“The market looks weak, a bounceback is expected and the benchmark indices may end flat.” That’s what we said last week. And look at the Nifty position.
Heavy volatility persisted, but the Nifty closed around 8 points in the positive, compared to the previous week’s close. And from the state of affairs in the equity market, things continue to look weak. The 14% correction in the equity market may have hurt many an investor.
More correction may be expected. Contrary to what the market thinks, open interest in stock futures is down by hardly 10% compared to selloffs witnessed during previous falls. So, unwinding pressure was limited.
What does this suggest? Maybe it’s a sign of caution. In the May ’06 correction, F&O unwinding was to the tune of 50% and more. Maybe, this will lead to another round of correction. According to technical charts, a bounceback was expected.
But then, statements from the government stopped the bulls from gaining any more territory. Expect more action on Monday, when the government is scheduled to release Index of Industrial Production (IIP) data for January. Common signals thrown from the F&O segment seem to be running haywire.
The putcall ratio (PCR) seems to rise on one day and drop the other. The discount to the spot seems to change arbitrarily. There seems to be no consistency in such numbers. It’s best to avoid such statistics at this point in time. You never know what may happen. Remember, how smooth things looked just ahead of the Budget in the F&O charts?
And then suddenly, everything changed overnight. So, depending on them seems to be futile at this point in time.
As far as your positions are concerned, some relief was witnessed during the week. But nobody wanted to take chances. It is time to book losses in your March Nifty positions, which are bleeding.
That’s where 50% of your losses are coming from. Use an upmove to exit this position. Also, events ahead don’t look too good. For instance, there may be some more liquidity tightening at the upcoming Bank of Japan meeting, scheduled this week.
So, global markets may enter the weak domain. Sell off your April futures, which are making money for you at this point in time. You will always get it lower.
It’s time to do some covering up on the individual stock futures. Buy Reliance and Satyam put options. Based on Friday’s closing price, Reliance 1290 March PA was available around Rs 20.
Satyam 420 March PA was available at around Rs 8. This will help hedge your positions. Fresh positions, at best, can be avoided for another week.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment