Market Trade Setup 8th February 2019
Yesterday’s 25 basis point rate cut by RBI had triggered a short term rally that took Nifty to 11,120 mark but it couldn’t sustain. You wouldn’t have had any chance to take a position as Nifty was always close to 11,100 mark from the time it opened. So, no positions would’ve been taken yesterday. The USA markets were negative with Dow closing 220 points lower and NASDAQ nearly 100 points down. Today Asian markets are trading mixed with Japan and Hong Kong down 350 points each, while China and Singapore are trading in mild green. Brent crude has fallen below $62 and is trading at $61.4 now which is a positive sign for India.
Coming to domestics yesterday’s monetary policy has evoked mixed reactions where there was a 25 basis point rate cut bringing down the repo rate to 6.25% and MSF and Bank Rate to 6.5%. The inflation forecast was also lowered to under 3% for first half of 2019 and the tone of the policy was also changed to neutral from calibrated tightening. Though markets liked it initially, it couldn’t sustain as there were some growth concerns with services inflation still at 5.8%. So this 6.5% Bank Rate would effectively yield 70 basis points margin for banks which is much lower compared to 125 to 150 points margin kept during the Rajan’s time.
Coming to derivatives there was a mild buying seen in futures market where the overall long positions still stand at 52%. On the options side the Nifty put-call ratio has come down to 1.78 from 1.83 seen at the beginning of the day. On the put side 11,000 put added maximum open interest of 5.3 lakh positions followed by 11,200 put which added 4.2 lakh positions. From 10,700 the floor for the market has shifted to 11,000. 10,700 now has the second highest open interest. On the call side 11,400 call added 4.2 lakh positions and 11,500 call added 3.7 lakh positions. 11,000 call still has the open interest but there is a lot of open interest building at 11,400 and 11,200 which might emerge as the roof going forward.
What is the Nifty call for the Day?
Yesterday there was no chance to take any positions and today Nifty might open slightly gap down between 11,030 to 11,060. On the downside 10,980 is a big support and it might face resistance at 11,080 to 11,100. Today is the last day of the week and some profit booking is expected at any time. So, I would advise to stay out from Trading and look at the Nifty from a fresh point of view as we get into the second half of the series on Monday.
Market Trade Setup 10th January
A mixed trend in the markets as we approach the second half of the week. The Dow Jones continued its growth and has ended up by 100 points while S&P has gained more than Dow Jones in percentage terms. This is on the back of lower than expected inflation numbers which means the Fed rate hike which was looking at a minimum of 3 hikes in 2019 sometime back is now at just 1. The same sentiment is not being shown by Asian markets which are down. Hong Kong is down nearly 200 points and so is Japan which is down nearly 300 points. China is the only market which is in the positive territory. On the Crude oil front, the Brent Crude has crossed 60 dollars and has almost touched 61 dollars, which is now a sign of worry.
On the domestics, there are quite a few fundamentals that are affecting the Indian markets now. The big positive news is the Victory that BJP Govt secured by passing the Reservations bill for EBCs in Rajya Sabha where it doesn’t have numbers. Govt got 165 votes out of 173 present in the house which is the 2/3rds majority that was required for a constitutional amendment. IndusInd bank made an average beginning to Q3 results seasons where the slippages have gone up and even the NII has shown a decline. This is mainly because of the exposure to IL&FS so the market is ready to forgive that. Today TCS will come up with its Q3 results and that will happen only after the market hours at 5 PM. The negative is the Rupee which crossed 70 per dollar again.
On the derivatives front, there was net buy by FIIs in Nifty futures and thus the turnover went up 30% from yesterday to 24,123 Cr. The options turnover has also increased from 7 lakh crore to 10 lakh crore and we saw an 11.1 lakh crore turnover, which is the highest in this series so far. The Nifty put-call ratio went up marginally from 1.41 to 1.43 mark at the end of the day. On the open interest positions, however, there is not much change as 10500 put and 11000 call still continue to have the highest open interest. We saw only 10900 put adding 2.2 lakh contracts while 10900 call added 1.4 lakh contracts.
What is the Nifty call for the day?
Yesterday’s trade worked perfectly as you would have made at least 70-80 points profit from the positions you might have taken on Tuesday. Yesterday I asked you to stay away from the market and that worked perfectly, the market has almost remained flat. Today we will have a 10870-10890 kind of start with 10920 as the big resistance again. So, there is no trade if Nifty remains in 10880-10920 zone. If there is a drop coming in the afternoon or after 11 AM then wait for a base. If Nifty holds 10820 then take a long position between 10820-10850 zone with 40-60 points as the target. We will have to see if 10920 will be decisively broken or not.
Market Trade Setup 26th December
Very bad Christmas for the market and we are starting the boxing day with a lot of bad punches delivered by bears. On Monday night Dow Jones closed 653 points down and now all the 3 indices in the US, Dow, S&P and NASDAQ are in bear territory losing more than 20%. Not only that Japan, China, Germany also have entered into the bear territory by losing more than 20% in a calendar year. The CBOE volatility which was at 19% a month ago is at 36% now which is almost 100% up. All indicators are pointing at a fear that there is no growth and that is leading to a big collapse in the market. India on, the other hand fell almost 10% when all these advanced economies fell by more than 20%.
Coming to domestics, the biggest positive for us is the Brent Crude. Brent is trading at 50 dollars per barrel and nobody can believe that it was 86 dollars just 2 months ago. From there Crude almost fell 40% and how much it will help the markets when other things are so bearish needs to be seen. It will surely help our current account but for today and tomorrow the expiry factors will play out and on Monday we slipped through the 20 and 200dma and closed below that. That means we now have the 50dma at 10580 levels and 200dma at 10760 then I can see Nifty moving in between these two values for the expiry.
On the derivatives front, there was not much selling in the Nifty Futures even though Monday corrected 90 points on Nifty. The overall long positions on Nifty futures still remain at 47% and there was not much change in the Nifty put-call ratio also where it dropped to 1.26 from 1.28. This was mainly due to very low volumes we have seen on Monday as we were trading right in between two holidays and Christmas season. The options chart looks messy and 10000 put and 11000 call stil have the highest open interest. But it is now more or less meaningless and we will look at 10550 and 10750 as the markers for expiry. That makes 10500 put and 10800 call more important and you need to see the open interests there.
What is the Nifty call for the day?
Slow down fears vs Crude positive is what we have to look at and today we might open a bit gap down again at around 10650 levels and what happens from there needs to be seen. 50dma is at 10580 and that might offer support. On the upside 10720 which is 20dma is resistance now. For me, taking a naked call on sell side could be a strategy now. 10700 or 10650 or 10600 could be your choice, whichever is suitable at the moment when you are taking that call.
Market Setup 20th December
The bull run from 10330 level seen on December 11th to 10960 levels in 9 days which is a 600 point rally looks like has halted. The reason is attributed to the Fed meeting which ended last night and Fed has gone and raised the interest rates by 25 bps. With this, the interest rates in the US goes up to 2.50% which is the highest in 11 years. The Fed rate which was just 0.25% in November 2015 has now gone to 2.5% in just 3 years. Fed also cut the future cuts from 3 to 2 and also have gone onto used the word “uncertainty” which was not liked by the markets. The Result made the US fell by more than 300 points and all the emerging markets are down with the worry that money will move from them back to the US as the interest rates in riskfree assets are increasing. Entire Asia is in red and so will be India when it opens.
Coming to domestics, the Fed rate hike will have its impact on the US as FIIs will pull out money from India and take it back to the US as interest rates are going up there. That is an inevitable macro that we have to deal with. Brent Crude also has stabilized and is trading at 56.5 dollars which is the same as yesterday so we won’t have that advantage also. The technicals hold the key today and we have the 100dma at 10930 and we will open below that. The 20day and 200 day moving averages are at 10730 and 10760 respectively and they might offer some support for a steep fall. But the bond-buying program of RBI and other OMO’s that it announced might keep the Nifty from falling majorly. The Rupee has recovered further yesterday to reach 70.40 and today we have to see what happens when dollars evaporate from Indian markets.
On the derivatives front, the futures are absolutely neutral with bullish and bearish positions taken alike. The Nifty long positions stand at 48% and the options markets the Nifty put-call ratio is at 1.66 from 1.59 and that is a positive sign. 10000 put still remains at the highest open interest at 47 lakh positions and 11000 call has the highest open interest at 38 lakh positions. Yesterday 11000 put added 5.9 lakh positions while 10900 put added 5.5 lakh positions and 11100 put added 3.1 lakh positions. On the call side, 11100 call added 2.7 lakh positions while 11200 call added 1.5 lakh positions. All this action indicates that traders are building for an upside expiry of 11000 mark while keeping the downside wide open.
What is the Nifty call for the day?
Yesterday I cautioned you from taking any trades and that has worked well. If you have closed your positions at 10950 or at 10970 mark you would have made a lot of profit of 100-140 points. Today will be a bad start with opening expected to happen below 10900 mark. From there the first support will come at 10850 mark and that should be held. If not then 10800 will be tested. Today is the day of uncertainty and taking a short position after a big gap down is not all a good idea. Long positions if taken at the gap down might also go into losses if market corrects. In such uncertainty condition it is better to stay away for today and see which way Nifty will go and finally where it ends.
Market Setup 13th December
When you wait patiently the reward will be bound to come. The market has been continuously rewarding you more than expected for last 2 days and even the positions taken above 10700 level at the beginning of the series are also making profits now. So, now we are at a situation where none of our positions are making losses and we have come out of all the problems. Global markets are also cheering up after sulking on growth fears and Dow Jones was up another 150 points last night and other indices like S&P 500 and NASDAQ were all in the green. The Asian markets are also following the trend and Hong Kong is up another 300 points Japan is up 200 points and other Asian markets are up almost 1%. The best news continues for India with Brent Crude still at 60 dollars.
Coming to domestics, the dust has settled down on elections and suddenly 0-3 loss for BJP doesn’t appear that way as Rajasthan and MP both threw up a hung assembly. Congress got 99 seats vs 73 of BJP and 101 is the majority mark. Similarly MP was even closer with 114 for Congress vs 109 of BJP where 116 was the majority mark. Another interesting point is BJP lost 5 seats with a margin of 500 votes and in fact BJP got more popular vote than Congress in MP so all this means it was a tight election and the hope is that things will reverse by April when we go for Lok Sabha polls and these states might swing in favour of BJP again has brought back the cheer back. Added to this is the new RBI governor who is looking more inclined towards Govt brought an end to Govt vs RBI tussle.
Other big domestic news that could be very positive today is the CPI inflation data that came last evening. Inflation for the month of November came at just 2.3% vs 3.4% seen in October and 4.9% seen in the same month last year. Food inflation came at -2.6% vs +4.3% seen in the same month last year. Vegetables showed a -16% negative inflation, Sugar is -9% and pulses inflation also came at -9%. But the best news came from the services inflation or core inflation which came at 5.8% vs 6.2% seen in October. This means RBI can release liquidity now into the market without fearing the rise in inflation. The other good news is the IIP for October that came at 8.1% vs expected 5.5% and this is on the back of 7.9% growth in manufacturing. This means a good start to Q3 GDP.
What is the Nifty call for the day?
The options market has been showing a lot of positivity with Nifty put-call ratio surging to 1.47 from 1.33 and lots of puts are in demand. Asia is also green so we might also open green and might open close to 10780 levels. That might take us to 10850 levels intraday and on the downside 10720 is a big support. I would suggest taking a long position in the range of 10770-10800 levels with 40-60 points as the target. Understand that 10850 is the resistance and you can’t risk taking the positions beyond this level. The rally might come to an end today or Nifty might get stuck at this level unless the 10850 level is broken decisively.
Market Setup 12th December
A sense of uneasiness prevails after a storm yesterday. A storm that swept BJP away from 3 states and to add to that we had an appointment of a Governor who is not a favourite person mainly on his credentials fit for an RBI governor. Globally things have become quiet and US markets have ended in a flat territory with a cut of 50 points and Asian markets are in the green territory with both Hong Kong and Japan up nearly 400 points. The Brent crude also has stabilized even though there were worries of escalation due to supply cut. Brent settled at 60 odd mark and it is trading at 60.7 dollars and the only worry is Rupee touching 72 per dollar and today is the day we have to watch out for on rupee front.
On the domestics, its 0-3 for BJP though the losses in two states were very narrow. Madhya Pradesh is almost a tie and still, we do not know who will form the Govt there. Congress emerged as the single largest party and with the support of SP and GGP are in a better position to form the Govt then BJP. This loss will have some impact on the market in the long term. The other big news is the appointment of Shaktikanta Das a retired IAS officer as the Governor of RBI. At the face of it, it looks like a horrible appointment as the Govt is looking at its convenience than the dynamics of running RBI as the major factor in the appointment. We will have to wait and watch what he will do. On the data front, IIP and CPI data is coming out today after the markets close.
On the derivatives front, we had a day that started on the low and steadily went up. But it didn’t help the long positions in the Futures market as they continue to be at 46%. We have created a scenario in this week where 54% of positions are short and at the beginning of the series we were 59% long and now it is just 46%. On the options front, there was some demand that has come on the put side with Nifty put-call ratio went up to 1.33 from 1.30 level. 10000 put added maximum open interest of 7.6 lakh positions, 10200 put added 6.8 lakh positions10400 put added 4.4 lakh positions. 10000 put has 53.1 lakh open positions and has the highest open interest followed by 10200 at 49.2 lakh positions. So, the base of the market moved from 10500 to 10000-10200 range. The call side open interest still remains at 11000 call.
What is the Nifty call for the day?
A flat to slightly negative start is likely to happen today, as we get the news of Congress emerging as a single largest party in Madhya Pradesh. The open might be in 10510-10540 zone and from there we might see some volatility. 10480 will offer as a support and it is better to take a long position there with a 50 point target not exceeding 10550-10580 range. Yesterday I had spoken about a call buying and that has given you a handsome profit and today it is more to do with this minor trade on the long side. We will wait for things to settle down to look at further positions.
Market Trade Setup 10th December
Firstly today Nifty is going to open on a big gap down and the entire blame of it need not be taken by the exit polls. Friday was a horrible day for the US market where Dow Jones lost more than 550 points on the fears of global slow down is being a reality now. NASDAQ is even-more worst as it lost more than 3% and the Brent Crude has risen by over 5% and quickly it moved from 59 dollars to 62 plus dollars on the back of a cut in oil production and a drop in US weekly inventories. Asia is also in deep red today morning with all the markets down by more than 1%. Hong Kong and Japan are close to 500 points down.
Coming to domestics, we have many problems to deal with. First is the fiscal deficit which comes at 2.9% of GDP up to Q2 of this financial year. It is a very bad sign as spending is very high and the Govt is unable to control it. Brent Crude going up more than 3 dollars will put pressure on some of the oil marketing companies but the news we can’t ignore is the Exit poll results. There were 9 exit polls which were conducted for 3 states of Rajasthan, MP and Chhattisgarh. For Rajasthan, 8 out of 9 exit polls say Congress is going to win and 1 exit poll predicts a slender win for BJP. In MP 5 exit polls predict win for Congress and 4 exit polls predicted win for BJP. In Chattisgarh 4 exit polls predicted a win for Congress and 5 predicts a win for BJP. So, not a good news for the markets.
On the derivatives front, the last one hour of trade saw some bullish positions coming onto the market. Though the Nifty futures positions remained stagnant with longs and shorts almost in equal, the options market saw Nifty put-call ratio going up from 1.44 to 1.47 levels. 10500 put added 4.9 lakh positions, 10600 put added 4.6 lakh positions and 10000 put added 4 lakh positions and 10000 put now has the maximum open interest at 41.9 lakh positions. On the call side 11200 call added 5.1 lakh positions and 11100 call added 3 lakh positions and 11000 call though has shed open interest, it Chhattisgarh the highest in open interest. All this will change today if nifty opens big gap down.
What is the Nifty call for the day?
Global slowdown fears, increased Crude prices, worsening fiscal deficit and exit polls throwing up possible losses to BJP will mean we will have a huge gap down of more than 120 odd points and we might open around 10550 zone and that means we will be back to protecting 10500 again. On the downside 10480-10500 will offer support and a rally in the late day might take Nifty past 10600 mark. So, I suggest going long on this fall around 10520-10550 levels with 10620 as the target
Market Trade Setup 16th November
The Weekend is here and we still have 10 trading days still left for expiry and this is a long series. I gave a no trade call yesterday and Nifty remained in 10550-10610 zone and you might think retrospectively that you can make some profit by taking long positions intraday. These are tight trades that nobody can accurately predict and unless Nifty crosses 10650 and stays above it, its not a sign that markets will go up. Dow Jones recovered yesterday after 2 continuous days of fall and went up 200 points. Asia is more or less flat today and the main news that will dominate Europe is the Brexit and we have to see what happens on this front in the next few days. The minister in-charge of Brexit has resigned and within the conservative party there are multiple views. So, this fundamental will dominate for sometime.
On the domestic front, there are two not so good news to talk about. First is the trade deficit numbers for October has not been great as trade deficit widens to 17.1 billion dollars and this is not a good number compared to the deficit of 14.6 billion seen in October last year and 13.9 billion seen last month. The main reason is due to the high import bill of Crude as both the Brent Crude as well as rupee were negative for us. Oil imports stood at 14.21 billion compared to 10.1 billion in september. Imports stood at 44.11 billion vs 37.5 billion seen same month last year while exports grew to 27 billion from 22.9 billion seen in the same month last year.
The second news is the crucial RBI meeting on Monday which can decide many things and which has the potential for many things to go wrong. S. Gurumurthy who is the board member as well as a right wing activist has criticized the monetary policy for only focussing on inflation and not on liquidity. When the board meets on Monday, it could turn into a stormy session if the two groups within RBI start going against each other. So, market will look at the event with some nervousness as we dont know which way the events will go. The other fundamental is the Brent Crude which after falling to 65 dollars has slowly moved upto 67 dollars now.
On the derivatives front, the action was almost mixed in the options market and the Nifty put call ratio remains at 1.61 and that indicates how stagnant this market is. 10200 put continues to add some open interest and yesterday it added 1.6 lakh positions. Now the total open interest at 10200 put is 33.5 lakh vs 10000 put that has 48.9 lakh positions. On the call side 10800 call added 1.3 lakh positions and the total open interest there went up to 30.5 lakh and 11000 call still has the maximum open interest at 34.1 lakh contracts. Next week things might shift a bit and we need to see which way things go.
What is the Nifty call for the day?
A mildly positive Asia means we will open a bit gap up at 10650 levels which is also the resistance zone. Will Nifty take out this resistance and go to 10680 in the morning or will Nifty again correct a bit and touch 10600 levels!! A lot of questions to be answered and we also have a very important fundamental on Monday and that might not make the market very comfortable. So, today also I suggest not to take any risk and just see if the 10650-10680 zone is take out or not.
Market Trade Setup 14th November
Patience is a very important virtue in the market and the one who shows it is always in with rewards. When we entered into long positions on Monday at 10550 range with 10650 as the target and when Nifty fell 100 points on that day to close below 10500 we were sitting on huge losses. Yesterday wiped out all those losses and we were back to levels at 10580 again. Today there will be a gap up which will make Nifty open above 10600 levels and most probably we will meet our targets today. Apart from that the long straddle and the long call opened on Monday and yesterday were closed at 20 and 80 point profit giving another 100 points additional profits. Thats why patience in the markets always pays off.
The big news today is the Brent crude prices which now have seen their worst intraday fall since 2015 and now trading at 65.2 dollars. Brent was 86 dollars 5 weeks ago and today is cheaper by 21 dollars and the rupee also appreciated by more than 2 rupees which will make buying of crude very economical and good. Globally the fall in demand for crude due to slowing growth is seen as the main reason for the fall in crude prices. Across the World and for many economies that might not be a good news but for India it is a great news as we are mostly a crude dependant economy. Dow Jones fell by 100 points and all the Asian markets are trading in red.
On the derivatives front, there was a complete reversal of positions seen in the options market. The Nifty put call ratio which was at 1.51 at the beginning of the day went to 1.60 at the end of the day. The equation is simple. The PCR corrected from 1.60 to 1.51 on Monday when Nifty fell 100 points and it went back from 1.51 to 1.60 when Nifty went up 100 points yesterday. Despite the rally 10000 put actually lost open interest to the tune of 1.7 lakh positions which indicates that the base of the market is now ready to shift from 10000 to 10200 now. 10200 put added 4.1 lakh positions while 10300 put added 3.9 lakh positions. Now 10000 put has 46.4 lakh open positions and 10200 put has 34.1 lakh open positions. On the call side 11000 call still has 32.8 lakh open positions while 10800 call has 28.6 lakh open positions.
What is the Nifty call for the day?
After small profit on Monday, and a reasonable profit yesterday today, you will achieve the 10650 target that you set out with on Monday. Nifty will open slightly gap up due to the crude positive fundamental and we might see a 10600-10620 range opening and Nifty will go to the 10640-10660 resistance zone where it might encounter some problem. It is better to exit the long position in this 10640-10660 range and take your profits home. Today I would like to see what Nifty will do, whether it has the legs to touch 10700 levels. So, exit positions and wait and watch what Nifty does.