many. The US and China have met and have discussed trade and have announced a truce for 90 days on any further increase in trade tariffs. so, the whole world cheered up for the result and Dow Jones anticipating that has ended 200 points in the green. Today morning the Asian markets are in green with all of them up more than 1%. Infact China is up almost 3% and Hong Kong is up more than 700 points, China is up nearly 350 points. The only negative is increase in Brent crude prices which went up from 58.8 dollars to 62.1 dollars. This is also on the trade tensions reducing between US and China.

On the domestic front, the GDP number comes at 7.1% vs my forecast of 7.2-7.4% and the market expectations of 7.4%. This is a disappointment for sure as the services sector growth has got stuck. Now we are worried about the growth for Q3 where the situations looks almost same as Q2. The auto sales numbers that came on Saturday has confirmed that. There was a 20% fall in the heavy commercial vehicle sales and even the passenger and 2 wheeler segment has seen a fall. All of them had a negative growth. Added to this is the November month GST collections that comes at 97,000 Crore vs the October GST collections of 1 lakh crore. So, this dip in GST collections is also not a good sign. There are some important cues to watch this week. RBI monetary policy is out on 5th, OPEC will meet to discuss crude production on 6th and we have Exit poll results coming on 7th. So these are some domestic cues we can look at this week.

On the derivatives front, there has been some positive to mixed action in Futures and options market on Friday. The Nifty futures long positions which were at 51% in the morning went up to 52% by the end of the day. There were some longs taken after the market corrected. On the options market however the sentiment was bit bearish with Nifty put call ratio falling to 1.69 from 1.74. There was bearishness both on the long and as well as short side. 2 long puts were taken for every long call and 3 short calls were taken for every 2 short puts. 10000 put added a huge open interest of 6.5 lakh after 10700 put that added 6.7 lakh positions. 10000 put now has overtaken 10500 put for the maximum open interest. On the call side 11000 call has the maximum open interest and it added 1.7 lakh positions. 

What is the Nifty call for the day?

Asia is on fire today and that means we will open gap up above 10900 level, probably at 10910-10930 levels and there it will encounter a resistance which is at 10930-10960 zone. So, there is a chance that Nifty will correct from there and might find support at 10850-10880 zone. If 10850 doesn’t hold then it is a bad news and if 10880 level holds then I would suggest you to go long at 10880 level with 10930-10950 as the target for the next 2 days. We are at a congestion zone and getting upside is not that easy. So, our targets should be realistic giving some time for them to be met.

Market Setup

Market Trade Setup 21st November #NIFTY

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Market Trade Setup 21st November

What a fall we saw in the last hour yesterday, I was talking about a 1% fall in the Nifty and it has happened that way and Nifty fell exactly 1% and Nifty just managed to hold 10650 mark. Dow Jones had a big fall yesterday of 550 points and with that fall, all the gains that it made in 2018 is gone. Now Dow is at the same level that it was on at the beginning of the year. The Fed policy which was tightening the liquidity and increase in interest rates has started to show a negative impact. The reason for it is, that the interest rates and inflation are increasing but the growth forecast for the US in 2019 is put at just 2%. So, this figure has created a bit of panic and the markets went on a sell-off mode. Asia also started in the deep negative but now they seem to be recovering a bit.

On the domestic front, the polls for Chhattisgarh is completed and the 2nd phase recorded 72% of polling and that is little above the 71% polling that we saw in phase 1. The initial ground reports have suggested that BJP has managed to split the opposition vote and it is looking to win above 50 seats and pushing Congress below 40 seats. This might act a bit on the market today. Another major positive news is the drop in the crude oil prices. Brent Crude which was nearing 67 dollars yesterday has now dropped to 63.1 dollars. The result is Petrol prices in Hyderabad that reached 89.06 on 4th October have now dropped to 80.98 yesterday and could go below 80 rupees by today or tomorrow. This will be a huge positive for India as any drop in crude will boost almost all the sectors.

On the derivatives front, though there was a big fall in the last hour in the trade yesterday, the overall long positions in Nifty futures market remained steady at 41%. Also, another positive sign is the Nifty futures premium which was just 5 points at the beginning of the day went to 15 points at the end of the day. The options market saw some bearish sign with Nifty put-call ratio correcting from 1.72 to 1.64 again. This is actually a good sign as PCR has receded from the overheated zone. 10800 call now has the highest accumulated open interest of 36.1 lakh contracts vs 34.2 lakh contracts at 11000. so, 10800 is now going to be seen as the roof for the market. The floor,however,  continues to be at 10000 which presents a downside risk for the market.

What is the Nifty call for the day?

Yesterday I talked about repeating the trade of going long around 10700 levels if Nifty sustains 10680. As Nifty held 10700 many would have taken a long position and they are now in some losses. Wait for the recovery today and close the positions if Nifty comes in 10730 zones, though it is a minor 30-40 point profit, it is worth because there is a lot of uncertainty in the market. The opening will be flat around 10650-10670 zone and the crude fundamental might take the market up. 10750 is the 200 DMA and 10720 is the 50DMA and Nifty might gravitate between these two levels. So, I would suggest exit between these two levels. If you don’t have a position, then take a long at the opening and exit at 10720-10750 level.

Market Setup

Market Trade Setup 15th November #NIFTY

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Market Trade Setup 15th November

As predicted, yesterday was a day when Nifty has not gone up, touched 10650 and came back. If you have taken out your positions, you are sitting at a handsome profit and if you have not, then there is a gap up and another chance for you to exit the positions. Globally things are not really going great as Dow Jones lost another 200 points yesterday as there are voices in democrats who are saying that they would do everything to stall the banking reforms bill that Trump wants to introduce. Added to that is the stagnant demand for Crude oil which will affect the developed markets across the world.

On the domestic front, today is the last day for the Q2 results season and all the small companies are going to finish off declaring the results. Most of the news are already out and the inflation, GDP and all the other parameters are looking good. The biggest positive still continues to be the Brent crude which is now at 65.8 dollars and because of that even Rupee is appreciating which is a good news for India. Petrol price in Hyderabad is likely to come down lower than 82 rupees and this drop from the 89.6 rupees seen 6 weeks ago tells the story of how much improvement is happening on that front. So, Crude is the only fundamental that has the potential to push the market today.

On the derivatives front, 10000 put is again becoming stronger yesterday when 2 lakh positions were added and 10200 put saw 2.2 lakh positions taken out. So, lack of forward movement yesterday in Nifty made the traders to believe that Nifty can still go to 10000 this series and that still continues to have highest accumulated open interest. 10900 call is adding maximum open interest on call side but 11000 call still continues to have the highest open interest and that also added 2.1 lakh positions yesterday. This has kept the Nifty put call ratio flat at 1.60 and still the chances are volatility is higher with 10000 on the lower end and 11000 on the higher end. Nifty is at 10580.

What is the Nifty call for the day?

Asia is more or less flat with a positive bias, except Japan which is showing a negative trend. India might open bit gap up today above 10600 level and 10620-10650 is still a strong resistance zone, and the call is going to be the same. I would not want to suggest any new positions till Nifty decisively crosses the 10650-10680 mark and goes up. Till that moment I would give a wait and watch signal. Just relax and see what Nifty does. If there is a fall see if Nifty closes below 10550 mark or not.

Market Setup

Market Trade Setup 12th November #NIFTY

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Market Trade Setup 12th November

The Third week of the November starts and now we are entering into the second half of the month. The first half has been really good for the market that fell 1500 points in 2 months, we have seen 500 point recovery in 2 weeks. Now its at the cusp of 10600 and its a point from where Nifty has to decide whether it wants to go up or re-test 10000 level again. Globally things are not looking very great as dollar index surging to 97 and risk aversion coming into the market. Bonds are getting more attractive than equities and that has pulled Dow Jones down 200 points and Asian markets are more or less flat and Brent Crude is again moving up after touching 69. It is now exactly at 71 dollars.

Coming to domestics, we have a lot of fundamentals to take care of in the second half. The Q2 results season has come to an almost end, with the stock like Britannia reporting their results today. This Q2 has been a disappointment where the growth has been almost flat and thus the Nifty EPS is now likely to be around 10-11% vs an expected 15%. The second major fundamental is the elections starting from today. The state elections in 5 states will start today and end with the result declaration on 11th December which is exactly 1 month away from today. So, a lot of cues will be available for the market to react. Then we also have the September IIP numbers and October CPI and WPI inflation numbers coming in which will also affect market a bit. So, these are the fundamentals to trade for this week.

Coming to derivatives market, the action will now slowly start moving to options market. The Nifty put call ratio in the options market moved to 1.60 from 1.59 even as Nifty closed on a flat note, down 15 points. Firstly there was some unwinding of positions on put side 10000 put saw 1.4 lakh positions unwound and 10200 put saw 1 lakh positions unwound. 10100 put added 4.7 lakh positions which are mostly longs which were taken as hedge to the bullish positions taken. 10500 put added 1.2 lakh positions on the put side and 10000 put continues to have highest accumulated open interest followed by 10200 put. On the call side 11000 call added 3.1 lakh positions and 10800 call added 2.5 lakh positions. 11000 call is now having the highest accumulated open interest and 10800 call and 10700 call has similar open interest. So, 10800 could be a resistance now.

What is the Nifty call for the day?

We will have a flat start today for Nifty around 10560-10580 range and on the down side 10520-10550 is the big support and upside could go all the way to 10650-10680 levels. So, I would suggest you to take a long position at a dip towards 10550 levels with 10650 as the target to be achieved this week itself, if not today. There is a condition where options data is suggesting a support at 10000 level and 11000 as resistance for this series and Nifty is right in the middle at 10580 level. So, another strategy is a long straddle that can be taken at 10550 level with 290 rupee combined premium. You can exit the positions with 10700 on the upside and 10400 level on the downside whichever is achieved first. This position can also serve as a hedge to various other Futures and options positions we are likely to take during the rest of the series.