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Market Setup

Market Trade Setup 2nd January #NIFTY

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Market setup 2nd January

So the working days start again after a long Christmas and New year and now nearly 80% of traders are back into business today and the remaining 20% will be back by next week. The US markets and Europe were shut yesterday on account of New year and so there are no cues available. Some of the Asian markets like Japan are not trading even today but most of Asia has woken up from the holiday and 2019 for them is not a great start. Hong Kong is right now down more than 600 points and that is the weakest level in the last 2 months. Other Asian markets like Shanghai, Taiwan, Korea and Singapore are all in red almost down by 1%. This is not a positive signal for us.

On the domestic front, we had seen a Happy New Year rally in the last hour of trade yesterday where Nifty had crossed 10900 levels but today is a different day. Asian markets are given a lot of negative cues. Domestically we had the December 2018 auto sales figures that came in and that was not encouraging. It has shown a fall in volumes both in passenger cars as well as HCVs. Maruti, Eicher, M&M and Ashok Leyland will have some negative impact on account of this. The only good news that came in was from the ATF front where Air Turbine fuel was cut by more than 14% and in the last 2 months, we had seen 25% cut in fuel. ATF account for 40% of operational costs for Airline companies and Indigo, Spice Jet might see some positivity. Also, the Airfares might come down by 10-15% in the coming days. Jet Airways has its payment problems with banks to the tune of 14,000 Cr so that stock will have some problems. Crude is still at 53 dollars which is positive.

On the derivatives front, yesterday was a very dull day where we saw 2.1 lakh contracts in Index futures and 4.2 lakh positions in stock futures. On the options side, 88.6 lakh positions were added in Index options while 2.8 lakh positions were added on stock options. 10800 put added maximum open interest positions of 3.8 lakh while 10700 put added 2.8 lakh positions and 10500 put added 2.6 lakh positions. On the call side, 11100 call added 2.5 lakh positions while 11500 call added 1.7 lakh positions. 11200 call and 10500 put still continue to have the highest open interest and 11000 call is close behind. 

What is the Nifty call for the day?

A weak Asia means we will open a bit gap down and might open between 10850-10880 levels and 10820 to 10920 is the likely range for today. Things will be dull in the morning but with Europe opening in the afternoon things might change. We might see an up move if Europe opens in positive and then 10920 resistance will be tested again and it might strech upto 10950. On the down side, 10780-10800 which is a 20dma and 200dma is the support that should hold. Breaking this would mean we will go towards 10600 which is 50dma. I am sure you would not have taken any positions yesterday, but if you have taken I would suggest you to exit positions today above 10850 for no profit no loss and wait for the next move. No trading till afternoon.

Market Setup

Market Trade Setup 6th December #NIFTY

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Market Setup 6th December

Fear has no bounds! It can come at a time when everything is alright and take away everything that is alright! We were seeing a handsome recovery and US was showing a lot of signs of growth with GDP coming higher in last few quarters and the Fed made lot of positive statements. Just 2 months ago everything in US was looking bright with jobs data at its highest in a decade and the unemployment at its lowest. Suddenly, fear of whether this growth will sustain or not grips and takes away everything that has grown till now. Global fears are still ruling the markets across the world. US markets were shut yesterday in respect of George W Bush but Dow Futures which are trading in other markets are giving negative cues. Even now Dow futures are down 300 points. Result is every Asian market is in deep red.

Domestically, we are going to vote tomorrow and the campaigning in all 5 states is finally over. The last phase of polls and Exit polls will come tomorrow after market hours. But what is important today is the OPEC meeting today where there is an expectation of supply cut. Will it result in Crude prices going up needs to be seen. There is a global growth scare that means lesser demand to crude so supply cut might not impact that much. Yesterday was the monetary policy day and the policy is more or less on expected lines, including the SLR cut. As I predicted SLR is cut by 150 bases points in multiple quarters by 25 bases points starting from January 2019. So, monetary policy failed to make any impact on the market that is gripped by global growth scare.

On the derivatives front, there was a massive selling that happened in Futures market especially by FIIs who sold more than 1100 Cr in the derivatives market. The overall long positions in the Nifty Futures market has come down from 51% yesterday morning to 49% by the end of the day. In the options market the Nifty put call ratio dropped as there was a lot of demand for the calls and Nifty put call ratio dropped to 1.63 from 1.69 seen at the beginning of the day. Open interest got added at maximum at 11100 call to the tune of 2.5 lakh positions and 11200 call added 2.4 lakh positions and 11300 call added 1.1 lakh positions. Still 11000 call has the maximum open interest but on the put side is still at 10000 put followed by 10500 put. Smart money is preparing for a BJP victory as well as defeat in all the 3 states where it is in direct competition with Congress. 

What is the Nifty call for the day?

Things are not at all looking good for the market and today we will open close to 10700 mark and that will take us below the 200 day moving average and if we quickly dont recover to 10750 levels then we might actually go into temporary bear zone unless the exit polls tomorrow show a decisive victory for BJP. You already have a position at 10820-10840 levels and that will be in deep losses. Hold on to it for sometime as we have every chance of recovery. There are days when you have to sit tight and today is one such day. Stay out of the market and see where this growth scare will take Nifty to. No trade for today.

Market Setup

Market Trade Setup 17th September #Nifty

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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.

Market Setup

Market Trade Setup 3rd September #Nifty

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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.

Derivatives Action

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.

Market Setup

Market Trade Setup 31st August #Nifty

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Market Trade Setup 31st August

The start of the September series on the last day of August. It’s not a great start. The trade tensions in US are back again with Trump throwing tweets on a daily basis about tariffs. Dow jones closed 140 points down last night mainly on the uncertainties and trade tensions in US and the emerging markets in Asia has also caught up with the trend. Hong Kong is down more than 400 points down now which is around 1.5% and Taiwan is also down close to 1%. The dollar however is weakening with dollar index going below 94.7 and that is the only mild positive for emerging currencies.

On the domestic front, its the GDP day today and that is going to have a big impact on the first half of the September series. The Q4 GDP came at 7.7% and this time the forecast is between 7.5-7.6% but I somehow have a feeling that it could be much more than that. Am looking at a GDP of 8% or maybe bit more also. I have my own logic for this and let’s see what it finally turns out to be. Apart from GDP today is also the day we will get the forex reserves weekly data and we are at 400 billion and we need to see how far it goes.

Another fundamental to worry about is the weakening Rupee which closed at another record low at 70.74 and today it might even move to 71 and another big worry is the Crude oil prices. Brent crude is inching towards 78 dollars and last time we saw 78 on crude rupee was at 68. Now it is close to 71 so this 78 on Crude is going to be much worse and the month end dollar demand will surely put more pressure on Rupee. On micro news, Rana Kapoor gets a temporary relief as RBI says he can continue as MD until further notice. 

This decision of RBI is nothing but continuation of uncertainty as we dont know what that further notice means. It could be one month of 2 months or even 15 days. They might give him 1 year extension and might ask Yes bank to get a succession plan ready by then. The reason why Yes bank is in problem is because of the divergence in their Quarterly results. Last time when Axis bank reported divergence in their quarterly numbers, Shika Sharma was not given extension by RBI. The same is not being done for Yes bank and RBI is taking its own time to decide.

What to expect from September series?

September series starts off today and if we see the last 3 september series they were all negative series. 2015 September series was down 81 points and 1%, 2016 was flat with 0.1% and 2017 september was down by 147 points. The August series ended 510 points up and the July series ended 558 points up. The roll overs were also higher this time around 69%. The long positions on Nifty futures is at 64% which is much better and the open interest starts at 2.37 Crore shares on Nifty which is the highest this year. The highest open interest on put side, am considering at 11400 put and on the call side at 11800. Nifty is now close to 11700 so there is a room for downside than upside.
I would expect September series to find some support at 11400 level on a fall and a huge resistance at 11800 level on the rise. On the broader level 12000 is possible this series and 11400 on the downside. The GDP news today and the macro data coming in after 10th September will have a big impact on Nifty. The Nifty put call ratio is starting at 1.12 and that is a very good level to start with. 

What is the Nifty call for the day?

A mild to red Asia means we will start a bit gap down around 11650-11670 levels and what happens from there needs to be seen. The first day of any series is usually positive but today could be a different day. Fundamentals like Rupee and Crude will have a big impact and dont be surprised if Nifty corrects to 11600 level or might even go to 11550-11580levels. That is a good point to go long on Nifty with GDP as the trigger for markets to open gap-up on Monday. Even if you dont get a gap up on Monday, you have the whole series to play with. I suggest a long anywhere below 11630 going all the way up to 11550.

Market Setup

Market Trade Setup 29th August #Nifty

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As we approach expiry, bulls are roaring and something extra-ordinary is happening. The biggest news is the upgrade of Q2 GDP of US from 4.1 to 4.6% and the growth is firmly back. A developed economy like US growing at this rate is extraordinary. Dow closed flat after days of uptrend with NASDAQ posting another record growth after Apple gained almost 1%. Asia is also celebrating where every market except China is seeing a growth with both Japan and Hong Kong up 150 and 100 points respectively. The dollar is still weak and consumer confidence index data for August 2018 is showing the highest level since 2000.

On the domestic front, we had a Rupee that that supposed to strengthen has weakened yesterday. Now the fuel prices have been revised again and Diesel went up by 15 paise on an average yesterday and now is at record highs. Petrol prices also went up by 12-15 paise across the country and this is primarily due to Brent Crude which is still at 76 dollars. Power companies are still in problems with almost 25 power companies facing bankruptcy now. Govt is meeting on 31st August to try and resolve this issue. So, there are some things to worry about on the domestic front as we approach the expiry. 

On the derivatives front, the Nifty put call ratio jumps to 1.94 from 1.85 and its been years since we have seen that levels. It is very difficult to sustain this level and Nifty has to fall so that there will be some reduction in put positions in the form of unwinding. The 11000 put still continues to have maximum accumulated open interest and yesterday 11700 put added 16.2 lakh positions and 11750 put added 8.1 lakh positions. On the call side 11850 call added 8.6 lakh positions and 11800 call which has maximum accumulated open interest added 2.3 lakh positions.

What is the Nifty call for the day?

Nifty is likely to open flat around 11720-11750levels and this is where Nifty has to decide whether to go up and correct. A small correction is on the cards looking at the options data and that might take Nifty to 11680 levels first and 11650 subsequently if 11680 doesnt hold. But on the upside the peak for Nifty is now at 11820, if it wants to climb that. In such scenario I suggest a short straddle during the course of today, so wait for my tweet.

Market Setup

Market Trade Setup 17th July #Nifty

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Markets and News

Yesterday I talked about Nifty put call ratio being at 1.79 and its very much over heated. From this level it has to come down and the only way it can happen is when call shorting happens. Call shorting is a mildly bearish strategy and that means a temporary fall in the Nifty. At hindsight anyone can talk about it, but I just fell short of predicting the market from that angle. If I had done that I would have seen markets going to 10920 not 10980. These are the misses that one has to live with, and we all mature on them.

Today the cues are mixed with Dow Jones closing flat but there was a 13% fall in Netflix as they reported lower than expected subscriber additions. Both domestic as well as international subscriptions came lower than expected. The point one needs to understand is, at the time when Google, Amazon, Facebook and Apple are coming up with fantastic additions, Netflix is not able to catch up. This is the big worry that market watchers are worried about. The good news however was the permission given to Iran even after its deadline of November, set as a part of sanctions to sell crude is slightly relaxed. The result is Brent Crude fell to 72 dollars.

Domestic Cues

On the domestic front, the WPI inflation comes at a 5 year high at 5.77% mainly on the food and the fuel prices. Vegetable prices are at 8% in June vs 2.5% in May and fuel inflation is 16% in June vs 11% in May. The number is not at all encouraging and now the case is very strong for RBI to hike the interest rates in its August policy. Meanwhile the Q1 results of HUL were almost as expected with 12% growth in volumes and 19.2% increase in profits. The profits were marginally below expectations and now some of the brokerages are feeling that HUL is plateauing out. But my personal view is, I want to wait a bit more before concluding anything.

Quarterly Earnings

Now Q1 season has picked up and the companies declaring their Q1 is going up. Here is some of them.

1. Ashok Leyland

2. CRISIL

3. Federal Bank

4. ICICI General Insurance

5. Muthoot Capital services

6. Rallis India

7. Sintex

8. Tata Sponge

9. Zee Entertainment

Derivatives Action

On the derivatives front, as mentioned earlier yesterday morning the Nifty put call ratio was at 1.79 which is overheated and by the end of the day it came down to 1.62. There was a massive unwinding of positions on the put side with 11000 put shedding 4.4 lakh positions, 10900 put 3.9 lakh positions, 10800 put 2.9 lakh positions. When 11000 put shed 4.4 lakh positions 11000 call added 6.3 lakh positions in the open interest and that brought down the put call ratio. 11100 call also added 5.9 lakh positions and the premium there fell by 60%.

What is the Nifty call for the day?

A flat to negative Asia means, we will also open around 10930 levels and the Crude will be the news that might push the markets up. Yesterday, you might have taken positions at 10980 levels and they might be in losses now. Wait patiently and the losses will be trimmed. 11020 is a temporary resistance and if you dont want to risk exit for a small 40 point profit whenever it is reached this week. Do not take any new positions and if you want to exit the market at 10980 which is no profit and no loss you can do that. Today Nifty will find support at 10880-10900 levels and can touch 10980 on the upper end.

Market Setup

Market Trade Setup 12th July #Nifty

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Markets and News
In all my analysis over a period of time, I have laid emphasis on the importance of Crude as a fundamental for Indian markets. Fall in the Crude might be negative for US and other emerged economies, but for India the fall in Crude is something that goes very well for India. Last night we saw the biggest fall in 2 years for the Crude on a single day. From 77.6 dollars Crude fell to 74 dollars and now recovered a bit and trading at 74.6 dollars. The result was Dow Jones fell by 200 points and Europe also fell. But Asian markets are singing a different tune today.
Domestic Cues
Coming to domestics, Crude is the dominant thing that we are looking at, and the last rally for us also came for us when Crude fell from 120 dollars to 30 dollars. Yes, Modi becoming PM is a positive that moved the market but what added fuel to it is the Crude correcting from 120 dollars in 2013 to 30 dollars in 2016. In 2013 we touched a low of 5100 on Nifty and by the time crude reached 30 dollars in 2016 we have recovered to touch 9500 levels. That is the importance of Crude in our economy. The increase in out put by Saudi Arabia is the season for Crude prices falling and let’s hope that Crude will continue to fall for the sake of bulls in the market. On the Q1 results from the big result expected today is Karntaka bank.
Derivatives Action
On the derivatives front, yesterday forward movement of Nifty has further pushed up the long positions on Nifty futures and the overall long positions have now reached to 49% and now we are on the verge of market having more long positions than short positions on Futures. On the options front, there was a mild movement in the put call ration from 1.66 to 1.67. 10800 put added 7.4 lakh contracts and 10900 put added 7 lakh contracts and now market is slowly believing that 10750 is the new base for this series and on call side 11000 call added 6.2 lakh contracts and 11200 added 2.1 lakh contracts mostly short and now 11210 might be the roof for the market in this series.
What is the Nifty call for the day?
A positive Asia means we might open positive around 10970 mark and yesterday’s longs you would have taken at 10920 levels will meet its 40-50 point target. You can exit the positions or you can revise the target to take it to 11000 and pocket more profit. Today might see 11050 also on Nifty and that might give you more profit. Just wait and watch after booking profit and dont rush for any new positions.
Market Setup

Market Trade Setup 28th June #Nifty

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Markets and News
Finally, the expiry day for the 6th series of the year. The score is now 3-2 with bulls taking January, April and May series and bears took at February and March series. June as of now is 65 points down having started at 10736. The global markets have undergone a lot of volatility with US going up 250 points up in the first half only to lose 400 points in the second half to close 150 points in negative. The trade sanctions fears seems to be ruling the global markets and Asia is also moving between red and green today.
Domestic Cues
Coming to domestics, Rupee is at 68.60 just few paise away from its all time low and today it might hit the all time low and that might have some impact on the stock market. Coming to this expiry the broader market is holding but nearly 460 stocks have hot the 52 week low and derivatives market is holding on just for the expiry. If Nifty recovers today then it has a possibility of turning into green series for that it needs to recover 65 points. All eyes are on last series expiry day when Nifty went up by over 100 points on the expiry day. If that happens today than we will have 4 bull series this year.
Derivatives Action
On the derivatives front, its all set for expiry and the focus is on the options and the expiry. We are at a series lowest of 1.20 in put call ratio as massive positions were created yesterday on the call side. 10800 call has 17.7 lakh contracts which is a record. 10750 call has 12 lakh positions and 10700 call has 11.2 lakh positions. So at 20 rupees premium 10720 will be the first resistance, if broken then it will encounter a huge resistance at 10750. 10700 put saw the maximum unwinding of 19 lakh contracts another record which brought down the accumulated open interest to 31.55 lakh positions. 10600 put also has 31.59 lakh contracts and now 10600 which is at 11 rupees premium makes 10590 the official new floor for the market.
What is the Nifty call for the day?
Asia is mixed and so we might open flat at yesterday’s close of 10670 levels and if there is a fall we might touch 10600 levels. If in the early morning there is a recovery to 10700 then some put shorting will happen at 10700 and that will build the base at 10680 and Nifty might expire between 10680 to 10720.
Another scenario is if Nifty stays below 10680 then put buying will happen at 10600 level and that will bring Nifty to 10600 levels. That will upset many positions. So, if Nifty is weak in the morning and till 11am if its around 10660-10680 then it is better to buy the 10600 put and wait for a slight increase in premium and sell it off. Risky trades, you need to be careful. Wait for my tweets.