September Derivatives Settlement as anticipated!

It was anticipated that this month Derivatives Settlement will be around 5000 levels on Nifty, based on the average weighted price of Nifty from previous settlement till the date on which previous report was written on 23rd. Today the Nifty settled at 5015, with see saw movement during this entire week owing to overseas news flow and volatility in currency movement. Tomorrow being the last trading day for the month, quarter and half year, it is to be seen whether Nifty will close above 5000 levels as it closed exactly at 5001 on the last day of august.

Germany's lower house has passed the Euro Stabilization Fund with good majority during market hours by afternoon, which has helped the sentiment in European markets, and this has helped in some short covering in the last 2 hours of trading. The subject will be put up for vote of approval tomorrow at the upper house, and this will send some calmness for overseas markets and currency temporarily. The real issue of debt default crisis which is haunting European countries, cannot be solved with these short term measures, unless the respective governments tighten their fiscal situation, creating environment for moving towards growth, as the global recession is almost certain, with all the data supporting this happening, if not already in place?

Coming to our economy and government action it is very disturbing with falling IIP Numbers, raising Interest Rates and Inflation, the investment climate is disturbed. There is disconnect between high commodity prices, while the recession is gripping global economies. Sudden sharp correction is overdue in Indian bourses, which are holding 4720 level so far during this year, I therefore see that higher volatility will continue till Diwali (26.10.2011) as the advance tax numbers do not suggest better performance by corporates for the quarter ending Sept 30th. There might be some built up in positions anticipating better performance from IT sector, leading in to Infy results in view of the weakening of rupee, and the markets might face downward pressure post the announcement of results and the guidance for the next quarter, which is generally the shortest one, owing to the holidays and also the business outlook from US and Europe in view of the present slow down being experienced there.

The financial sector, Banking in particular faces NIM contraction, raise in provisioning due to loan deliquencies, raising pension payment and above all firming of interest on long term dated securities which shall call for higher provisioning, as government has announced higher market borrowing for next half year amounting to Rs.52,800 crores, while retiring Rs.15,000 crores of Short Term Securities ( Treasury Bills).

Breach of 4700 and close below 4650 will push markets to further lower levels, as most of the long term investors and funds are supporting this level for the past one month. The capitulation move will happen sooner than later, if the uptrend now fail to breach 5181 level, as the Nifty turned downwards already 3 times, therefore, investors should be light on long positions, and sell on rallies until Nifty consistently trades above 5360 with all round participation and volumes, which can confirm medium term bottom around 4700 - 4750 zone, for this calender year.

Strategy for next Series: Investors can buy Straddle of 5000 and watch the volatility to book profits.

Happy Trading!

Weak Indian Rupee causes Mayhem on Indian Bourses

FOMC two day meet did not bring any positive indications or road map to solvage either the US economic or fiscal problems, which most of the investors and traders world over were watching keenly. In fact the head room for any step on monetary measure by Fed is already exhausted long ago as the interest rate is quite low for considerable time. Fed Chairman in his last meeting has already announced that there will be freeze on the interest rate movement till mid 2013, was a clear indication of his helplessness. What the US Government can do is to be only will put their house in order, bringing stability to global economy and world markets in times to come.

The reaction on US indices was reasonable as expectations were buil7 a head of FOMC meet. However, the strengthening of US $ has lead to weakening of currencies world over, and the rupee breaching 49 levels, has caused havoc for Indian equities, where FIIs and Hedge Funds investment will have double whammy with prices falling and rupee weakening simultaneously. Nifty Futures opening with a price of 5010 as against 5133 closing previous day, clearly confirms that these category of investors, have thrown their towel and ran away from our markets. The huge gap down on both the indices, continued the bear grip through out the session and once Europe opened with losses ranging from 3 to 5 %, there was breach of psychological level of 5000 on Nifty too. For yesterday, 4910 was defended intra day, which is tested the third time already in recent past, and the closing of 4923 was positive for the day.

With US markets tanking further 4 % down, and the Rupee likely to touch or breach 50 levels today, SGX Nifty is already indicating breaching of 4900 at the opening itself, however, whether 4800 will  be held and closing happens above 4845 today, needs to be watched closely, as it is week end session too. In my view, this level will be held for today, as we move into the settlement week later. Nifty September derivatives settlement which happens on 29th should be around 5000 levels and 30.09.2011, the last day of the month, quarter and half year should see better closing. 

With all the events behind, markets will concentrate on local issues while keeping watch on global developments, however, higher volatility in the range of 4800 to 5200 is a positive sign for base building for any further rally post Diwali. Domestic situation is also clumsy with Government caught up in number of scams, and lack of authority and will to move a head firmly, from PM is a main cause of concern for our economy and markets.

It is confirmed that our markets will continue to offer only trading opportuniites in 2012 too.

Trading Strategy for the Day and Month: Buy 4800 Calls and hold till expiry, if the market opens below 4900 today at the opening.

Happy Trading! 

Have Indian Markets bottomed out??

The price action in our indices during August 2011 and steep fall in all most all index stocks, touching new 13 months lows, due to relentless selling by FIIs and Hedge Funds, made equity investments highly risky, and the question being asked by everyone is whether a bottom is found around recent lows....4720 on Nifty??

The answer is both yes and no. Technically, most of the analysts following Dow Theory, expected Nifty to take support in the region of 4700 to 4800, where mulyi year long term support emerges, for  the long term bull market began in 2002, after a ten year bear market from 1991 to 2001. The level of 4650 to 4750 offers good support zone, which is also a fibonacci retracement level of entire up move of larger bull market from 2002 too. Now the mute question is whether this support holds in the next down move, whenever it happens, owing the almost confirmed US recession, and the turmoil of debt markets in Europe, where developed markets are bleeding continuously?

My reading is short term trend is down, medium trend is sideways where as long term trend is up until 4720 holds. 4650 to 4750 range will be re-tested before this diwali, andour  markets might  rally to 5300, or even much higher levels, before the next major down move happens. Only a rider shall be, any external shocks like, collapse of Eurozone, due to break up of Euro as nation after nation are landing in to debt crisis in Europe, and the contagion effect on US can have their rub off effect on all markets globally, including our markets too, as it would change the equation of inflows, currency valuation, etc.,

What an investor in indian equities is supposed to do  in these uncertain times?? Invest in beaten down stocks / sectors..Invest in Mutual Funds...Invest in Gold..Go for Bank Fixed Dposits.. The answer is not simple and straight for every one. It all depends on the risk profile of each individual and the long term goals.

Let me take up one by one..Equities...Invest in Index heavy weights..preferably PSU stocks,with good fundamentals, as the businesses will continue irrespective of the state of economy, and any trouble to their finances, receives the Government support. Identify the next bull market leaders and start building a portfolio for substantial returns.. will discuss about individual stocks separately.

Mutual Funds performance depends on stocks they hold, and fund manager's skill but can give returns only in Bull Markets. Some sectoral funds have performed in bear markets and bear phases of Bull markets too.

Invest in Gold even at current price because, there is going to be a crisis of international medium of exchange if US dollar looses its shine. Gold has risen very steeply from last diwali to this diwali from 20K to 30K as predicted by some analyst, during last year diwali time, which I was not believing. The current price is quite high, and one gets a doubt, whether it would fall from here along with other commodities and markets? According to an analysis, Gold has not performed in the last 20 years, and now entered multy year bull market, would continue to post new highs, with intermittant corrections, as Governments also started accumulating Gold Reserves in huge way, in the recent times. Recent peak of $1918 once taken out it will be into an unchartered territory..shall quickly cross $2000 and in due course might touch $3000 too, as all great investors like Tim Rogers, Marc Fabers, are all bullish on this Yellow Metal. Therefore, I stongly recommed investing in Gold ETFs in SIP mode for averaging the price from now on, for the coming few years, to reap in good returns.

Bank Deposits of PSU Banks are offering 9.5% taxable return which does not beat the inflation also hovering around the same level, but if one is risk averse, this is best instrument, as capital is secured, and interest rate cycle shall peak with another maximum two more hikes of interest rates by RBI.

Finally on Nifty, indices will be volatile during September as events unfold on 15th (advance tax payments) 16th RBI's policy statement, 22nd and 23rd FOMC meet and statement on QE etc., 

It is a traders market only..not yet investors market in short to medium term.

Strategy for the Month: Buy 5000 Straddle of September Series, and exit on profits, 

Happy Trading!

Nifty tests 4800 level and what is Next!!!!!

In my earlier note I have mentioned that 5200 will notbe broken in hurry during August, 2011 and I was proved to be completely wrong, owing to global crisis in Europe and USA, equities as a class of investment became totally orphan.... The ease with 5200 is taken out followed by 5000 in the complete sell off in response to the global turmoil, has shifted the range too, below 5200 levels. Nifty moved in the range of 5200 and 5800 during entire 2011, both the indian indices making new yearly lows and 52 weeks lows everyday for the past 10 days, brought the values of index heavy weights like RIL to very attractive levels. With Nifty touching 4796 on last friday, and bouncing back to 4850 levels, gives rise to two scenarios.

1. Nifty having completed 38.2% retracement of entire up move, can consolidate between 4800 and 5200 for some time,before the next break down or break up shall happen.

alternatively,

2. Nifty might continue the down ward journey and test 50% retracement levels around 4200 in this leg itself, with minor bounce due to derivatives expiry and because of oversold position in all counters including Nifty.

My personal view, is that nifty shall hold 4800 level for some time, as the time wise correction came much faster than anticipated, due to external factors, and astrologically, Planet Mercury who went into retrogression from August 3rd, 2011 will become direct from tomorrow...August 23rd, 2011, which will change the direction of existing trend, as observed on number of occasions, in the last decade, by me and eminent astrologers. As we go into expiry of August Settlement this week, I hope that some relief rally shall happen from here on, and the advance tax numbers as on September, 15th followed by RBI's monetary policy announcements and action based on inflation data in the coming two weeks, will influence indian markets, as I feel that RBI might pause to raise rates for some time, as the Crude Oil has cooled off, which helps the Indian OMCs and Fiscal situation too.

Strategy for the Day: Aggressive traders can buy 4800 Straddle of September for good returns, as IVs are high, with CBOE and VIX indices shooting up. One need to have strict stop loss owing to one's risk taking ability. Will suggest Trading Strategies for this settlement separately after seeing the price action today.

Happy Trading and Investing!

Strategy for August' 2011

July Series and month ended within the range of 5400 to 5800 predicted at the beginning of the month and a strategy of selling straddle resulted in profit. RBI surprised markets and all analysts with 50 basis points raise in Repo and Reverse Repo rates in its monetary policy meeting on 26.07.2011, which brought our markets into bearishness again. The results season of Q-1 performance was mixed. While the inflation continues to raise, the pass on effect of petroleum products will be felt in the coming weeks, global markets kept their watch on US debt ceiling issue, and the resultant impact on its economy as well as Global GDP performance in the coming quarters.

The news from abroad is not encouraging either Europe or USA., as the economies and governments are battling for recovery, from the slowdown, and to avert recession. Our markets especially Nifty breached 5400 in yesterday's trade and made a low at 5378, before it finally closed above 5400, is well below July settlement closing or monthly closing. August month has no triggers on the positive side, and the Indian Parliament is in session, our markets have always fared badly, while Parliament is in Session, on most occasions, as Government will find it difficult to take any policy decision during the periods, by passing Parliament.

Therefore, I see a narrow range for the nifty, with a downward bias for this settlement, as the participation is low due to 'risk aversion'. Crude cooling off with weakening of US dollar is a good news for our markets, and if it falls further, there could be a relief rally. Gold hitting new all time highs touching $ 1678 per ounce overnight, and analysts predicting it to touch 1800 $ per ounce in this journey, points to lack of interest in equities or risky assets, by investors. I do not see Nifty breaking 5200 in hurry during the month on the down side, whereas 5650 itself will be a big challenge as trapped investors, push sales at every technical level of Nifty..viz., 5440, 5477, 5532, 5580 5612 and 5647.

One Can construct a 'Collar' buy going long on August Nifty at CMP(5430) with a stop loss below 5350, and also hedging with a put option of 5400 at CMP Rs.80/- and also selling 5500 call at Rs.63/- in the opening trade today. This Strategy shall require an investment of Rs.50000/- (approx) for margin initially.

Happy Trading.

RBI MONETARY MEASURE SHOCKER TO INDIAN MARKETS

RBI has come out with a shocker of raising the Repo and Reverserepo rates by 50 basis points, as against street's consensus expectation of 25 basis points, which has sent jitters in all interest rate sensitive sectors, like banking, automobiles and real estate sectors. Being an ex-banker, I am extremely happy with the RBI's decision to take 'inflation' bull on by its horns. The current inflation is really hurting everyone, mostly common man, the pass on effect of raise in petroleum products is yet to be built in. The Government policy to do away the subsidies gradually on Diesel, Kerosene and LPG (domestic consumers) will further make these products costly, in the months to come, which inturn will push the manufacturing, production and transportation costs, across all sectors of economy. Therefore the inflation not coming under control is well written on the wall for a year or two.

How much raise in interest rates by RBI will help in controlling inflation is a big debatable point, however, RBI has this monetary instrument in its foray to pre-empt the possible shocks, even from externally like the debt market crisis in Europe and possibly in USA??? August 2nd dead line for allowing the borrowing by US Government is already making US markets lot nervous, also has the rub off affect on all markets including our markets.

Well, as forecasted by me July series are likely to end between 5400 and 5800, the result of which will be known at the end of trading today! The strategy has given good return for anyone who has followed. I will come up with the strategy for August series in tomorrow's article, after analyzing the technical pattern of nifty at the end of the day.

Strategy for the Day:

Short term traders can go long on 5400 calls today, at the opening for a bounce and exit quickly, with profits.

Happy Trading.

Nifty levels for July 2011

June Settlement happened in style, where last week of settlement, seen a spectacular 'short squeeze' and Nifty settling exactly around 200 days EMA. FIIs have pumped in more than a billion rupees in the last fortnight. Once the settlement is behind, markets are languishing in a range of hundred points (5600 to 5700), where DIIs are net sellers on rallies though FIIs are marginally net buyers. Retail participation is completely absent, as lot of bearish sentiment is in mind, due to the huge volatility seen during June.

Results season unfolds from next week, and RBI policy in the last week, on set of monsoon as well as estimates and actual data on precipitation, will be watched closely. Inflation being very high, and Interest rates not peaked out as of now, and Government is moving towards decontrolling the other petroleum products, gradually, are all negative for risky equity investment. I am foreseeing that Nifty might not be able to move above 5750 during July, as 200 day SMA would fall around the same level, and the recent relief rally in june, made upward gaps, closest between 5600 to 5606, is held till now. Nifty should ideally consolidate in a narrow range of 5450 to 5750 during the month, and take out the 200 DMA (SMA) may be next month or so., 

One can play a short strangle of selling 5400 put and 5800 call for july series, duly protecting with stop loss, with a hedge of going short on nifty future below 5450 or long above 5750, if it gives a breakout of the range.

Happy Trading!

Nifty levels for June'11

Dear All,

2011 has seen lot of volatility in Indian Stock Markets, though developed markets like US and UK are in multi year Bull phase. From the day one our markets started falling from the peak made in November' 2010 during diwali, raising a question whether we will be in a bull phase or bear phase during 2011. Analysts are divided over the technical levels of supports and resistances, as the market started moving in its own way, since it has its own dynamics, and some pundits put it 'its own mind'.

Instead of drawing the levels for entire year or more, I wish to look at the pattern that is developed over past 5 months in 2011, and try to forecast the range and levels for June'11.

On monthly closing our markets have the following low( 5333.25 on Feb'28th 2011) and high( 5833.25 on Mar31st 2011) as far as Nifty is considered, which is taken as basis, since the volumes traded on NSE are larger, and maximum Derivatives are traded on NSE, which give indication of futuristic view of option writers.

Month    Closing on Nifty on the last trading day of the month

January     5505.90

February   5333.25

March       5833.75

April         5749.50

May          5560.15

From the above data, I am of the opinion that Nifty should move in the range of 500 points, i.e., 5333 to 5833 during the entire year. Well, once the high or low are broken decisively on monthly closing with volumes and participation, then our markets will witness prolonged bull phase or bear phase.

June Derivatives settlement, and last day of the month fall on 30th, which has lot of significance, as 2 quarter closing, for MFs to show better NAV, advance tax numbers indicating the first quarter performance from 16th june' 2011, Second half performance of economy, corporates will be influencing the markets. However, I see that markets sticking to the above 500 points range during June'11, as per the options build up at the beginning of the month. 200 DMA and confluence of other EMAs in the region of 5600 to 5640 will be a supply zone, which only if over come then there could be further upside. However, I foresee maximum 5750 not breaching during the month or by the settlement date.

Traders will have number of opportunities to make money using derivatives strategy on Nifty, which is more predictable than individual stocks performance / movement. I will be suggesting strategies in due course of time, through the blog, as academic interest, to fine tune, my knowledge of markets, forecasting skills.

Wishing all readers, happy trading.

bkvrkraao.

Union Budget 2011-12 and Our Markets

The much awaited Union Budget for the FY 2011-12 has been presented by seasoned and senior economist cum politician Dr.Pranab Mukherjee on Feb 28th which indicates the government's intention on few reforms. 

The highlights which help individuals and investors which might influence the markets are:

a. Increase in exemption limit for payment of Income Tax for various categories.

b. Increase in exemption limit for investment in Infrastructure Bonds.

c. Increase in exemption limit for Housing loans for considering them under Priority Sector lending by banks.

d. Assuring to introduce GTC and DTC from April, 1st 2012 as originally planned.

e. Reduction in age limit for eligibility to be Senior Citizen to 60years and 58years for Railways.

Announcements regarding Pension reforms, Insurance reforms, unearthing black money etc., are for consumption of gallery...as no definite set up or road map is announced. Talk about containing fiscal deficit, inflation are superfluous, without concrete steps, in view of elections to 5 states scheduled during the year 2011, are understandable from Indian Political stand point of view.

From my reading, shocks and surprises are in store as we enter the financial year on April, 1st 2011 or even after March, 18th 2011 when the budget session of Parliament comes to close, as budget has become a non-event for the past decade and Government and RBI are meddling with the Excise, Customs, Petroleum Product Prices and interest rates, when ever it is comfortable to them.

I do not understand one comparison as how Indian Crude Basket crosses 100$ already recently, while the Nimex Crude is below 100$ as of now, while Indian Crude Basket was 82$ in 2008 when  Nimex went to 144$. 

If we compare the price of Petrol in India while it is already Rs.66/- in metros, it was around Rs.50/- when Nimex crude hit all time high of 144$ in 2008. 

Both Central and State Governments are earning huge revenue in the form of excise, sales tax / VAT etc., on petroleum products, thus,   an actual increase of Re.1/- for OMCs will result in raise of Rs.3/- for the consumers. Neither the OMCs losses are compensated nor consumers are spared when ever the price of Indian Crude Basket comes down with Nimex Crude falling...Remember it came down to 33$ at one time from a peak of 144$, but conveniently, governments have ignored to reduce the prices of petroleum products and enjoyed the fruits of profits and excess revenue which is collected and is being wasted in ever increasing Non-Plan Expenditure year on year.

While coming to markets, 2011 started to be an year for Bears from Day one and as of now, our indices are trading below long term moving averages, while US markets are in bullish mode. I observe that this year 2011 may not have any bull run like what we saw from 2004 to 2007, however, will witness huge turbulence and volatility, as lot of uncertainty is hovering around the world and will be a good year for traders, with strong technical knowledge and strict discipline.

Remember 2010 saw an inflow of Billions 28$ which made markets to rally100%, while a meagre outflow of Billions 2$ have brought our markets into a structural bear markets, shows that how shallow and vulnerable our markets are. There is no market stabilization mechanism as it exists in developed markets like U.S. thus, price rigging, insider trading, go un-noticed for ever. Look at the prices of some stocks and sectors, which have corrected more than 50% in a span of one month, which were the darlings and delight of traders and punters. 

Ultimately, it is the uninformed and greedy small investor who gets trapped and looks to average his junk stocks at every dip, and lives in the hope of bull rally for exiting at profit, which always eludes him/her as a mirage!!!!

Will come up of with derivative strategies shortly.

Hello every one - Resuming the blog

It has been more than 14 months since I wrote on the blog, and in the mean while, suddenly I have suffered serious 'Heart Attack' ......Acute Coronary Syndrome on 12.12.2009, and was convalascing for the past one year, following cardiologist's advice to take care of health. By strict adherence to the change of life style and pattern, following one hour brisk morning walk, complete avoidance of fats, carboydrates, etc., I have recovered completely and am having better functioning heart and body.

I will be sharing my thoughts on the blog once again as usual periodically, to put my thoughts for my own record and review at a later date, and in case it helps readers and viewers and followers, will make me feel greatly satisfied and happy.

Wishing everyone Happy trading and investing!

bkvrkraao.

Nifty made a double top at 5181 and Sideways movement continues!!!

Nifty which corrected sharply after making an intermediate top of 5181 on 20.10.2009, to 4538 levels on 03.11.2009, reacted at a faster pace to climb above 5000 levels by November end. The upward push continued in December amidst volatility, and a reaction came exactly at 5181 now, on 03.12.2009, and yesterday correction has set in, as gains on indices and appreciation of rupee became favourable to FIIs in our markets. This week will see some sell off from Corporates, as they draw funds for meeting 'advance tax payment' due on 15.12.2009.

 

While Nifty made a higher low at 4806 on 27.11.2009, and quickly retraced entire fall, whether the present correction/fall halts above it or around the same level, will unfold the possible reversal of short and intermediate trends. From the Options data analysis it appears that puts of strike prices 5000 and 4900 are aggressively sold by bulls and 5200 calls too are shorted on rallies in current series. This indicates a range of 4800 to 5200 for the month, as at present, and some external or domestic trigger is required to break this range which decides the further trend. Any positive news on raise on advance tax numbers which will be known by 16.12.2009, will help bulls to clear the double top formed at 5181 and Nifty can easily race to 5250 - 5290 levels immediately and then to 5555 levels, where the valuations shall look stretched.

 

Many analysts are cautiously bullish and are expecting 5300 to 5500 levels during December itself looking at the liquidity situation and the firmness in global markets. However, I am little sceptical on the second target for this month and 2009, as herd of IPOs and FPOs from both private and public sector companies are in cue, to raise resources through the booming stock markets. RBI and Government of India are watchful and are concerned of flows and appreciation of rupee with huge volatility which is hurting exporters, and liquidity tightening measures like raising CRR, Bank Rate and or REPO/Reverse REPO rates suddenly can upset the sentiment of overseas investors, which might bring in the desired correction breaching the level of 4800 too.

 

Thus, one needs to be cautious, and duly hedge the portfolio, going long on 4800 puts of current month series, or participate in the markets by increasing cash levels to 25%, by selling stocks at current levels and going long on 5200 calls.

 

Nifty Range for the Week: 4800 - 5200.

Nifty above 5120 level and what next????

Well November Series ended around 5005 levels, and markets reacted to DP World Debt Crisis along with global markets next day, where Nifty touched an intraday level of 4806 and bounced back to 4940 at the end of trading last friday. Once the impact of Dubai crisis is estimated and its effect on Indian companies directly or indirectly is clear, there was a smart rally on 30.11.2009, which was the last day of the month, where nifty climbed 5000 level at the opening and closed around 5032 levels. Recovery in Global markets helped Nifty to post further gains yesterday to clear important technical levels of 5080 and 5120 with ease.

 

US markets have posted substantial gains overnight and today the opening should be good for our markets, where Nifty should clear 5155 initially and even challenge 5182 the high of 2009 so far. However, since the rally from 4806 has already given substantial gains some profit booking can be expected in the zone of 5180 to 5200. Investors and Positinal traders who have entered Nifty at lower levels can exit the futures or calls around the earlier high or alternatively hedge the long positions with 5200 puts and ride the rally which might give further upsides of 5290 or 5500 also during this month before 10th.

 

 

Nifty Range for the Day: 5050 - 5100 - 5150 -5200.

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.

Settlement Blues!!!!!!! Can we expect some relief rally now?????????

October Settlement of Nifty was exactly at 4750 which was not anticipated by any one, in my understanding, since every analyst was expecting a strong rebound from 4930 level which extended support on more than one occasion, after there was a break out on upside from the 4500 to 4740 range. Markets were on a roll till Diwali (17.10.2009) and closed around 5140 level and every one was complacent, as observed by me in my earlier postings, and giving further upsides to 5300, 5500 etc., The mute point I always re-iterate is markets are 'dynamic' and will discount future, or react to news and expectations, and generally trend reversal happens where there is large consensus among various category of players. I was also hoping that market will not break 5000 level on 'block theory' and will post further gains after brief correction to 5000 levels. Any way November Series commence from today, with lot of pessimism around and futures have closed with 24 points premium will help bears to continue shorting, as they made huge profits after Diwali.

 

RBI's hawkish stance to raise SLR by 100 basis points and increasing the provisioning against Standard Assets to be complied by September 2010, have sent zitters in banking stocks and real estate sector. Weakness in global markets also contributed for further fall, as USD strengthening became favourable to FIIs to press for sales, amongst emerging markets, including India, because the valuations of some sectors and stocks reached astronomical levels. The scanty support from DIIs have not helped the markets to hold important support levels, and already analysts and experts are suggesting deeper correction to levels of 4400 or 4200 in this run itself.

 

However, in my view, Settlement of October series is behind us, November series today will open on positive note, as markets have held the break out level of 4730 in the recent may hem which ran for 9 straight sessions without any break. US markets have posted huge gains overnight, on positive GDP data and reversed the trend, which should help a relief rally in emerging markets and back home, where Nifty to move to at least 4920 level in the coming days. Further today being the last day of October month, some fund buying in index heavy weights like, RIL, ONGC,DLF, SBI, M&M etc., should give a closing between 4850 to 4900.

 

Nifty Range for the Day: 4700 - 4750 - 4850 - 4900.

 

Strategy for the Day: Buy November Futures around 4800 levels with a stop loss at 4750 for a target of 4920.

 

 

Global Markets enter into correction mode and so our markets too become volatile!!!

Nifty struggling to hold 5000 level in past 5 trading sessions and Sensex being far away from 17000, inspite of some outstanding corporate results, indicate formation of short term top and fatigue in the bull camp. Dow has become more volatile in the recent past moving 100 points + / - range of 10000 level. Volatilityin the movement of US Dollar, make  matters worse for all markets and all asset classes in the near short term, since it is the defacto global medium of exchange. Crucial RBI Monetary Policy Statement scheduled for announcement today, shall give indication of interest rate movement, inflation tackling measures and liquidity situation which are anxiously awaited by market players, especially FIIs.

 

FIIs or Domestic corporates and infact every investor and participant, wishes stability in Exchange Rate, and predictability of its range over short to medium term for planning investments in the economy. SEBI has cleared the proposal to allow Stock Exchanges to extend trading hours from 09.00 a.m. to 05.00 p.m., after ensuring the necessary related infrastructure issues are in place, is a welcome measure for FIIs, who need longer trading hours for proper hedging the investments across globe. Indian Banking and the Clearing agents and Depositories etc., need to tune their working hours too to suite this proposal, for implementation of the new system.

 

Positive Features: Investing in stock markets, commodity markets, forex markets etc., will invite more players and participation which raises volumes on bourses. Extended hours will necessitate for shift operations for front and back office staff, which creates more job opportunities in the field. Since complexities raise as markets take cues on economy, exchange rate apart from performance of corporates, opportunities for Port folio Manager, Investment Advisors, Analysts, Private Equity Players, Venture Capitalists and Merchant Bankers will increase.

 

Since markets are becoming top heavy, Strategy of Sell on rallies to increase levels to 25% of investments is not a bad idea, as there will ample opportunities to purchase the same blue chip stocks at much lower prices in the weeks/months to come. The Monetary Policy Statement and analysis of its effect on markets shall be posted after its announcement separately.