Dalal Street Week Ahead | Stocks and Commodities

October 25, 2015
Time: 10.30 am

Dalal Street Week Ahead:

1. Last week, markets consolidated as expected.
2. Nifty future was up just by 45 points, from 8260 to 8305.
3. After breaking out 8250, the markets consolidated for a considerable amount of time.
4. Now markets are ready for a decisive trend.
5. Markets are waiting for trigger.
6. Some positive triggers are coming from overseas markets.
7. ECB's readyness for another stimulus, China interest rate cut, good corporate results from US (particularly from technology companies) are all acting as triggers on the upside.
8. But our markets will become volatile due to expiry next week.
9. Bihar election results will be the key trigger for our markets but that will be only in the first week of November.
10. Until then markets will be volatile and corporate results will dictate the trend.
11. Next week, Axis Bank, HDFC, Bharti Airtel, Maruti, Lupin, Yes Bank are the key companies to announce results next week by Thursday.
12. After the expiry, on Friday, Larsen and ICICI Bank are the two important companies to announce the results.
13. So it will be corporate results dominated week.
14. On Tuesday, Apple is expected to declare very good results and that may add bullishness in Nasdaq.
15. German Business Climate Index and US New Home Sales data on Monday, UK GDP data, US Consumer Confidence data on Tuesday, US Q3 GDP data and US Pending Home Sales data on Thursday are the key data to watch next week.
16. Nifty is expected to trade between 8200 and 8400 until expiry.

Follow Up:

1. Last Week I suggested selling Bank Nifty 17000 Put and 19000 Call at a combined premium of Rs 77.
2. But it closed at a combined premium of only Rs 17, giving Rs 60 per share as profit in just one week.
3. This translates into a profit of Rs 1500 for the investment of Rs 30000 (approximate Span Margin). This has given 5% return in one week.
4. Also I suggested selling Nifty 8000 Put and 8500 Call at a combined premium of Rs 30.
5. On Friday the combined premium was only Rs 6.
6. This has given a profit of Rs 600 per lot, giving 4% return for the Span Margin of Rs 15000.
7. Since this is a low risk strategy compared to Bank Nifty, this is an excellent return.
8. One may continue to hold these positions until expiry.

Strategy for this week:

1. Bank Nifty is expected to expire between 17000 and 18500.
2. Since Bank Nifty closed around 17950, it is not likely to fall 950 points in 4 days.
3. It is possible only if Bank Nifty falls more than 250 points everyday.
4. Since the markets are in some bullish trend, FIIs started buying in Cash Market, the fact that Bank Nifty has been trading above 17200 for the whole series so far, Bank Nifty surely will not fall below 17000.
5. At the same time, Bank Nifty crossing 18500 is also difficult.
6. Axis Bank and Yes Bank are due to declare results and PSU Banks are sluggish so far.
7. There has been no momentum in PSU Banks, so the upside will be very much limited.
8. So selling 18500 Call makes sense.
9. Bank Nifty 17000 Put and 18500 Call have closed at a combined premium of Rs 31. (I actually sold 17200 Put and 18500 Call as I decided to take slightly higher risk)
10. Nifty is likely to expire between 8200 and 8400.
11. So one can sell Nifty 8150 Put and 8450 Call which are closed at Rs 10 and Rs 5.

Note: 

1. Trading in Bank Nifty has higher risk compared to trading in Nifty.
2. Investors must keep appropriate stop losses or enough money to create additional positions in case if markets move violently.
3. The prices quoted here is Friday's closing price, when you actually create position on Monday, the prices may vary.
4. But the variation will not be very high as we create both side positions.
5. We give the same suggestions slightly earlier to our paid customers.

DISCLAIMER

The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Readers are advised to consult their Financial consultants before taking any position. The analysis is partially Technical and partially Fundamental. The views expressed are the Author's own views.