Nifty opened with yet another gap down, got a lot of short covering only to reverse a lot of gains again. Volatility is extremely high and markets are in a mode of panic. The fall below 5000 has been ominous and as I mentioned yesterday, each fall now goes on capping the pending upside on Nifty. Today, we had the 2nd consecutive close below 5200 and a close below 5092; there may be one more round of panic selling before we see some relief on the bourses.
Whilst Puts gained a remarkable percentage today, what was striking is the rise in call premiums of 53/54/5500 Strikes during the second recovery at 5050 levels. We need to realize that a lot of this selling is due to obligations of hedge funds on western bourses. Hedge funds have been heavily leveraged with long positions and the bloodbath that has followed is bringing a lot of margin calls. Fundamentally, we should be around the 5200-5400 band given the macro-economic outlook. However, markets have a tendency to overvalue or undervalue securities at any point of time (rarely fair values). Moreover, the political instability in the monsoon session of parliament is doing nothing to assure markets of better prospects;
As of now, I still maintain that expiry target of August series is around 5400 levels and we should start seeing some positive changes by the end of this month. The upside is capped to 5944 for rest of 2011 and you can refer to yesterday's outlook on how this can change
Major Levels For This Month
For Downside: 4920-4950-5020-5050-5092-5125
For Upside: 5180-5225-5280-5320-5348-5378-5408
We have already opened 4950 this morning and if Nifty does not take out 5092 on EOD basis tomorrow, sub-4900 levels will be a reality. It is good to see banks staging a pullback [granted that a lot of gains are being reversed by EOD] LnT also is managing a pullback but the main culprit for Nifty seems to be Reliance. Unless Reliance turns around well, Nifty values will continue to be lower.
We need a close above 5225 by the end of this week and right now I am pretty optimistic about the same. Tomorrow's EOD will decide the fate of Nifty for this week
Whilst Puts gained a remarkable percentage today, what was striking is the rise in call premiums of 53/54/5500 Strikes during the second recovery at 5050 levels. We need to realize that a lot of this selling is due to obligations of hedge funds on western bourses. Hedge funds have been heavily leveraged with long positions and the bloodbath that has followed is bringing a lot of margin calls. Fundamentally, we should be around the 5200-5400 band given the macro-economic outlook. However, markets have a tendency to overvalue or undervalue securities at any point of time (rarely fair values). Moreover, the political instability in the monsoon session of parliament is doing nothing to assure markets of better prospects;
As of now, I still maintain that expiry target of August series is around 5400 levels and we should start seeing some positive changes by the end of this month. The upside is capped to 5944 for rest of 2011 and you can refer to yesterday's outlook on how this can change
Major Levels For This Month
For Downside: 4920-4950-5020-5050-5092-5125
For Upside: 5180-5225-5280-5320-5348-5378-5408
We have already opened 4950 this morning and if Nifty does not take out 5092 on EOD basis tomorrow, sub-4900 levels will be a reality. It is good to see banks staging a pullback [granted that a lot of gains are being reversed by EOD] LnT also is managing a pullback but the main culprit for Nifty seems to be Reliance. Unless Reliance turns around well, Nifty values will continue to be lower.
We need a close above 5225 by the end of this week and right now I am pretty optimistic about the same. Tomorrow's EOD will decide the fate of Nifty for this week
1 comment:
Hi Nagraj,
Nice to read your blog.
Even i do Trading on Nifty FnO but just based on information from mmb.
Can i request you to advice me books to start with Nifty FnO.
Thanks
Pawan
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