Market Wise, Be Wise…!!

By: CA. Amit Chandak, Nagpur

The week gone by:The market posted gain of 1.50% in previous week. Market reacted positively to the global economic data released over the previous week. The data released worldwide was more or less stronger than expected. US Initial Jobless Claims we recorded much lower below the level of 400K at 385K against the expectation of 390K, whereas the same was 406K in the previous release. Better than expected numbers of jobless claims in US as well as stronger economic data released in Europe has sparked fresh hopes of economic recovery. The stock markets worldwide have reacted positively to the data so released. European Markets already traded new highs whereas emerging market also traded new highs during the week including Nifty. However, Japanese data on front of employment still remain worrisome. Japanese Stock Market still remained under pressure and could not performed in line with global markets. Manufacturing data released in China and Europe shows expansion in manufacturing activity. Back at home, domestic markets also traded new life high and Nifty closed at its highest ever level. Reserve Bank of India has kept interest rate unchanged at 4% and maintained accommodative stance. Moreover, Quarterly GDP also recorded at 1.6% against the expectation of 1%. The benchmark indices gained approximately 1.50% percent whereas banking index gained 0.43 %. The changes in benchmark indices and Bank Nifty week-on-week areas under

During the week, sectoral rotation took place whereby Interest rate Auto, Metal, Financial Services and Realty sector outperformed the market and Banks, Pharma, IT and FMCG underperformed the market. Nifty closed at near record high level and hold the level of 15650 whereas Sensex and Banknifty also closed near 52,100 and 35,300 respectively. VIX closed at 15.94 at the end of the week. On currency front, INR remained sideways to positive against dollar. Dollar likely to subdue against global currencies in upcoming sessions.

The Week Ahead:The level of 15,350 expected to provide good support in the coming week. VIX stands at 15.94 on closing. The VIX value of Nifty in points is 346 points, which denotes, Nifty can move 346 points either side during the week. Therefore, as per VIX, level of 16,000 expected as resistance on upper side, and support at 15,350.

Banknifty underperformed the benchmark indices. On technical charts, the Banknifty had a good breakout and had buoyed structure. Longs suggested for Banknifty on support levels. Levels to be watched in banknifty are 35,800 and 36,200 on upside, whereas on lower side, 34,700 and 34,300 seems good support.

On derivatives front, the higher open interest concentrated at strike 16000CE and 15500PE, suggesting range for movement of market in very short term.

The UPCR reads at 0.81 and at option chain undergone Calls Blast over Puts, therefore, Nifty may see higher levels followed by profit booking in the week ahead.

The major players, who generally dominate the market direction, are FIIs. The change in trade sentiments of FII in derivatives segment is worth noting to predict the market movements. A summarised decoding of trades undertaken by FIIs (in number of lots) is mentioned as under:

On analysing the trades made by FIIs in derivatives segment, it seems that the FIIs added long bets on Index Put options whereas Long unwinding seen in stock futures, , Index Call Options and Index Futures.

FIIs reshuffled there position and seems booked out the stock futures significantly. As FIIs are reduced long on stock Futures significantly, stock specific movement may prevail in addition to movement on account of Q4 results. Hence profit booking on upper levels expected

As discounting for Q4 results likely to witness in market, traders advised to keep hedged position as market volatility increased.

(The author is Chartered Accountant and Market Expert. Views share by the author are based on academic study and shall not be construed as trades or investment advice. Readers are suggested to consult their financial adviser before acting on the aforesaid view. The author has no position or holding in the shares referred in above)