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.
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.
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.
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.
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.
Now Q1 season has picked up and the companies declaring their Q1 is going up. Here is some of them.
1. Ashok Leyland
3. Federal Bank
4. ICICI General Insurance
5. Muthoot Capital services
6. Rallis India
8. Tata Sponge
9. Zee Entertainment
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.
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.
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.
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.
Markets and News
Monday blues yesterday with Bank nifty doing much better than Nifty as I have predicted. So, if you had taken a long position in Bank Nifty at the lows you would be sitting on some profits. The global markets are going fine and Dow Jones yesterday gained 300 points on the statements from US that they are not pursuing with sanctions against China and that is a good news. Today Asia is flat, and there are still worries persisting. The Crude is at 79.5 dollars and now its getting prepared to break 80 and start moving upwards probably towards 90 dollars.
Crude is the biggest worry for domestic markets today as petrol and diesel prices are at an all time record high and that would not go well. The dollar index is also at 93.5 which means rupee still could be around 68 dollars and that will make the crude imports worse. Added to that is the disappointments in Q4 results. Both Colgate and Future Retail reported bad results, especially Colgate which reported just a 4% growth in volumes and it has started losing market share in its core toothpaste segment. Today is an important day with SBI, the mother bank coming up with its Q4 results and many are expecting a loss.
Following are the other Q4 results expected today.
1. Andhra Bank
2. Bata India
3. Bosch India
4. Dr. Reddys
5. Future Consumenr
6. Igarashi Motors
7. Indian Oil Corporation
8. Radio City
9. State Bank of India
10. Bharat Forge
11. TVS Srichakra
12. TV today
13. VIP Industries
On the derivatives front, there has been a late surge in the premium in the nifty futures which is bringing in the belief that 10500 might be a temporary support. The Nifty futures premium which was almost zero went upto 20 points by the end of the day, though the overall long positions in Futures is at 52% which is the lowest in this series. In the options market also, the Nifty put call ratio came down to 1.28 from 1.37 and this is because of massive unwinding of puts at various strikes like 10600, 10700 and 10800 where combined 15.6 lakh positions were unwound. 10450 put has built 1.9 lakh positions and at 50 rupees premium 10400 is a firm floor for the market in this series. 10600 call has 13.8 lakh contracts created at 25 rupees premium making 10630 zone a firm roof for this series.
What is the nifty and Bank nifty call for the day?
Expect a flat opening for Nifty around 10500 mark and it might be a support as well as resistance and that depends on where the open actually happens. It is not required that you should trade everyday but if you feel like, then think of going long around 10480-10500 zone with 10550 as the target. It might work out this week if not today but if 10450 is broken you need to exit.
Bank nifty has gained somewhat yesterday and if you had taken long positions around 25700-25750 you are now at a slight profit. Keep a target of 25800-25850 and exit positions and book profits. Wait for a dip to take further call on this.
Markets and News
The drama of Karnataka seems to be over for now, but the implications of it will be felt for sometime. The US markets closed almost flat on Friday but things seem to have improved a bit after that. Over the weekend there were no major fundamental which has gone adverse and the crude still remains at 79 dollars. Dollar index however is touching 94 and that will have some impact on Rupee. Asia is trading in green today Dow futures is up 200 points and all that means some positivity to start with.
On domestics, things look grim, with BJP losing the trust vote in Karnataka paving the way for Cong-JDS govt on Wednesday. There are questions on the stability but that will be after sometime. The big merger news is the Ultratech cement acquiring Century cement, further consolidating the cement space. Today is also a day when FMCG major Colgate is coming up with Q4.
Following are the other Q4 numbers expected today.
1. Cigniti Technologies
2. Colgate Pamolive
4. Just Dial
On the derivatives front, there has been a huge selling on Nifty Futures on Friday maybe the market got a hint that BJP will not be able to cobble up majority. The Nifty futures premium has almost eroded to nothing from 13 points and the overall long positions came down to 54% from 56% at the beginning of the day. The trend continued on the options market also with Nifty put call ratio dropping to 1.36 from 1.46 levels and this is the biggest drop seen in this series. This was because of puts getting unwounded across the strikes.
What is the Nifty and Bank Nifty call for the day?
Global factors and green Asia especially Hong Kong which is 375 points in the green now, will put pressure on India to open flat around 10600 levels and what happens from there needs to be seen. Its a risky day to trade as the direction is unclear so it is better to stay away from Nifty as on today.
Bank Nifty will also open flat around 25900 levels and some positivity is likely to be seen there. So it is better to take a long position on Bank Nifty for today and see where it goes.