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 Setup 23rd October
It was an unexpected day yesterday, where contrary to all the expectations, Nifty opened more than 100 points gap up and closed the day more than 50 points in the red. That simply means Nifty lost more than 150 points intraday but at 10300 it took support to go to 10360 twice. Thus the call I gave to look for 50-60 point profit only and exit yesterday itself came 100% true. Today its an altogether different story where Nifty might open 100 points gap down all the way close to 10150 levels and if you look at volatility its close to 22% and that is the reason why you are seeing such wild swings in the market.
Global cues are not at all positive to start with as US is fighting almost every country in the world and the word trade war has become a common norm now. If you ask me, why there was no trade war yesterday when global markets were in green, my answer is this is all the play of the market where we try to find reasons for a fall and markets do what they want to do. To put it in simple words, markets across the world had to correct with what US is doing and it will choose to fall when it wants and not when we try to estimate it. Dow Jones fell 150 points and that made Asia go open in red and almost all Asian markets are in red.
Coming to domestics, the good HDFC results couldn’t do anything much to the market and the Q2 results that came yesterday were not that great. Asian paints disappointed with volume, EBIT and PAT along with margins have come way below the expectations. So, this quarter results were bad so far except a handful of companies. The only good news is the Brent Crude prices which are still below 80 dollars, trading at 79.6 dollars. But the bad news is Dollar index has again crossed 96 mark and that could put pressure on the Rupee and it might go to as high as 73.80 mark. There are some important Q2 results awaited today from cement, banks and infrastructure companies that that is the only good news we will be banking on domestically.
Following are the Q2 results expected today.
1. Adani Ports
2. Ambuja Cements
3. Bajaj Fin Services
4. Escorts Finance
5. HCL Tech
6. HDFC Life
7. ICICI Prulife
8. Indian bank
9. RBL bank
10. TVS Motors
On the derivatives front, the morning started on a positive note but as the nifty started falling in the last hour many positions have started to change. Though Nifty ended in red, Nifty put call ratio has actually gone up from 1.07 in the morning to 1.10 at the end of the day. As predicted 11000 is no longer the roof of the market and that is cut short to 10500 mark as it overtook 11000 in accumulated open interest. On the support side 10000 still continues to be a strong support and 10200 is slowly emerging as the new floor for the market. 10200 put added nearly 8 lakh contracts and on the call side 10300 call added 4.8 lakh positions while 10500 call added 3.2 lakh positions. Today’s move will decide whether 10000 still holds or whether 10200 will replace 10000.
What is the Nifty call for the day?
A weak Asia means we are sure to open below 10200 and as low as 10150. This is a strong support zone, that is between 10130-10150 levels and Nifty might take support there. If that doesnt happen then 10000 will be the next target. If the support is taken at 10150 zone then we can see Nifty going as high as 10300 level and with volatility at 22% we just cant rule out this possibility. So, in such an atmosphere I suggest you to wait and watch rather than rush into positions. If things are fine, I will tweet intraday the positions to take in the options market.
Market Trade Setup 8th October
Start of the 2nd week starts and we are yet to recover from shocks of the first week. Nifty has seen the biggest fall in 9 years see at 6.1% and we have seen 700 points getting wiped out in a week’s time. If you see this week, globally things are looking mixed. The US is growing big time, strengthening the dollar and that is making all the other currencies weaker. The jobs data that came on Friday in the US shows that the unemployment rate in the US is at the lowest level in the last 49 years. China, the second largest economy in the World is going through some problems and the Central bank of China has decreased the CRR there to increase the liquidity in the economy, thus increasing the demand for loans. China is down by 1%, Hong Kong is down by 400 points and India will have some pressure of all this at the opening.
Domestics and Derivatives!
Coming to the domestics, the biggest jolt was given to us by RBI in our monetary policy on Friday, where the rates have been kept unchanged. The reason given was why should rates go up when inflation is not going up? This is a valid reason but a depreciating rupee needed higher interest rates to stabilize and since RBI did not hike rates to save rupee there was a massive sell-off in Nifty, which fell close to 290 points. For today, the biggest relief is from the Crude which fell from 86 dollars to 83.2 dollars and that might come as a huge relief. Apart from that the Q2 results season starts this week and Zee Entertainment will be the first company to declare results on Wednesday.
On the derivatives front, there was a massive selling seen on Friday where 30 short positions were taken on Nifty futures for every long position. That has brought down the overall long positions in Futures market to 36% from 46% seen at the beginning of the series. On the options front, there was a lot of action on the call front and 7 calls were shorted for every 2 short puts and that brought the Nifty put-call ratio down to just 1.07 from 1.21 seen at the beginning of the day on Friday. 10200 put added 4.5 lakh positions while 10700 put shed 6.8 lakh contracts and 10500 put shed 8.3 lakh contracts, On the call side 10500 call added 16.7 lakh contracts, 10700 call added 11.2 lakh contracts and 10800 call added 14.5 lakh contracts. 11000 on the call side and 10500 on put side continue to have the maximum accumulated open interests.
What is the Nifty call for the day?
After 700 point fall in 4 days, what can we expect? Nifty will open slightly gap down today around 10280-10300 level and immediate support will come at 10260 and what happens from there needs to be seen. 10380-10420 is a resistance zone and will Nifty overcome that or not needs to be seen. Today for me is a wait and watch day. After such big falls, its not safe to jump into trades now. Already you have a position and keep it intact and let’s observe the markets today to decide on the further course of action.
Market Trade Setup 4th October
Ugly day, when you really dont want to trade if you are a bull. Being a bull, I feel like running away today and not writ this post but you have to do it as responsibility wont allow you to do so. What went wrong? Everything. US bond yields reach a 7 year high of 3.18%, Brent Crude has crossed 86 dollars, dollar index has crossed 96 and that would mean dollar is growing from strength to strength. The better than expected jobs data from US means increased rates are actually helping US economy to grow. The Dow jones is at a record high now.
If I have to explain you further, the risk free return in US has crossed 3.2% for an average global inflation of 2%. So, you will understand clearly that US pension funds and treasury securities are offering more than 1.2% of real interest rate for its risk free securities. That would mean, funds from everywhere will move to US and that means money will disappear from every emerging market including India and that explains why most of Asia is in red now. Hong Kong is down more than 400 points and in last 1 month it lost more than 2500 points.
Domestics and Derivatives
On the domestic front, today is going to be real ugly with bond yields going up above 8.12% and could reach 8.2%. Rupee which closed at a record low yesterday will open around 73.70 zone and if things dont improve we might see a 74 on dollar and that would mean total disaster to equity markets. Added to that is the Brent Crude which is at 86.12 dollars now and that means all crude oil related stocks will be in deep red. So banks, NBFCs, crude related stocks everything is going to hit today and in this kind of atmosphere I dont know how much IT stocks can carry the market.
On the derivatives front, things are horrible there and yesterday afternoon around 1PM itself the 10500 put has overtaken 10800 put for the maximum accumulated open interest. On the call side 11500 still has the maximum accumulated open interest. So, if you have a 1000 point band, Nifty could be exposed to wild swings. That is confirmed with Volatility index crossing 18% mark yesterday and it was at 15% just few days ago. The Nifty futures premium also has dropped a lot from 50 points to 32 points indicating a strong bearishness in the market. The Nifty put call ratio also dropped with demand for calls increasing, it moved from 1.41 to 1.36.
What is the Nifty call for the day?
A huge gap down will take the market directly to 10770, which is the 200 day moving average and it might open below that at 10750 levels. What happens after that is difficult to guess because the next meaningful support comes at 10600 levels. Today Nifty might try to stabilize itself between 10720-10700 levels and might try to go to 10780 which is the 200 day moving average. I suggest to take a long call during the day or a long position in the futures and I would suggest what position to take during the course of the day.
Market Trade Setup 3rd October
Thank God we did not trade yesterday, thank god it was Gandhi Jayanti. Brent Crude went to a high of 85.45 dollars and dollar index went to 95.5 from Monday’s value of 94.5. That would mean Crude at 85.45 and Rupee would have reached 73.5 and that would have spelt disaster on Nifty and it would have lost another 100-120 points. But thank god, all this was saved as we were on a holiday. Today as we open things are bit settled with Brent Crude at 84.95 and Asia in mild green and Dow Jones closing 120 points so all this might put some losses to rest.
On the domestic front, things are not looking great here also. The GST collections for the month of August come at 94,000 Cr vs expected 1.1 lakh crore and that is definitely not a good news for Govt which is looking for some revenues to stick to 3.3% fiscal deficit. The auto sales for the month of September also has been disappointing on the back of lower demand and Kerala floods impacting consumptions. The 3 day MPC meeting to decide the monetary policy rates would be commencing today and on Friday we will have the rates coming out. The consensus estimate is a 25 bps rate hike.
On the derivatives front, Monday was a great day for bulls as the premium on Nifty futures has doubled from 28 points to 55 points and the overall long positions in Futures shot up from 46% to 48%. The options market also was going good with Nifty put call ratio surging from 1.33 to 1.41. There was more of call buying, with 2 calls bought for every put and in selling nearly 5 puts were sold for every 2 calls. 10700 put added maximum open interest of 10.6 lakh contracts while 10500 put added 8.8 lakh contracts taking the accumulated open interest to 30.3 lakh and 10800 put is at 31.9 lakh. Any drop in Nifty means the base for the market will shift from 10800 to 10500 which means we could go to 10500 in this series. Not a good sign.
What is the Nifty call for the day?
Though Asia is looking green, we might open flat to negative between 10960-10980 levels because of yesterday’s trade not being there. What happens after that, with Crude almost touching 85 dollars and Rupee at 73 needs to be seen. Rupee for sure will open above 73 per dollar and soon we might see it going to 73.20-73.30 levels. That would put immense pressure on Nifty and Bank Nifty. I would not suggest any position but would advice you to wait and see what happens. 10880 is a strong support and I want to see if Nifty would touch that today. On the upside 11150 is a resistance.
So, its a very wide and volatile range, so no trade today, just try to see which direction Nifty goes.
Market Trade Setup 26th September
A relief rally was seen yesterday which took Nifty 100 points up and now its on the cusp of re-conquering 11100. It went down to 10950 levels before jumping and closing above 11050 levels. It doesnt change in any way what I said yesterday of Nifty touching 10600-10700levels. It just means that temporarily for this expiry we have found a base at 11000 and are moving up. Yesterday was just the first step, today it has to act on that. Otherwise everything will be back to worse again and Nifty will go below the 11000 levels.
The global scenario is not great with US entering into trade wars with almost every country including India. First it was China, then it was Iran and then yesterday Trump had entered into a trade agreement with Mexico without taking Canada on board. On top of that he talked about removing trading incentives to India. To add to it, Brent Crude is still at 81.8 levels but Asia today is all in green with Hong Kong, Shanghai and Japan all trading in green. Rupee remained bit stable at 72.69 owing to weakening dollar index to 94.16.
On the domestic front, we have plenty of micro problems and yes bank is on the top of the list. Now the management of yes bank has sent a fresh proposal to RBI asking it to extend the tenure of Rana Kapoor to 30th April 2019 instead of 31st January 2019 as he would complete the annual report by then. The other macro news is Govt putting pressure on RBI to cut the CRR in October policy from 4% so as to make liquidity available in the market. But it really doesnt make sense how much help the cut in CRR will make if the repo rates are raised further.
On the derivatives front, the action is now completely on the options market as the put call ratio surged to 1.29 from 1.05 on the back of 100 point gain on Nifty. Puts have come into demand with 11000 put adding 3.4 lakh contracts, 10500 put adding 4.8 lakh contracts and 10600 adding 3.1 lakh contracts. Now 11000 put and 11200 call remain as the markers for expiry and that means we have 10970-11230 range to play. On the call side 11500 saw maximum unwinding of 5.2 lakh contracts followed by 11200 call which saw 4.6 contracts unwinding.
What is the Nifty call for the day?
A green Asia means we will open around 11100 mark and 11160 on the upper side is a resistance while 11040 on the downside could be the support. If these are taken out then 10960 on the downside is a possibility. I would suggest taking a short straddle for 11100 or a short strangle between 11000-11200strikes is a good strategy. I will tweet with what exactly to take depending on how the premiums move for these premiums.
Another red Monday with a more than 100 point fall has brought Nifty back to below 11000 mark and if you think the worst is over, we still have some of the worse still to come. The 200dma of Nifty is at 10750 and Nifty will try to negotiate that and it means we have another 200 point fall yet to come. Bull markets have their corrections and we have completed 7% of that correction and another 3% might take us around 10600-10700 levels and when that happens, its just the matter of time. But to lose 700 points in a month and 500 points in just 10 trading sessions is not at all a good thing.
The global scenario is also not that bright with Dow closing more than 180 points down on the back of worsening tensions with China and the sanctions with Iran also coming into picture now. The Fed meeting begins today for the Credit policy and there is an expectation of 25 bases point rate hike coming out tomorrow evening. But the biggest negative is the Brent Crude which has surged to a 5 year high of 81.3 dollars and we are above that dreaded 80 dollars and with Rupee worsening things really look ugly. Rupee closed at 72.63 yesterday and today we are surely going to see 73 and if it closes above 73 then its going to be worse for the current account deficit in India. On the Yes bank front, Rajat Monga who is the group VP and ex CFO of Yes bank could be the new boss as things stand today. But lot of time to go before anything is decided.
On the derivatives front, there has been some buying that has come back to the futures after the battering we got but that is simply not enough to prevent the market from further sliding. The Nifty put call ratio in the options market has come down to 1.05 from 1.14 and this is the lowest I have seen in this year. For sometime in February it went to 1.05 and now we are back to same level again. Call are sold freely and there are 10 calls sold for every 1 put sold and that is contributing to the fall in PCR. 10800 put is now picking steam with 9.4 lakh contracts added and the gap between 11000 and 10800 put is just 6 lakh contracts so the danger of base moving to 10800 from 11000 is there. On the call side 11200 call is just 1 lakh contracts less than 11500 and today if there is a fall the roof will shrink to 11200 from 11500.
What is Nifty call for the day?
A flat Asia means we will also open flat below the 11000 mark and with Crude above 81 and Rupee reaching 73 could be a deadly combination that could take the market into red. The fall has no limit and 10770-10740which is the 200dma range is the last support. On the upside Nifty wont go above 11200 levels and 11150-11180 might be a strong resistance. As said many times, money in the pockets is better than money in red. So, stay out and see which way the market goes.
Market Trade Setup 17th September
Second half of the September month starts off on a not so good note. We had seen two monster rallies after two big falls on the first two days of the last week. Now Nifty is above 11500 but there is nothing much to celebrate. There was a storm that has hit North Carolina last weekend, we also have a typhoon hitting Hong Kong and that has shook the Asian markets. Hong Kong is down more than 500 points and all the other indices like Shanghai, Korea are also trading in red. Dow Jones on its part had closed flat on Friday and that doesnt matter really that much.
On the domestic front, the news is all about the cabinet meeting that PM and FM called on Saturday to review the economic situation came out with nothing in concrete. The only positive was FM saying very clearly that the 3.3% target of fiscal deficit would be met at any cost. An announcement was also made on increasing the FPI investment in masala bonds but at a time when rupee is falling this doesnt matter much. There was nothing on rupee or falling GST collections or on the bank restructuring or on FCNR bond issue and all this has left everyone disappointed and this would be visible in currency and bond markets today and that will have impact on Nifty. Dont be surprised if Rupee goes to 73 all the way from 71.8 that is the closing value on Friday.
On the derivatives front, the surprising factor on the trade on Friday is, despite Nifty going up 140 points the premium on Nifty futures shrunk to 32 from 40 points. The overall long positions remained at 44% indicating that though the Nifty is going up, not many are taking long positions and risk it to taking on Monday. So, why was Nifty moving? It is because of the action in Options market where the Nifty put call ratio went up from 1.29 to 1.38. There were puts bought and puts sold also. There were 3 puts bought for every 2 calls and there were 5 puts sold for every 3 calls sold. 11400 put still continues to have maximum accumulated open interest and on the call side it is 11800 call.
What is the Nifty call for the day?
Our fundamentals on currency market going to hit Nifty today and Nifty will open gap sown at around 11470-11480 levels and it might test intraday low of 11420-11450 levels. I feel that it is a single day disappointment and we might start recovering from the time Europe opens in the afternoon also. So, the better strategy is to go long when Nifty is in that 11420-11450range with a 50-60 point target to be achieved either today or tomorrow. There is a fundamental involved so the timing of the long position is critical and should be taken only after confirming that the last low intraday has been made.
September starts on a note that it is known for. Septembers always have been cautious and no over-optimism or pessimism. That is why if you compare the last 3 years Septembers were always flat not getting carried away either by good news or bad news. Let’s hope that this September also behaves the same way. The US markets were flat on Friday and today they are shut on account of labor day so no big clues available. Asia is down on account of trade wars in Europe emerging slowly. Hong Kong is down more than 250 points and other markets were down anywhere between 0.5% to 1%.
On the domestic front, the big news that will move the market today is the GDP number that came at 8.2% and the GVA number that came at 8%. For a 8% GVA if the tax collections were good then we would have seen a 8.3 to 8.4% GDP but 8.2% indicates lower tax collections which is a worrying point. Another worrying point is the drop in the services sector GDP has actually been lower than 8.2%. The good point is manufacturing that grew 13.8% and excellent numbers from construction and Agriculture that indicates that jobs are getting created in the unorganized sector.
The other domestics are the very good numbers that have come from the auto sales in August and this could be positive. Commercial vehicles grew very well led by Ashok Leyland reported 28% growth in commercial sales, Tata Motors commercial vehicles grew at 26% and M&M commercial vehicles sales went up 25%. Maruti, Hero and TVS saw a drop in sales due to Kerala floods. Now coming to the negative fundamentals its the strengthening dollar again where the dollar index crossed 95 and stands at 95.2 now. That means fresh pressure on Rupee and we might see Rupee tumbling to another all time low. On the other hand the Brent crude prices are still holding on and not showing signs of falling. They are still around 78 dollars per barrel.
On the derivatives front, the first day saw a massive short build-up in the Nifty futures and the percentage of Nifty long positions came down from 64% to 60%. On the options market also the shorts in the calls side is more than the shorts on the put side. But when it comes to longs, there were 2 puts bought for every call. The put call ratio now stands at 1.55. 11600 put added 7 lakh contracts and 11500 put added 5 lakh contracts and 11700 put added 3.1 lakh contracts. With this the 11600 put has the maximum accumulated open interest now and that means 11520 will be the new floor for the market in this series. On the call side 12000 call added 5 lakh contracts and 11800 call added 4.9 lakh contracts and 11800 still has the maximum accumulated open interest. At 100 rupee premium 11900 could be the new roof.
What is the Nifty call for the day?
GDP numbers will make our markets open in green at 11700 levels and the long position you have taken on Friday at 11640-11660 will have a 40-60 point profit. First resistance might come t 11720-11740 zone and Nifty might correct to 11650 intraday after touching this level. So, it is better to exit the long positions as soon as 11720 is reached. The minimum profit you are guaranteed with is 50-60 points. As the market starts negotiating this positive and negative factors, stay out and see where it closes. Any close below 11680 is not good for the near term.