Pre Market Report, February 4, 2015 | Stocks and Commodities

February 4, 2015
Time: 8 am

Pre Market Report:

1. I was too busy to write 'Post Market Report' yesterday.
2. But I missed an opportunity to give my views, people may not believe if I give now as many things are in public domain now.
3. First I mentioned that RBI will cut the rates or tinker with other things, they cut SLR by 50 basis point.
4. So RBI policy has become a non event and Bank Nifty was trading slightly positive just after RBI policy.
5. But it was PNB results that spooked the markets. Such a bad results, it fell 8% on top of 5 - 6% due to BoB results.
6. Most people think Bank Nifty has fallen by 600 points because of PNB.
7. The truth is that it was the selling in HDFC and HDFC Bank that brought the markets down.
8. HDFC and Axis together contributed about 30 points fall in Nifty yesterday, while Nifty fell only 40 points.
9. Yesterday evening I told my friend, Bank Nifty has bottomed out.
10. Reason 1: All the negatives have been factored in as all key results are out except SBI results (which is due next Friday).
11. Bank Nifty has fallen nearly 1600 points in few trading sessions.
12. Third, Bank Nifty has corrected about 60% of the rise. (The low was 18300 and high was 21000, both approximate figures) This is very close to 61.8% Fibonacci retracement which is a very strong support.
13. Most importantly, when the markets fall, VIX will rise (as both are negatively correlated). But yesterday despite markets fall, VIX actually fell. This is a sign that markets bottom out.
14. Things have changed so fast to support my view, petrol prices were cut surprisingly yesterday night. (They did not cut on Jan. 1 when crude prices fell, now they cut when crude prices are rising. So say thanks to Delhi elections)
15. US markets shot up by more than 300 points after 200 points rise yesterday.
16. So Asian markets are all up.
17. SGX Nifty is trading around 8660 which is about 50 to 60 points higher than yesterday's close here. SGX Nifty hit a high of 8871.50.
18. Follow up: Yesterday at 10.45 am, Bank Nifty was trading closer to 20000, the premium on 20000 put and call was around 1150. Despite such a big fall in Bank Nifty, this position is still in profit. I stopped giving this kind of ideas as the follow up during the market hours is very difficult. When the Bank Nifty started falling significantly due to bad results from PNB, one should have sold Bank Nifty 21000 Call or 21500 Call in order to protect the downside. I sold 21000 Call at Rs 120 which closed around Rs 80, I will maintain the stop loss at Rs 120 for this position. This stop loss would get triggered only when our 20000 put & call position becomes a good profitable trade. How much profit will depend on the time factor, not only price factor.
19. Since the Bank Nifty fall was so fast and furious, we do not know how much short is their in the system. If there is any short covering, Bank Nifty should rise 200 to 300 points easily.
20. Nifty future took support at 8780 yesterday and that should be the support for today as well as for the days to come.
21. Resistance will at 8920 today.