Settlement Blues once again!!! How December Series unfold???

Nifty managed to close around 5005 levels on the settlement day yesterday, amidst huge volatility, induced due to heavy outstanding positions to be rolled over to Dec Series. The Asian markets weakness and collapse on an important day worsened the situation, since most of the traders and short term players were expecting that Nifty would close at 5100 + levels and march a head in December posting further highs.

 

US markets were closed yesterday on account of 'Thanks Giving Day' and futures are indicating huge fall today. European Markets have reacted in tune with Asian markets yesterday, and currently Asian markets are trading in negative territory. SGX Nifty futures are already indicating a discount of 72 ponts at present, which certainly give a gap down opening for Nifty where 4920 levels may be tested. What happens after that shall decide the medium trend since short term trend already is down, as Nifty closing above 5055 today, being the last day of the week, appears to be a herculean task for bulls  as global markets are correcting from November peaks.

 

Short term traders can sell into rallies with a stop loss at 5050 levels for today, for quick returns on Nifty.

 

Nifty Range for the Day: 4900 - 4950 - 5000 - 5050.

Nifty is back above 5050 level and whether further upside is possible from here on ???

The weakness during last week till thursday, and gap down opening on friday tempted lots of traders to go short as many analysts were hoping that the 80% retracement was the final leg of the rally, and the announcement from Finance Minister that P- Notes will not be discouraged helped to improve sentiment amongst FIIs. The talk that Government is considering merger of PSUs to reduce the number of banks operating also encouraged a rally in PSU Bank Stocks, and the announcement of Disinvestment of PSUs has already pushed the listed PSU stocks. When the bulls forced the rally beyond the predicted resistance levels like 5000, 5020 and then 5040, intra day traders and short term traders have no other way except to exit the positions at what ever price in the last 15 minutes of trading, as they will not have the capacity to carry forward the positions on a week end.

This observation is based on the huge premium of 24 points with which November Futures traded at the end of the day. Now that the indices have closed firmly above 5050 and 17000, whether there will be further short squeeze coupled with fresh buying which can push markets further during this week is the mute question. This week being the Settlement week, and the outstanding open interest positions at record high, above 1 lakh crores, huge volatility can be expected during this week. Roll over of positions to December also will provide two way movement in Nifty. Investors may stay away from markets for this week, and can take a view on the markets next week, after knowing whether fresh rally has begun, or sideways movement with downward bias shall continue for some more weeks/months emerges with clarity.

I will update the posting next saturday, after the settlement and november montly closing is known. The range for the week could be 4800 to 5200.

Strategy for the Day: Buy 5100 Puts on rallies and 4900 Calls on weakness of November Series for quick returns with adequate stoploss owing to one's risk perception.

Whether Nifty Can Challenge 2009 High???

Well the 'V' shaped recovery of indian stock markets after touching lows on 03.11.2009, at hightened volatility, was surprising to many analysts, who were looking at deeper correction to levels of 4200 and so on, in the down move started on 17.10.2009. But the markets have their own mind and always defy logic and especially consensus opinion, in whichever direction it builds up. The volatility index hovering around 29 and Nifty's attempt to close above 5000 last week, suggests that the retracement is almost completed. I felt that Nifty will in a band of 4500 to 5000 during this month, proved to be on dot so far. Currently both the indices have retraced 70% of the fall and might move upwards upto 80% retracement levels during this week. Nifty level to watch shall be 5054 and Sensex it will be  17061, from where down move should start once again, or sideways movement of consolidation will last till next trigger emerges during December in the form of 'Advance Tax Numbers' and the outlook on economy, especially on Agriculture front.

 

Watch the level of 5054 for clues and exiting long positions around this level is not a bad idea. One may look at buying a straddle of 5000 Nifty for quick returns, capturing the volatility.

 

Range for the Day: 4920 - 4950 - 5020 - 5050.

Whether the correction is completed at the bottom of 03.11.2009???

The volatile movement of yesterday on our indices, must have hurt both the bulls and bears (traders) as the range was wide, and stoplosses triggered on either side. The ultimate bull charge in the last hour of trade, forced short covering by intraday traders, which made Nifty to close above 4750 level and Sensex above 16016 finally. The overnight strong rally in US markets will certainly push the indices further up, possibly with gap up opening today, as indicated in SGX quotes (where nifty is trading around 4826 level) and whether a bottom made on 03.11.2009, will hold for now is the question on everybody mind as the sentiment turned negative.

 

Peculiarity of market dynamics is they tend to correct when everybody is bullish and looking for higher levels, with complacency, and reverse the trend and start going up, when the mood is of pessimism. FM announcement on disinvestment of existing PSUs and unlisted PSUs to bridge the Fiscal Gap, was mostly welcomed by FIIs and DIIs. US markets rallied as senate approved unemployment allowance support for another 20 weeks, and the production data, jobless claims etc., came positive. Dow finally closed above 10000 and Nasdaq climbed 2100. Back home, inflation data was not announced yesterday, as the Government decided to announce it on monthly basis, shifting the base also from 1993-94 to 2003-04, from this month onwards.

 

Nifty is exactly at the mid point of 4500 - 5000 range advocated by me, and I expect today being the last day of the week, after a gap up opening profit booking might come around 4840-4860 levels, where 50DMA is placed. One may buy 4900 puts on rallies and 4700 calls on weakness for intraday trading for quick returns, using adequate stop losses, as per one's own risk perception.

 

Range for the Day: 4650 - 4750 - 4800 - 4850

Is it a Dead Cat Bounce!!! or the relief rally???

Our indices have recovered the entire losses posted on tuesday(03.11.2009) by wednesday (04.11.2009), thanks to fund buying since the markets were oversold, coupled with short squeeze in index heavy weights like RIL etc. Both Nifty and Sensex in the process have created upward gaps, which indicates the bull pressure, which might be tested and covered sooner than later. Nifty closed around October Closing level, and the immediate hurdle is 4750 series settlement level, which nifty needs to cross and close above it. However, the levels of 4800 and 4850 will offer stiff resistance, way a head. CBOE index and VIX raising to levels of 29 after a prolonged stay at around 23 to 25 levels suggests of higher volatility. Higher volatility in weak markets indicate possible bottoming.

 

Owing to the fundamental and economic data pouring in around the globe, there is no reason for markets to be exhuberant for some time, the 10% correction in our markets from 52 week highs happened with great speed and in less time, so some more spending in a range of 4550 to 4850 on Nifty shall be good for resumption of rally later. Break out or Break down of these threshold levels will move the markets into the direction upward or down ward, which need to be closely watched.

 

Options are the best products in these times, as IVs are low, since stoplosses need to be at deeper levels if one wants to take a position in futures.

 

Range for the Nifty today: 4660 -4750 -4800.

 

Strategy for Day: Buy Straddle of Nifty 4700 strike price for quick returns capturing two way movement and volatility.

How will November month unfold??

October month has witnessed the 52 weeks high by Diwali and deep cuts in our markets and also amongst global markets later on, owing to domestic as well as global cues. Both October derivatives settlement and monthly closing posted negative returns over September. Now the mute question is whether the rally ended by 17.10.2009 highs for our markets and are we to witness further deeper cuts and sell offs, as the turn of events unfold!!. Many analysts are looking at a maximum relief rally, if it happens from here or later cannot surpass 4920 or 5000 on Nifty during November.Markets having corrected already 10% from their 52 week highs would post another 5% or more correction is the most preferred view. Now in this back drop where will November series and monthly closing would happen important.

October series ended at 4750 while monthly closing was at 4711, these are the bench mark levels for bulls to defend, if there has to be a relief rally or if one is over enthusiastic for resumption of the rally after this 10% correction. Most of the funds and analysts are advocating sell on rallies, instead of buy on weakness which was the dictum for the past 5 months, when the rally began in March, 2009. RIL being weak due to the litigation takes and twists before Supreme Court, has to lead the rally or relief rally which is possible once there is settlement on Gas Pricing Issue between brothers, and a clear policy from Government, as the power and fertilizer projects viability is dependent on the chief raw material, where ascertainment of price is must. AGM of RIL is scheduled for 17th November where the 1:1 bonus issue will be approved and a record date will be finalised, before AGM or Record Date to be announced (later) if this issue is resolved amicablly privately, through arbitration, or through Governmetn action, that could be turning point for the bell weather stock which can decide the future of our markets. Thus, the bearishness shall coninue till this one issue is resolved.

November might witness a range of 4500 to 5000 in my assessment and Nifty is currently exactly at the middle level. Professional traders can buy puts when there is upside and calls on weakness at the money for quick returns with adequate stop losses, owing to one's risk perception.

Nifty Range for the Day: 4600 - 4650 - 4750 - 4800.