Pre Market Report, August 14, 2017 | Stocks and Commodities

August 14, 2017
Time: 8.30 am

Pre Market Report:

1. Asian markets have turned around.
2. SGX Nifty is trading around 9780.
3. Last week correction is a classical bull market correction.
4. It reminded me 2008 January correction.
5. In just four trading sessions, Nifty lost about 400 points.
6. In just 4 trading sessions, Nifty moved from 'Over Bought' level to 'Over Sold' level. Means RSI moved from 'above 70' to 'below 30'
7. India VIX shot up by 10% just in one day, topping 15.
8. Remember India VIX has to be below 15 for a sustained bull market.
9. Now everyone want to know one thing, 'Is today's upmove is a trend reversal or dead cat bounce?'
10. Surely today's upmove is not a trend reversal, at the same time it may not be a dead cat bounce also.
11. But, in my opinion, it is a technical bounce.
12. Markets may start consolidating for few more days.
13. We will decide only after 2 or 3 trading sessions about the trend.
14. First, in July India out performed world markets due to P Note ban in derivatives.
15. Second, our corporate results have not been that good in the last few days. On Friday, SBI, Bank of Baroda, Sun Pharma and many other good companies declared bad set of numbers.
16. Third, in addition to US-North Korea issue the world markets are facing, we have additional problem of Indo-China issue.
17. So markets may not move significantly higher as all technical factors are also not in favour.
18. DIIs buy figure matched FIIs selling figure on Friday.
19. But in F&O, FIIs have shorted heavily in Index Futures.
20. Since last Friday Nifty future high was 9800, we need to see whether that level is taken out.
21. Nifty will bounce back, then will consolidate, Option premiums will collapse, and then towards the end of the series again markets may show significant moves.
22. So Nifty may trade between 9700 and 9900 for next few days.
23. Do not go long on this bounce back.
24. If you want to go short with proper hedging, you can do.
25. May conside shorting Nifty future if Nifty future trades between 9800 and 9820 (current series). Short in September future between 9850 and 9870 and then sell September 9800 Put and December 9000 Put double the quantity.
26. In this strategy, we will be safe upto 10150, which is not likely to be hit in the next one month.
27. Bank Nifty may underperform initially, WPI Inflation data around 12 noon may change that.
28. Today evening CPI Inflation data is due.
29. IIP data was very bad.
30. A combination of low IIP data and Low Inflation data will trigger the expectation of further rate cut by RBI.
31. That may support the Banking and Auto stocks.
32. Real Estate stocks may come under pressure as SEBI is stepping in to probe some Real Estate companies.
33. Nifty future may trade between 9720 and 9820.