Pre Market Report, October 18, 2016 | Stocks and Commodities

October 18, 2016
Time: 8.35 am

Pre Market Report:

1. US markets closed lower despite some good economic report.
2. Asian markets are mostly higher.
3. That is because of selling exhaustion, not because of buying interest but because of 'no interest in selling at low levels'.
4. SGX Nifty is trading about 30 points higher and about 60 points higher than the intraday low here yesterday.
5. The reason may be the same, since Nifty is very close to 100 DMA, close to August low, close to osychological level of 8500, that is the place short sellers would have squared up their shorts.
6. The trouble will start when 8500 level is broke.
7. Futures Vs Spot premium has come to zero in Nifty and about 20 points in Bank Nifty.
8. Usually Nifty future will have 30 points premium and Bank Nifty will have 100 points premium.
9. In the past many times, markets have bottomed out when future premiums have come down to this level.
10. In fact 8500 level in Nifty is a right level to invest even in Cash market.
11. Markets may not fall much from that level.
12. May be another 300 to 500 points maximum, that is not a big deal for Cash market investors, moreover they can buy some more quantities at lower levels.
13. Though FIIs were net sellers in Cash market, two things are important.
14. One they have reduced the selling compared the days before.
15. Second, in Futures market, they have bought stock futures much more than what they have sold in Cash Market.
16. Now with this selling exhaustion, market direction will be determined by corporate results.
17. There will be some action in Reliance today or tomorrow ahead of Thursday evening results.
18. Yes Bank will also see some action as it declares results during the market hours on Thursday.
19. Yesterday ICICI Bank shot up by 7% due to Essar news and that alone contributed 200 points in Bank Nifty.
20. Despite 10 out of 12 Bank Nifty stocks falling, Bank Nifty closed higher.
21. So the same way, corporate results will contribute to the indices.
22. Just for example, Axis Bank has fallen from 640 to below 520, so there will be huge short position, so in case if it declares good results, short covering rally will come just like ICICI Bank's short covering yesterday.
23. So next 8 trading sessions in this expiry will see lot of volatility.
24. Yesterday once again India VIX shot up more than 5%.
25. Nifty future should trade between 8500 and 8620.