Tag Archives: Derivatives

Market Trade Setup 4th July #Nifty

Markets and News

As we approach mid week the blues are back on the market again. One step backward and two steps forward seem to be the order of the day. US has ended lower as the date of trade sanctions against China is approaching. 6th July is when US is imposing 34 billion dollar worth trade sanctions and China said it will also retaliate. US wont trade today as it is their Independence Day and that is the main reason why US dropped to pre-empt the trade tariff deadline. Asia is also a bit worried with the approaching deadline and most of the Asian markets are in red.

Domestic Cues

On the domestics, India is slightly different from Hong Kong, China or Japan when it comes to trade sanctions and so, their worries are not necessarily our worries. We have a different set of worries to take care of. The top one in that list is Crude price which has crossed 78 dollars and that might start to push the prices up. For last 9 days the prices of Petrol have remained stagnant at 80.03 at Hyderabad. Good news is that dollar index has come down a bit and that might keep the rupee in 68 zone which is definitely a good news.

Derivatives Action

On the derivatives front, there was a rapid increase in the long positions and the overall long positions now stand at 40% again and the Nifty premium also has gone up from 0.5 points at the beginning of the day to 12 points. The options data also showed bullishness with Nifty put call ratio touching 1.50 from 1.45 because of the positions that were built on put side as Nifty crossed 10700. 10600 and 10700 put both added 4 lakh positions each and 10600 is again getting established as the strong support.

What is Nifty strategy for the day?

Today might be a day when India could sing a different tune than rest of Asia. The opening again will be around 10680-10700 zone which is the 50dma and if Nifty holds this level, without slipping below 10650 then we can see a push towards 10750-10780 zones. That push can be taken advantage of by taking a long position on a dip towards 10700 with 10750-10780 as the target. Do not consider a long if Nifty struggles between 10650-10700

Market Setup 3rd May

Markets and News
When I was talking about 10650 as a support yesterday, many of you might have wondered how it can lose 90-100 points from 10750 levels. Markets are never linear and when you take long positions, it could be a swing trade or a weekly or a monthly trade that works with its ups and downs. Intraday trade is not possible every day and intraday calls are usually given after markets open as we need to understand the dynamics of them and it is possible only after market opens. Today is one such day where US markets lost some gains with Dow closing 150 points down. The reason is the US fed which left the rates unchanged and said that there is a upward risk to inflation and US non food, non-fuel inflation is likely to go above 2%.
Domestic Cues
On the domestics, dollar index which crossed 92.5 will be a worry as any further move could put pressure on rupee and it might touch 67 which is something we have not seen for some time. Crude oil is at again at 74 and the Q4 numbers started to disappoint. n fundamentals, GST council is thinking of adding 5% cess on sugar and coming to micros most of the companies that came up with their Q4 results yesterday were either average or bad and now, starting from HCL and ending with Siemens. Now the hope is on today’s Q4 numbers and how they would be.
Here is the list.
1. Adani ports
2. Adani power
3. Castrol India
4. Edelweiss
5. Emami Ltd
6. Hexaware
7. IRB Infra
8. JSW Energy
9. MRF
10. PNB housing
11. Sri Renuka sugars
12. Vedanta
Derivatives Action
On the derivatives front, yesterday saw a lot of action in the futures markets and the futures premium which was around 40 points in the morning halved by afternoon and ended at 26 points. That indicates a lot of selling that happened as Nifty started to break 10750 mark and the Nifty long positions has decreased from 58% from the beginning of the day to 56% at the end of the day.
The options market also remained more or less flat with respect to puts and calls and we saw equal numbers coming from both sides keeping PCR to 1.52. 11000 call still has the highest accumulated open interest of 60.3 lakh shares while 10500 put has 45.7 lakh accumulated open interest indicating that this series its the move between 10550 and 11050 mark. Yesterday for the first time 11000 call added the highest open interest of 3.5 lakh contracts and 10500 put added maximum open interest of 8.1 lakh contracts. So, this expiry is definitely between these two markers.
What is the Nifty and bank nifty call for the day?
A negative Asia triggered by negative US means we will open a bit gap down probably around 10700 levels and what happens from there needs to be seen. 10650 is the temporary support and a close above 10700 means the uptrend is intact and if by any chance Nifty breaks 10650 and goes below then it could trigger panic.
The more important story is bank nifty, which has its weekly expiry today and it is the time we usually look at the positions in the options. There is put shorting that can be done today and even call shorting is also possible. 25600 short straddle is something that you can take and wait for my tweet to take it.

Market Setup 2nd May

Markets and News
Welcome to May, the month which is the saying “Sell in May and go away”, and emerging is the slogan “Buy in May and stay”. Behavioral change with time and if we look at last 10 years May has been a good month majority of times, indicating that there is nothing in the market that shows it will fall in near future. Having said that, it is way too early to say all that but globally things are looking very good. Dow has stopped its fall, Crude is now at 73 dollars and the bonds are also stabilizing but the only worry for India is dollar index which touched the all time high of 2018 of 92.
Domestic Cues
On the domestic front, things are looking fantastic with auto sales numbers for April beating expectations. Maruti Suzuki is the topper and today we could see the stock surging further up. The GST tax collections has now crossed 1 lakh crore. I was expecting it to happen in the month of June but they have happened in the May itself. The Q4 results so far have been the best that we have seen in the last 6 quarters with whole range of companies coming with good results. FMCG major Dabur came up with a fantastic numbers with 19% growth in profits. Honey sales grew at 24% and toothpaste at 20%. Expect Dabur to go up.
Following are the Q4 results expected today.
1. Ajanta Pharma
2. Century Textiles
3. HCL Tech
4. Hero Motocorp
5. HT Media
6. Indigo Airlines
7. JM Financials
8. Marico Industries
9. Rane Engines
10. Siemens
11. Tata power
12. TBZ Jewellers
13. Visa steel
Derivatives Action
On the derivatives front, the linear uptrend of Nifty on Monday had a lot f impact on futures market with lot of long positions being taken there. That has now pushed the overall long positions to 58% and at the series it was 53%. On the options front, there has been a lot of consolidation both on puts and calls side and the nifty put call ratio remained flat at 1.53 vs 1.52 at the beginning of the day. The point to note is the buying that has happened at 10600 and 10700 puts as the hedge to the long positions that traders are taking in Futures. These, if the Nifty doesn’t correct will have to be covered, which will give more push to the market on the upside.
What is the Nifty and bank Nifty call for the day?
A flat to negative Asia should not stop India from opening flat around 10720 levels and what happens from there needs to be seen. 10650 is a very strong support and if you have long positions taken on Monday you can keep them to meet the target of 10800. If you don’t have a long position, then any dip towards 10700 should be taken as an opportunity to enter the market by taking a long position with the target of 10800 to be achieved anytime this week.
On the Bank Nifty front, I see it to be more bullish than Nifty and keep the long positions and wait for 25700 to be achieved. Again if you don’t have positions any dip should be bought with 25700 as the target.

Market Setup 30th April

Markets and News
Last day of April, first week of May starting on a very positive note. Q4 results are fantastic and even a half dead telecom company like Idea cellular has come up with a good Q4 result where EBITDA beating the estimate and the loss came at close to 700 Cr vs expected 1200 Cr. The global factors are neutral with Dow closing in a flat territory on Friday with GDP of US coming at 2.3% just as expected and Asia is in a green zone today and that might rub off on India. Crude also has settled down at 74.50 dollars and doesnt seem to be moving away.
Domestic Cues
On the domestics, the big news is Indigo CEO Aditya Ghosh suddenly resigning and that happened on Friday evening after markets closed. But somehow the news seem to have leaked and stock fell by 6% on Friday.
We need to see how much more Indigo will lose before settling down. The differences with the owners on how to go for the expansion seems to be the major reason for him to quit. He was the CEO for 10 years from 2008 to 2018 and has brought Indigo from nowhere to being the 4th largest low cost Airline in the World. Now for some good news. Good news is on 28th April 2018 at 5.30PM the last village in Meghalaya was electrified thus completing the electrification of all the villages. India is now a fully electrified country, something which took us 70 years to achieve and it is a great news indeed with 5.97 lakh villages in India completely electrified.
Meanwhile the Q4 results season is on and following are the companies coming up with their Q4 numbers today.
1. Ceat Tyres
2. Container Corp India
3. DHFL
4. HDFC
5. Kotak Mahindra Bank
Derivatives Action
On the derivatives front, Nifty 70 point upward move has created a lot of buying on the long side in Nifty Futures. The Futures long positions which were at 54% at the beginning of the May series now stand at 57%. In the options market there has been more demand on the puts side and the May series that started with 1.49 as the put call ratio has gone up to 1.52 by the end of Friday. 11000 call saw 7.3 lakh contacts build up while 10900 call saw 5.3 lakh, 10800 call 3.4 lakh contracts respectively. On the puts side 10600 put saw 7.2 lakh contracts, 10500 put 7 lakh contracts 10700 put 6.2 lakh contracts and 10400 put saw 4.1 lakh contracts respectively.
What is the Nifty and Bank Nifty call for the day?
Most of the Asian markets are shut today and SGX is suggesting a slight gap up so we might open above 10700 mark and immediately 10720 will act as a resistance. 10700 was a target for many and that being achieved, expect some profit taking at that level. You might see Nifty correcting intraday and might come down to 10650 which could be a very good level to enter into the market and take a long position with 10800 as the target for sometime to be achieved in this series.
Bank Nifty is a slightly different story than Nifty and with Axis bank recovering and Kotak coming up with its Q4 result today, after the initial cool off it is advised to go long in Bank Nifty with 25700 as the target.

Market Setup 27th April

Markets and News
First day of May series, and the famous behavioral finance quote “Sell in May and go away” comes to mind automatically. But if we see India the last 3 years May series all had a positive close, though it was a growth between 1.5 to 2.5% which is good enough if not great. So will this May be another month following up 2015, 2016 and 2017 or will it be a different year this time. There are lot of markers that points to a better May if we look at it technically. The Nifty roll overs from April to May has been at 72% which is higher than the average rollovers of 65% for the first 3 months of this year.
Not only that, the open interest for May is also starting at higher than average. May is starting with 2.2 Cr open interest which is higher than the average of 2 Cr open interest in the first 3 month. Also what you need to focus is on the long positions in the Futures market. It is starting at a healthy 54% compared to dismal 18% in April. Though it is lower than Jan, Feb and March, a 54% long means a healthy start to the series. April series ended with a positive of 504 points and now we have 2 red series and 2 green series this year and all this points to an exciting May.
What are the fundamentals that will affect the May series?
Q4 results is the answer. So far, April has seen 85% above average to good results and that presents a bright picture. But with just 10% of companies declaring results so far, this number should not be taken seriously. So, a good Q4 means market will have legs to go up. The other big fundamental is the Karnataka election results that will come at right in the middle of the month on 15th May. A victory to BJP or even a coalition govt of BJP with JDS will take the markets up. A congress victory means a huge red. Apart from that global actors like Crude prices and FOMC meeting on May 2nd will have limited impact and also the CPI and IIP data that will come in the 2nd week of May will also add to the momentum or take away the momentum.
Derivatives Action
On the derivatives front, the 10500 put and 11000 call is having the highest open interest as we start the series. That means 10500 will act as some support on the fall and it was 30.6 lakh open interest at the start. 11000 call is much more active with 43.8 lakh contracts and that means initially the tendency will be to move towards 11000 and 10800 will be the first major resistance as it resumes its journey towards that point. At 27.5 lakh contracts 10800 will be one call where profit booking might happen. Above all the nifty put call ratio ended at 1.70 which is kind of over heated zone for the month of April.
What is the Nifty and bank Nifty call for the day?
The first day of the series is either the day to relax and watch the market or look at going for a long straddle or a strangle. If you are thinking so, I would suggest a long strangle at 10500 and 11000 put and call respectively and you spend 130 rupees roughly. If you feel you need to look at it more take a break, watch how May goes and then enter it on Monday. Ditto is the call for bank nifty.

Market Setup 26th April

Markets and News
The 4th expiry day of the year 2018 is here. It is 2-2 so far for bulls and bears with Bulls winning January series with 650 plus points and now the April series with 450 points. The bears won the February and March series with 650 points and 300 points. April has seen a huge uptrend in stocks also with Reliance growing at 9%, Kotak bank 11%, Mindtree at 24%, TCS at 12% but there are losers also. SBI even after 4% gain in Nifty fell by 5%, PC Jewellers fell by 24%. IT stocks did well but Infosys and Wipro were flat. Infosys grew by 3% and Wipro by just 2%. Let’s wait and see if the 456 point uptrend in this series will be maintained and close above 500 point gain or not.
Global cues are looking flat and confused. Dow jones closed positive last night after 5 days of falling. The 10 yr bond in US has now gone to 3.02% and now that means that money is going to get costlier. Brent crude is still at 74.50 and its not good. Domestics wise its the Q4 results that is leading the market and Wipro disappointed yesterday with a bad Q4 numbers. Today there are crucial banks like Axis bank and Yes bank coming up with their Q4.
Following are the other companies that are releasing their Q4 numbers.
1. Axis bank
2. Rallis India
3. Reliance Capital
4. SBI Life
5. Tata Elxsi
6. Tata Metallics
7. Yes bank
Derivatives Action
On the derivatives front, its all about expiry today and the cues are primarily on the options market than on the futures market. This time the premiums are low compared to other series primarily because lot of short positions have already been taken as money making has become easy now. Its a lesson that whenever things get easy and predictable, rewards decrease. The calls have slowly come into demand now and yesterday the put call ratio came down from 1.70 to 1.61. 10700 call and 10500 put has maximum open interest but in between this all the strikes have become very active.
Following are the possibilities for today’s expiry.
1. Nifty opening flat, staying above 10580 and going above 10600 and closing at 10610-10620 range with 3PM moving coming on upside. This is the most probable scenario.
2. Nifty staying below 10580 but a sharp 3PM move might take it over 10600 and expiry happening at 10600 levels. This is the next possible scenario.
3. Third is Nifty staying above 10580 and a sharp cline at 3PM seeing the expiry happening at 10550-10570 level. 3rd most probable scenario.
4. Nifty staying between 10550-10580 with a downward 3PM move with expiry at 10520-10530 range. Least probable scenario.
What is the Nifty call for the day?
Today am leaving bank nifty as it is not very relevant and everyone will be looking at Nifty. Expect a flat opening for Nifty around 10570-10580 levels and 10630 will be the major resistance and 10550 is a support. with premiums so low, after the market opens, upon my call try taking a short strangle at 10600 call and 10500 put. At what point you need to go for it, will be tweeted during the day. Apart from that there is nothing you can do. Exit the long position taken yesterday for May if the target of 10600 is met.

Market Setup 25th April

Markets and News
Penultimate day of expiry and things are looking very interesting. US markets have fallen yesterday on the back of US bond yields crossing 3% mark. This is a very interesting phenomenon to watch as we have not seen that levels since 2011. A 3% risk free rate means money is getting costlier everyday and we need to see how much US grows as the lending is getting expensive. Crude thankfully is coming down now, and has settled below 74 dollars and that might be a good news. Asia is red on the back of Dow losing over 400 points and Honk Kong to which we are correlated is 300 points as of now.
On the domestic front, the big news is continuing to be the Q4 results and they are looking fine as of now. Airtel marginally escaped coming up with its first ever losses on consolidated basis in last 15 years primarily due to Africa. Africa gave 650 Cr profit to Airtel compared to 630 Cr loss seen in India. That kept the Airtel floating with around 20 Cr profit, its lowest level in 14 years. Jio has completely paralysed Airtel, now we need to see how the company will tackle the onslaught of Jio.
Following are the Q4 results expected today.
1. Indiabulls Realestate
2. KSB pumps
3. M&M Finance
4. Syngene
5. Ultratech Cements
6. Wipro
Derivatives Action
On the derivatives front, there has been a massive spike in Nifty long positions in the afternoon as Nifty was heading towards 10600 and after that there were some shorts. The longs now stand at 43% which is very interesting. On the options front, the put call ratio has touched the dangerous mark of 1.70 and that means put shorting has become the norm for profit making and with still a day left for expiry, you could see that getting challenged. Market never makes life easy for you and today there could be some red. 10700 call still has 44.9 lakh contracts and 10500 put has 49.5 lakh contracts and everywhere there is winding up of positions. This is really uncertain.
So what is the Nifty and bank Nifty call for the day?
Expiry is around and global factors are indicating a gap down open for Nifty around 10560-10570 levels. Maybe that is a point to buy May series futures with 10620 as the target on the spot market. The second strategy that you can take is to buy a 10650 call at the open because of the gap down and you will see surely your price doubling. Keep a tight stop of 5 rupees and exit if Nifty doesn’t hold 10550 intraday.
Bank Nifty is much more complicated than Nifty and with no real cues to talk about I suggest you to wait for my updates during the day before taking a position.

Market Setup 24th April

Markets and News
I am a believer in fundamentals and technicals when it comes predicting the markets. Last few days bond yields and Crude prices are going up and by that logic Nifty should have come down. But it is not happening. The reason is primarily the technicals and the importance that the market is attaching to the expiry factors. The overall long positions started at 18% this series and went upto 40% now. The rollovers to May is at a record low of 18%.
All this indicates that everyone is waiting for the expiry to happen. It is because when there are so many shorts in the market then long positions will be taken to offset the shorts and make profit. So, until there is heavy shorting Nifty will not fall and with so many shorts already in the system nobody is willing to risk taking more shorts. Its a strange situations seen very rarely in the market.
Globally, US has closed almost flat yesterday with Dow in mild red and S&P in mild green. Today Asia is also as confused and the bad news is Brent Crude has finally touched 75 dollars. The alarm bells will now start ringing as OMCs have to cut excise duty to keep the prices constant and with Karnataka elections just 3 weeks away Govt will not dare to do anything now. The bond yields in US is also touching 3% almost and in India also the bond yields are touching 7.8% in India and very soon we might see a 8% bond yields which is not a very good sign.
On the domestics things look bright when it comes to GST tax collections. The March GST collections stand at 96,000 Cr and now the dream of touching 1 lakh crore looks real and it could happen as early as April itself. The corporate results are also good and all the companies that declared Q4 yesterday have done a decent job.
Here are the list of companies coming up with Q4 results today.
1. Bharti Airtel
2. Coromandel Cements
3. ICICI Prulife
4. IDFC bank
5. Network 18
6. Oberoi realty
7. Raymonds
8. Tinplate India
Derivatives Action
On the derivatives front, there was a lot of confusion as the Nifty touched the 10630 mark and shorts started appearing suddenly and that took away all the 21 point premium that Nifty futures was having. The overall long positions in Nifty futures now stands at 40%. In the options market also 10500 put and 10700 call remains the most active and attractive positions to take. 10500 put now has 57.7 lakh accumulated open interest and 10700 call has 48.8 lakh accumulated open interest. That means some call positions at 10700 call were unwound yesterday as Nifty crossed 10600 but 10500 put is adding a lot of open interest. Now 10800 call is getting some attention and 3.2 lakh contracts were added there.
What is the Nifty and bank Nifty call for the day?
Today also Nifty will open flat in the range of 10570-10580 and what happens from there needs to be seen. 10500 is a very strong support and breaking that seems to be tough. The premiums have also come down a lot and it really doesnt make any sense to enter into the market till you get a direction. Understand that everyday is not a trading day and today you need to watch if 10630 will be tested and whether it holds and Nifty closes above 10600. If that happens then we are going for a 10700 expiry and accordingly wait for my tweet to take a position. If nifty corrects towards 10500 by breaking 10550 then we need to be bit more cautious.
Bank Nifty is directionless as it is stuck in the range of 24900 and 25100. Avoid it till it comes out of that range. The 50dma and 200dma is adding to the woes of bank nifty by keeping it within the two moving averages. So wait for the bank nifty to break this and start moving before taking a position.

Market Setup 20th April

Markets and News
Finally weekend is here and looks like World markets and commodities are taking a slight breather. US markets have ended in a flat to negative territory with Down Jones closing over 80 points in red. Technology stocks are primarily responsible for the fall. Asian markets are also mixed with Shanghai and Korea are in slight red whereas Hong Kong and Japan in mild green. The commodities prices seems to have stabilized a bit and as the weekend is approaching everyone wants to take the profits off the table after a huge rally seen in last few days. Brent Crude also cooled off a bit from the highs of 74.75 yesterday to settle at 73.80 now.
Domestic Cues
On domestics there are quite a few things happening around. RBI has released the minutes of the meeting of the credit policy announced earlier this month and the tone of the policy is more hawkish than expected. There is a feeling that only Micheal Patra is talking about rate hike but now it gives a feeling that Chetan Ghate and Viral acharya are also very hawkish though they didnt vote that way. That makes the probability of a rate hike somewhere this year looks like a real possibility. Second, there is major disagreement between RBI and Govt on the rules of framed by RBI for lending by the banks. Govt is saying that these rules are just impractical.
On the other side there is some good news as well. After a minor disappointment by Infosys, Mindtree and TCS have come up with fantastic Q4 numbers. The best news is coming from guidance which is looking at a 28% growth rates and a major turnaround expectations from BFSI sector and digital sector expected to grow. They are expecting an EPS of 150 and they have also announced a 1:1 bonus shares. So expect TCS to get more demand as price becomes more affordable. So for us IT is the only good news while everything else looks worrying.
Derivatives Action
On the derivatives front, things are picking up on the futures front as the overall long positions going up to 38% from 36% seen at the beginning of the day. Traders are betting on Nifty holding 10460-10500 zone and going up to 10600. So any dip towards that is seen as an opportunity to enter into a long position and make money. The options data is also turning bit bullish with more puts coming into picture than calls. The Nifty put call ratio goes to 1.63 from 1.60 seen at the beginning of the day yesterday. 10500 put saw a maximum open interest build up of 5.9 lakh contracts and 10600 put is also coming into play with 3.8 lakh contracts built there. 10600 call has 2 lakh contracts. So at 47 rupees premium 10650 is the roof for the market at 40 rupees premium for 10500 put 10460 can be the floor.
What is the Nifty and bank Nifty call for the day?
A flat Asia means India is likely to open flat with a slight negative bias in the range of 10540-10550. If you have take a short position yesterday above 10550 you can expect your positions to hit the target of 10480-10500 levels. There will be buying happening as the Nifty moves towards 10500 or breaks it. So, exit the positions as soon as 10500 is reached. For those who dont have positions wait for my tweet before going further.
Bank Nifty is a different story than Nifty and might react more to MPC commentary and Govt’s disagreements on lending. If Bank Nifty opens around 25050 levels then you need to watch out for the 50dma which is at 24950 levels and see whether it holds or not. Wait for my tweet before taking any position there.