Tag Archives: Market Setup

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 23rd January

Market and News!

World Economic Forum kicks off at Davos. The World is green all over. Lots of positives to be seen. IMF predicts a 7.4% growth for 2018 year and World will be listening to an Indian PM first time in this century and looks like this century belongs to India. And World wide US seem to have put behind the fears of shut down and US markets rallied and made more highs. Asia is looking all green and India also will follow the same.
Domestically things are looking more better. Whole of India will watch Modi delivering his address at Davos today at 7.30PM. The Q3 results are also coming in line as per expectations. Axis bank is the biggest reason for celebration with a Steller numbers with PAT jumping up and NPAs showing a decline and has seen a healthy loan growth. All this augers well for the economy and as more and more banks declare their results we might see the economic recovery story becoming more brighter.

Following are the Q3 results expected today.

1. Alembic
2. Crompton
3. Edelweiss
4. Force Motors
5. Indiabulls real estate
6. Indiabulls housing finance
8. PNB Housing
9. RBL bank
10. Shemaroo Entertainment
11. United Spirits

Derivatives Action

On the derivatives front, the focus is firmly shifted to options now and lot of people are going long in calls. Yesterday 11000 calls saw a record 4.2 lakh volume where the premium surged from 6 rupees at the beginning of the trade to 33 rupees by the time we closed. Volumes started building up at 11050 and 11100 calls also. Yesterday 11000 call also saw a unwinding of 2.7 lakh contracts and now it looks like 11080 is the resistance for this series. This can be predicted from open interest build up of 6.7 lakh. On the put side also lot of action is seen at 10900 put. It saw a build up of 17.4 lakh contracts and its at 30 rupees. That means 10870 is a firm support for this market. Even 11000 puts are also shorted at 70 rupees indicating 10930 being a firm support at the first drop. All this saw Nifty put call ratio at 1.76 vs 1.72 at the beginning of the day.

What is the NIFTY call for today?

Expect an open around 11000 and markets have decided to Welcome Modi to Davos with a 11000 so 11000 is inevitable. So, the target you kept for Feb expiry you will be achieving now itself. Nifty might hit 11020 and that could be a first hurdle it might face. If it overcomes 11050 possible. Else it will trade between 10980 and 11020 levels and might close around that 11000 mark.
The best strategy is to exit the Futures position after NIFTY crosses 11010 mark and it will give you a handsome profit of 250 points. Today you can take a short position at 10950 put which is at 45 rupees and hope to eat that premium. Not a great day to so long on options

Market Setup 14th December

Global News and Markets!

Big over night news of Fed hiking the interest rates wakes us up this morning. Fed has hiked the interest rates by 25 bases points to 1.50% and that is expected. It also says that it expects the US GDP to go to 2.5% from 2.1% and inflation to settle down at 1.7%. The jobless forecast continues to be at 4.10%. The result is US markets celebrated it mildly with S&P losing some sheen at the end of the day. The Asian markets are mixed and finding their foot and India is likely to be open gap up of 30-40 points .
Domestically today is the big day with Gujarat election 2nd phase election happening in the crucial 93 seats in central and North Gujarat. Ahmedabad is going to be vote today and so does the congress strong hold of North Gujarat. In 2012 congress won 41 out of 93 seats compared to 52 won by BJP. So this was a neck and neck race last time and this time we need to see which way the wind blows.

Meanwhile EC has issued show cause notice to Rahul Gandhi for giving an interview to a local Gujarati channel after the campaigning time is over and we need to see whether that creates sympathy for him or works out in the advantage for BJP. By 1PM markets will get the wind direction of the election and how they react after that needs to be carefully observed. The exit poll will be out by 7PM.

Futures and Options!

On the derivatives front, one interesting thing to be observed is the unwinding of positions happening at 10300 level yesterday as market was going through a high degree of volatility. 2.1 lakh contracts go created but we have seen almost 2 lakh unwinding of positions seen there. These are the short positions created and with NIFTY nearing 10300 many of these positions were unwinded. 10400 call still is seeing some shorting with almost 2.2 lakh contracts getting generated.

The maximum action is seen at 10500 call with maximum of 5.2 lakh contracts getting created and at a premium of 35 rupees we are looking at 10550 as a resistance for an upside seen. On the put side 10200, 10100 and 10000 puts continue to be active indicating that 10080 is a strong support for any fall seen. The 10200 put has a premium of 120 rupees which traders are actively shorting. The volatility went up by 4% and the put call ratio is almost stabilizing at 1.30 mark.

What is the NIFTY strategy for today?

You will see a gap up open today morning. But It is better to stand by and watch the market till the afternoon and see how it goes. Very important to watch the behavior of the markets after 1PM. Whatever maybe the opening today markets will not move much and would wait for the 1PM trigger.

If NIFTY remains above yesterday’s close after 1PM it is better to take a long position. If its not clear then stay away, wait for the exit poll. Today’s position is for the Gujarat election and should be taken with care.

Market setup 12th December

Markets and News!

Tuesday starts with some worries. After 3 days of 250 point gain for NIFTY today looks like a bit of a tough day to cope up with. There are few important fundamentals that NIFTY has to deal with. Here they are:

1. The two days FOMC meeting concludes today and an announcement would be made on the rates. This is the last FOMC meeting for Janet Yellan and everyone is bothered about the tone of the FOMC. The Fed might increase the rates on the back of growing GDP, good jobs data, increasing bond yields etc. The raise in interest rates will not go well with emerging markets in Asia including India and because of this the whole of Asia is trading weak now.

2. There was a crack in the oil pipe in the sea off the coast of Atlantic near UK and that means temporary halt in the supply of the crude oil and that has sent the crude prices soaring again. They have now crossed 65 dollars again and that could also mean fears of inflation and that might worry the market a bit.

3. On the domestic front the fundamental that is troubling us is the rising bond yields. The impending fed hike has pushed the bond yields across the world up and Indian yields have gone up from 7.08% seen at the beginning of the day to 7.17% at the end of the day. Its the highest we have seen in last 16 months and bond yields could cross 7.2% today and might even touch 7.25%. That would mean bad news for banking sector and Bank Nifty might react bit negatively.

4. The CPI and IIP data is scheduled for today and inflation is likely to come at around 4.5% and that would trigger immediate panic. The IIP is expected to be 3% which is lower than the September IIP. The current account deficit is also likely to come day. All this data will be released after the market close but none of it looking positive.

Futures and Options

On the derivatives front 10700 call is being bought by traders and yesterday its premium went up by 40% to 14 rupees from 10 rupees. That is a definite bullish sign. Another bullish sign is the shorting of 10300 which has a premium of 100 rupees indicating that 10200 is the floor for the market. That kept the put call ratio stale at 1.30 from 1.26 seen at the beginning of the day. All these are before these fundamentals so need not be taken seriously.

So, what is the NIFTY call for today?

After 3 days of non stop rally things are looking bit tough now. Exit the long position as soon as the market opens. NIFTY is likely to open slightly down around 10300 and that is the good position to exit the long position for a comfortable 220 point profit. After that you can take a short position around 10300 with a target of 10220-10250 achieved probably tomorrow.

The other trade could be, keep the long position in NIFTY and take a short position just for today and tomorrow in Bank NIFTY as soon as it opens at around 25370-25400 zone with a downside target of 25150-25200 as the target. Depending on what suits you, you can take that position

Market setup 11th December 

Markets and News!

Start of a fresh week where everything looks green. US markets have ended again at new highs and Asia is also green today. But India has fundamentals to deal with and that is the Gujarat. 1st phase of election in 89 out of 182 seats are done on Saturday and if today’s open is of any indication then BJP seems to have more or less held on to their position. In 2012 out of 89 seats that went to poll BJP won 63 out of them and Congress won 22.

These 89 seats are spread in South Gujarat and central Gujarat. South Gujarat is dominated by patel community and Hardik Patel’s influence is maximum here. Central Gujarat where Surat, Ahmedabad and Vadodara are located have seen lot of protests from trader community against GST. So reports are indicating that BJP will hold on to their 63 seats then we are expecting BJP to hold on to 115 seats that it held last time.

The other fundamental news US fed meeting is happening this week and the much awaited rate hike decision will be announced. We need to see how much NIFTY gets affected by it because Asian markets will react negative to any big hike by US fed. Added to this is the fundamentals in India that include IIP and CPI data which will also come this week. Inflation is expected to be higher and could cross 4% also.
So, with Gujarat we have host of other fundamentals that will affect the markets this week.

Futures and Options!

On the derivatives front, Friday saw a huge bull run in the derivatives market. The Futures have seen a lot of buying and now the overall NIFTY futures is net long with 52% long positions and 48% short positions. In the options market there has been a huge unwinding of put positions.

The long put buying that was seen for 10000 put seems to be going for a profit booking and so is the 10200 short call. When Nifty broke 10100 mark there were some traders who shorted 10200 call and lot of unwinding is happening there as they are confident that expiry will happen above 10300 mark. Unwinding of 10400 short calls is also seen as the Gujarat results might take the markets to 10500 levels. Infact the maximum open interest was at 10200 put where shorting it will give you 85 rupees premium. That means they are not expecting it to fall below 10120. On the other side call shorting is being seen at 10450 call which is at 50 rupees premium indicating that 10500 is the upside. The Nifty put call ratio is now at 1.26 level and we can expect more surge in it.

What is the NIFTY call for the day?

Keep the long position and try to take more long position by buying calls. There is nothing much to be done for today as the positions you took last week around 10150 is at a handsome profit. Today the market will open gap up on the back of perceived good showing by BJP in 1st phase. The open might be at around 10300 levels and 10320 is a resistance. So it will be a range bound day with 10270 and 10320 will be the range. Keep your longs. Dont sell them!

Market setup 30th November

Big Day!

The last day of November, and the most important day of the month. Two major events are scheduled, one is GDP figures for Q2 of FY17-18 and second is the expiry of the November series, the longest series we have seen this year. Best news is from US which came up with its revised GDP data for Q3. From provisional 3.0% it was revised to 3.3% that is a great news. But Asia is not that positive riding on US tax fears and ICBM launched by North Korea. Most of the Asian markets are trading in red as I am writing this.
Coming to Indian GDP data, it’s impossible to predict as data doesn’t exist with anyone and only Govt can get the data. So anyone making a prediction is an intelligent guess work and that needs to be taken with caution.

So, following is the predictions for this quarter.

1. GDP is expected to come at 6.4% vs 5.7% seen in the previous quarter
2. GVA is expected to come at 6.3% vs 5.6% seen in the previous quarter
3. Agriculture is likely to slow down to 1.8 to 2.2%. No logical explanation offered to this.
4. Manufacturing sector is likely to pick up to 5.5% vs 1.5% odd seen previously. This is primarily on the back of good IIP numbers in August and September.
5. Trade hotels and transport is likely to see a 9% to 10.5% growth and that’s purely based on tax deposit numbers that dont have a base.
6. Finance and real estate could come at 8.5% and that is also speculative.
7. Finally the Govt spending or pulic administration is likely to come around 5.6% as Govt is tightening fiscal spending and that is compared to 9.6% seen in the previous quarter.
We all have to wait till 5.30PM to see what exactly are the real numbers.

Futures & Options!

On the derivative front, this series is one of the flattest series of the year and we have seen just 20 points up move from last expiry close. But if you see volatility we have seen nearly 400 point volatility this series. It went all the way up to 10480 on the upside and 10076 on the downside. So, if you had taken a long straddle at the beginning of the series at 10300 level you would have made a lot of money on both sides. Refer to 27th October post of mine where I had spoken about it. But today F&O cues are looking mixed. The Nifty futures is trading at a discount and you have more short calls and long puts than short puts and long calls. That had pushed the NIFTY put call ratio to 1.27 at the end of the day from 1.33 seen at the beginning of the day.

What is the NIFTY strategy for the day?

NIFTY is likely to open gap down around 10320 which is the 20 day moving average and your short position taken yesterday, if you are still holding will now give you 70 point profit. Today NIFTY is likely to move between 10265 to 10380 range and you need to take positions accordingly. Do not buy in the options market and only take positions in the futures market. You could go for a long position with a 30-40 point target when NIFTY goes below 10320 or around 10320. I am suggesting a short straddle at 10350 that might work for you and another strangle which I will tweet sometime in the morning.

Market set up 1st November

November starts off with a bang!

The best news is India jumping 30 places above to 100th position in the ease of doing business. Now we are at a touching distance from China which is at 78th position. We never moved so much higher ever in our history from 1950s!! This reminds me of Indian Football team wanting to make it to FIFA World Cup. If this can happen today, very soon good days will come to Indian football team also. Coming back, everyone is surprised with this move and its on taxes that we moved up. Ease of taxes moved from 172nd position to 119th position, which is a superlative jump.

Q2 Results Outcomes!

The other big news is the Q2 results of Bharti Airtel and Indigo which gives you a confirmation that all is well with Indian micros still. The 3rd good news is core sector numbers that come at 5.2% which is the best in many months and shows that IIP is on the verge of recovery. The only not so good news is the auto sales numbers for October which are likely to be flat to down as festival season came bit early this year and most of the sales happened in September. The other bad news is crude prices cross 61 dollars and now trading at 61.20 dollars per barrel. That is a bad news for India with respect to inflation and should start showing up soon.

On the derivatives front!

Yesterday saw some unwinding in the NIFTY futures and the long positions in NIFTY futures came down from 70% to 68%. But still the premium is at a healthy 35 rupees. In the options market the bullishness turned into mild bullishness with put shorting becoming the norm of the day. 8 puts were shorted for every 1 short call and that is still a good news. On the other side, 10,100 and 10,200 puts are being shorted indicating that the range has now gone to 10050 level. On the other hand 2.3 lakh calls were unwound at 10700 call that indicates that the probability of going to 10700 seems to have gone down now. Call shorting picked up at 10500 which has a premium of 70 rupees indicating 10570 as the roof for this series.

So what is the NIFTY strategy for today?

Expect a gap up on the back of ease of doing business news and that the open might be around 10370 level and if the resistance at 10380 is taken out then expect a 10400 intraday. If the rise is sharp wait for 10420 before exiting. If that happens the long positions taken at 10320 yesterday can be exited for a profit of 80-110 points. Do not go short now as still the market is not showing any clear signs of falling. Bharti Airtel and Indigo will shine today.

Q2 results for today

1. Apollo tyres
2. Godrej Consumer
3. Hexaware
4. Kirloskar India
5. Max India
6. Radio City
7. Tech Mahindra
8. TVS Motors

Market setup 25th October

Indian Stock Markets!

Today will be remembered as a day when the NIFTY could possibly open at 10,300 and that’s a huge huge gap up of 95-100 points. It’s been a while since we have seen this. Imagine what is going to happen to Bank NIFTY? I am expecting a 225-250 point gap up for Bank Nifty that will take Bank NIFTY to close to 24,500!!
What a day!! It could possibly be the turnaround that we are all looking for in the economy! It’s all because of this bank recapitalization announced by Finance Minister last evening after markets closed.

What is bank recapitalization?

Banks, especially the PSU banks are have a big stress on their balance sheets and are having huge NPAs that’s compounding the problem. The result is a massive drop in their share values because of which the equity share capital of many banks. Even a big leader like SBI in its last 2 years gave 0% returns and banks like syndicate bank lost 25-30% of its value! That has eroded the equity share capital of almost all the PSU banks. Normally for every 10 rupees that a bank is holding 9 rupees comes from deposits and 1 rupee from equity share capital. This fell drastically to 65-70 paise and in Bank of India kind of banks to even 50 paise. That created a huge stress in banking system.
Govt. announced a 2.11 lakh crore recapitalization plan where it would be pumping in money into these banks. 1.36 lakh crore of this money will come in the form of recap bonds that will be front loaded into the system. That means Govt will sell these bonds and the money raised by selling them will be pumped into the banking system. The rest of 70,000 Crore will be through budgetary support. I feel its an excellent move that will take care of loan needs and NPA problems of many PSU banks that are reeling under stress.

What will NIFTY do today?

Forget technicals for the day, NIFTY will open at 10,300 or close to that and what a day its going to be! Nobody knows what is going to happen. There are huge shorts built for expiry and if those shorts are covered after opening, you will see NIFTY racing towards 10,350 levels or if shorts are created at the open then NIFTY will correct to 10250 levels. Two short straddles taken by FIIs were shattered this series, one at 10,000 level and 2nd at 10,200 levels. What these straddle holders do on the penultimate day of this most exciting series need to be seen.
Watch out for Bank NIFTY and State bank of India! Dont be surprised if SBI gives you 10% in a single day today. If you are holding it, you are lucky. Other things, I wont say, as I need to wind up this post and go to college.

Q2 results for today

1. Cigniti
2. Coromandel cements
3. Emami
4. Exide Industries
5. GSK Pharma
6. HCL Tech
7. IDFC bank
8. Kotak bank
9. M&M Financials
10. Mindtree solutions
11. NIIT
12. PNB Housing
13. RBL bank
14. Tata communications
15. Tata Elxsi
16. V guard

Market setup 24th October

Yesterday’s predictions were bang on and today it seems nothing much has changed. Globally things are going steady and Japan elected the same Govt with a 2/3rd majority and the focus remains on growth and on aging population. For a change, US markets didn’t close positive or at all time high. The Q3 results are doing its damage there with GE reporting a loss after a while. That has rubbed off on Asia and even Asian markets are subdued. Domestically it’s the Q2 results is having a big impact on the way the markets are moving. All this is coupled with the fact that today is the 2nd penultimate day for expiry and rollovers will be highest today.

On the F&O front

There is a huge shift that is seen from Futures to calls and that is interesting. After correcting for the discount yesterday the premium moved up because of buying but by mid day the Futures premium started falling again. At the end of the day the premium stands at 12 rupees and with 2 trading sessions left for expiry day its a good position to be in. On the options front, 10100 and 10200 put are being shorted and there is buying happening at 10100 call which is interesting. The call premiums have gone up to 112 rupees for 10100 call because of that. Today the same call might be shorted and traders would want to eat the 112 rupee premium. But the favourite strategy for today seems to be short straddle at 10200 which has a combined premium of 90 rupees. Yesterday it was 120 rupees. If you go for this today you can still eat 90 rupees. That makes this the traders favourite. The put call ratio is at a reasonable 1.53 now. That also shows the range bound nature of NIFTY.

So what is the strategy for today for NIFTY?

NIFTY is likely to open flat around 10180 mark and again 10200 and 10220 will offer strong resistances. On the downside 10120-10130 will be a big support. The close might be flat again with slight negative bias. Under these markers shorting 10100 call or 10200 call which has 44 rupees premium is the best strategy.

Q2 results for today

1. ABB
2. Ambuja Cements
3. Asian Paints
4. Canbank financial homes
5. HDFC bank
6. ICICI Pru life
7. Infosys
8. L&T housing Finance
9. Radico Khaitan
10. Raymonds
11. Saregama
12. TTK
13. Visa steel
14. Zee Entertainment