Dalal Street Week Ahead | Stocks and Commodities

November 15, 2015
Time: 11.15 am

Dalal Street Week Ahead:

1. In October series, in the first three weeks, we had lot of good news.
2. First Fed indicated that it was not in hurry to hike interest, then RBI cut interest rates by 50 basis points, China cut interest rates by 25 basis points, ECB announced that it was ready for another stimulus, commodities stabilised, etc.
3. Starting from fourth week of October, we have been pounded by all negative news.
4. BJP lost Bihar election badly, IIP and Inflation data were bad, economic data from China has been bad, Fed announcement that it is likely to hike the rate in December, commodities falling again and now the terrorist attack in Paris. 
5. It seems that Nifty will surrender all the gains it made from September low.
6. On Monday Asian markets will react negatively for Paris attack, US futures were down by 1% after the markets closed there, Nifty is likely to break 7700.
7. Net institutional selling of over Rs 700 crore on Friday, US markets down by more than a percent on Friday, Paris attack will all aid the downward move.
8. Last few trading sessions, markets recovered from the lows, but it is not likely tomorrow.
9. Reforms in FDI in 15 sectors has helped a little bit, otherwise our markets would have gone below 7550, the September low, by this week.
10. WPI inflation data will be out at 12 noon and that may affect the banking stocks.
11. So real selling in Banking stocks will come in the afternoon after Europe opens.
12. Of late, PSU Banks have been doing well due to the improvement in their NPAs. FDI reform is helping Banks like Axis, Kotak and Yes Bank.
13. After markets close, export import data will be released.
14. On Tuesday. Inflation data is due from UK and US. German Economic sentiment data is also due.
15. On Wednesday, building permits data is due from US.
16. On Thursday, Manufacturing index data is due from US.
17. On Friday, there are are no market moving economic data from any country.
18. Results season has come to an end and hence stock specific moves will be less.
19. Except WPI data, we do not have any important economic data next week.
20. So we will mostly follow the global cues.
21. Towards the end of the week, either Thursday or Friday, there may be a big move upside (counter trend move)
22. Usually near the end of the third week, there will be a big counter trend move and the move will severe in case of down move, but since the trend now is down, the counter trend should be up which may not be very big.
23. I squared off 7700 Put and shifted half to 7600 Put and half to 7500 Put. On the other side, I sold Call options from 7900 to 8200.
24. Tomorrow I plan to square off all the Put options and corresponding Call options as long as there is profit. Means the profit in Calls is more than the loss in Puts.
25. Things may turn ugly as we approach Fed event.
26. Even the defensives are coming under selling pressure now. 
27. First it was Pharma and now it is IT. FMCG anyway not doing well due to ITC cigarette business.
28. There will be panic if Bank Nifty breaks down.
29. Last Monday, Bank Nifty hit a low of 16625 and if that is broken the Bank Nifty can fall to 15800-16000 region. It may not happen in one day. It may happen before expiry.
30. There is a possibility this expiry will be at the lowest in 2015.
31. So people with long positions should trade with strict stop losses.
32. Since the markets are heavily oversold, any time technical bounce may come.
33. So I will not advise to go short tomorrow that too when the markets are expected to open gap down.
34. Any intraday recovery, one may consider selling 7900, 8000 Call options. Though the profit will be less, time value will work in your favour.
35. Any intraday recovery in Bank Nifty, one can sell 17800, 18000 Call options.
36. Bank Nifty December expiry 15200 Put option is trading at Rs 80, which means that the people who buy this option will make money only if Bank Nifty expires below 15120 on December 31.
37. So you can see the level of bearishness in December expiry.
38. Nifty is expected to trade between 7500 and 7900 this week if there are no more bad news, with downward bias.