Pre Market Report, May 16, 2014 | Stocks and Commodities

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May 16, 2014
Time: 7.0 am

Pre Market Report:

1. US markets fell.
2. Most Asian markets are down.
3. SGX Nifty is trading around 7100.
4. All these are irrelevant today.
5. Only election results will decide the course of the day.
6. Continued FII flow in cash market, India VIX future trading at 40% discount, highest voter turnout in Indian election history (highest turnout equals to decisive mandate, last time in 1984 highest turnout, Congress came with good majority), India VIX trading around 37 (which is not very high considering the event risk), uniformity in all Exit polls, possible alliances between parties post poll like BJD, AIADMAK, NCP and BJP, all pointing towards the decisive mandate to NDA.
7. What will happen in today's market for stocks, we do not know, but we know one thing for sure, India VIX will crash by the end of the day, possibly by more than 20%.
8. Option premiums are likely to collapse at deep out of money strikes.
9. Can you imagine, Bank Nifty 9100 Put option, which is more than 4000 points from the spot, trading at Rs 7.45?
10. Our expectation is that markets will start lower, volatile until noon, then move higher towards 7400 to 7500.
11. Let us see our prediction goes right or not.