Yesterday’s market almost took with it a part of the bull’s spirit. Not all, but it’s one of those days where one sits back and thinks a part of me or something around just went amiss.
No one saw yesterday coming, no one. The amazing pullback that we saw on Tuesday of 110 points from the day’s low on the Nifty to close at over 4500 convincingly would have made all (including myself as I wrote in my article yesterday) believe the momentum was back with the bulls.
But I humbly accept I got it wrong; at least for the moment. Acknowledged is the fact the Down overnight fell by over a 100 points on Tuesday and Asia and Europe had a tepid day of trade, but just as we were singled out as beneficiaries on the way up, we are being punished by that same token now.
The golden egg, liquidity, has not been laid for 4 days now. After selling $250 mn and $90 mn respectively on the Index and Stock Futures respectively on Tuesday, FIIs followed it up once again on Wednesday by selling $270 mn on the Index Futures. The bad news does not end there. In the cash markets too FIIs have sold $150 mn and $75 mn respectively on Tuesday and Wednesday.
There is massive unwinding pressure on the Nifty as mentioned by the selling on the Nifty Futures by the FIIs. The premium picture over the last 3 days has moved in the following way for June and July – 16 and 23 points on Monday that came down to 11 and 16 points on Tuesday, to a discount of 3 points in June and a premium of 10 points in July yesterday.
The pressure on unwinding in stock futures was also evident with them shedding 6.6 crore shares in OI. In one day, the domination of the futures where the value of the transactions were double that of the options, in trade yesterday the value of the options transaction increased by Rs 1557 crore and the value of the futures transactions fell by Rs 2646 crore.
Things this time are looking different, and I am afraid not for the better. But like I said, all may not be lost, just yet (yes supports by the 100’s of points are being broken everyday on the Nifty but one can never rule out a sudden reversal of liquidity for people to start talking 4800 on the Nifty again, remember after all it is a 10% move, and since we have been talking about it getting hit pre budget, should that still hold [however improbable it seems currently], we have 12 sessions to do it in).
The situation is similar to what it has been for a couple of weeks save the last few days. We kept stating that the increasing importance of the 4700 Call meant that if it were decisively taken out one would see 4800 within the blink of an eyelid.
The corollary took place yesterday. As I have been maintaining, the base of this market post May 18th has been 4300/4400 on the Nifty. With 4400 serving as a very dogged support till the last one hour of trade, it finally relented on the unwinding pressure and went to within 30 points of breaking 4300 as well.
This can happen when a trend line or the backbone support or resistance of a rally gives way after resisting a lot, so it was not surprising one bit to see the weakness creep into the markets in the last one hour.
The Nifty OI PCR too from the 1.17 levels 3 days back has fallen to sub 1 level at 0.91; this has been accompanied by the Nifty IVs climbing to 44% and the NSE Vix to 62%, up nearly 50%.
All this coupled with the increase in value of the options transactions is for the first time since March 9, giving a bearish undertone, which is not a good thing for traders when the screens start ticking at 9:55 am today.
The rise to 4700 on the Nifty gave way to caution which gave way to skepticism and then a bit of uncertain fear on whether the honeymoon is over? It sure would seem like that when one sees a 20% cut in OI (7 lakh shares nearly) on the higher support of this rally, 4400 (the 4500 Puts too shed 4.5 lakh shares in OI or 13%).
The Call writing has assumed uncanny proportions with the Calls from 4300 to 4800 all adding significant OI between 2.2 and 11.4 lakh shares in OI, the maximum coming in at the 4400 level. The support has now turned resistance. (4600 Calls have added 7.3 lakh shares in OI or 22%).
As far as global cues are concerned, still wait and watch mode for the S&P to break 945/950 convincingly. In the US financials slid after S&P reduced its credit ratings on 18 US banks, including Wells Fargo & Co., Capital One Financial Corp. and KeyCorp, citing tighter regulation and increased market volatility.
Keycorp dropped as much as 13%. Five of the lenders, Carolina First Bank, Citizens Republic Bancorp Inc., Huntington Bancshares Inc., Synovus Financial Corp. and Whitney Holding Corp., were cut to “junk” status. High-yield, high-risk, or junk, debt is rated below BBB- by S&P.
Obama meanwhile laid out ‘Sweeping Overhaul’ of Financial Rules - would create an agency for monitoring consumer financial products, make the Federal Reserve the overseer of companies deemed too big to fail, and bring hedge and private equity funds under federal scrutiny.
In other news JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among 10 of the nation’s largest banks that repaid $68 bn to the U.S. Treasury in a step toward shedding government restrictions on lending and compensation. JPMorgan, the second-largest U.S. bank by deposits, repaid $25 bn while Goldman Sachs and Morgan Stanley each gave back $10 bn. A confluence of this news saw the US markets close flat.
The silver lining in trade yesterday was a buy of $120 mn by DIIs. The question is will it persist and will FIIs return? That is the answer on which the Nifty’s next moves to either 4300 and below or 4500 and higher are predicated.
No one saw yesterday coming, no one. The amazing pullback that we saw on Tuesday of 110 points from the day’s low on the Nifty to close at over 4500 convincingly would have made all (including myself as I wrote in my article yesterday) believe the momentum was back with the bulls.
But I humbly accept I got it wrong; at least for the moment. Acknowledged is the fact the Down overnight fell by over a 100 points on Tuesday and Asia and Europe had a tepid day of trade, but just as we were singled out as beneficiaries on the way up, we are being punished by that same token now.
The golden egg, liquidity, has not been laid for 4 days now. After selling $250 mn and $90 mn respectively on the Index and Stock Futures respectively on Tuesday, FIIs followed it up once again on Wednesday by selling $270 mn on the Index Futures. The bad news does not end there. In the cash markets too FIIs have sold $150 mn and $75 mn respectively on Tuesday and Wednesday.
There is massive unwinding pressure on the Nifty as mentioned by the selling on the Nifty Futures by the FIIs. The premium picture over the last 3 days has moved in the following way for June and July – 16 and 23 points on Monday that came down to 11 and 16 points on Tuesday, to a discount of 3 points in June and a premium of 10 points in July yesterday.
The pressure on unwinding in stock futures was also evident with them shedding 6.6 crore shares in OI. In one day, the domination of the futures where the value of the transactions were double that of the options, in trade yesterday the value of the options transaction increased by Rs 1557 crore and the value of the futures transactions fell by Rs 2646 crore.
Things this time are looking different, and I am afraid not for the better. But like I said, all may not be lost, just yet (yes supports by the 100’s of points are being broken everyday on the Nifty but one can never rule out a sudden reversal of liquidity for people to start talking 4800 on the Nifty again, remember after all it is a 10% move, and since we have been talking about it getting hit pre budget, should that still hold [however improbable it seems currently], we have 12 sessions to do it in).
The situation is similar to what it has been for a couple of weeks save the last few days. We kept stating that the increasing importance of the 4700 Call meant that if it were decisively taken out one would see 4800 within the blink of an eyelid.
The corollary took place yesterday. As I have been maintaining, the base of this market post May 18th has been 4300/4400 on the Nifty. With 4400 serving as a very dogged support till the last one hour of trade, it finally relented on the unwinding pressure and went to within 30 points of breaking 4300 as well.
This can happen when a trend line or the backbone support or resistance of a rally gives way after resisting a lot, so it was not surprising one bit to see the weakness creep into the markets in the last one hour.
The Nifty OI PCR too from the 1.17 levels 3 days back has fallen to sub 1 level at 0.91; this has been accompanied by the Nifty IVs climbing to 44% and the NSE Vix to 62%, up nearly 50%.
All this coupled with the increase in value of the options transactions is for the first time since March 9, giving a bearish undertone, which is not a good thing for traders when the screens start ticking at 9:55 am today.
The rise to 4700 on the Nifty gave way to caution which gave way to skepticism and then a bit of uncertain fear on whether the honeymoon is over? It sure would seem like that when one sees a 20% cut in OI (7 lakh shares nearly) on the higher support of this rally, 4400 (the 4500 Puts too shed 4.5 lakh shares in OI or 13%).
The Call writing has assumed uncanny proportions with the Calls from 4300 to 4800 all adding significant OI between 2.2 and 11.4 lakh shares in OI, the maximum coming in at the 4400 level. The support has now turned resistance. (4600 Calls have added 7.3 lakh shares in OI or 22%).
As far as global cues are concerned, still wait and watch mode for the S&P to break 945/950 convincingly. In the US financials slid after S&P reduced its credit ratings on 18 US banks, including Wells Fargo & Co., Capital One Financial Corp. and KeyCorp, citing tighter regulation and increased market volatility.
Keycorp dropped as much as 13%. Five of the lenders, Carolina First Bank, Citizens Republic Bancorp Inc., Huntington Bancshares Inc., Synovus Financial Corp. and Whitney Holding Corp., were cut to “junk” status. High-yield, high-risk, or junk, debt is rated below BBB- by S&P.
Obama meanwhile laid out ‘Sweeping Overhaul’ of Financial Rules - would create an agency for monitoring consumer financial products, make the Federal Reserve the overseer of companies deemed too big to fail, and bring hedge and private equity funds under federal scrutiny.
In other news JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among 10 of the nation’s largest banks that repaid $68 bn to the U.S. Treasury in a step toward shedding government restrictions on lending and compensation. JPMorgan, the second-largest U.S. bank by deposits, repaid $25 bn while Goldman Sachs and Morgan Stanley each gave back $10 bn. A confluence of this news saw the US markets close flat.
The silver lining in trade yesterday was a buy of $120 mn by DIIs. The question is will it persist and will FIIs return? That is the answer on which the Nifty’s next moves to either 4300 and below or 4500 and higher are predicated.
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