HAPPY NEW YEAR TO ALL OUR VIEWERS

   

MARKET OUTLOOK AND WEEK AHEAD

Equity benchmarks continue to witness sharp decline as it closed lower by more than 2.5% during previous week on the back of weak global cues. Index closed lower for four out of the five trading sessions during previous week. Nifty formed an intraweek high of 10408 on Monday's session and kept on dragging lower as the week progressed. Index breached its recent low (10138) and formed a seven month’s low of 10004 on Friday’s session. Broader markets also continue to witness sharp decline as the Nifty Mid cap and small cap indices closed lower by 1.7% and 4.2% respectively.
	The S&P BSE Sensex closed at 33349, down by 966 points or 2.8% while the NSE Nifty closed at 10030, down by 273 points or 2.7% for the week.
	Among the Nifty Constituents, Bharti Airtel, HDFC, Coal India, Bajaj Finance and Titan were the major gainers for the week.
	Whereas the Asian Paints, ITC, Axis Bank, Indusind Bank, State Bank of India, Yes Bank, ONGC, Reliance Industries, Cipla, Sun Pharma, Grasim, Ultratech Cement, Infosys, TCS, Tech Mahindra, JSW Steel and Zee entertainment were the major draggers for the week.
	Indian benchmark indices traded lower during the week amid negative global cues and weak corporate earnings.
	On the data front, India's fiscal deficit touched 95.3% of budget estimate in H1FY19, compared with 91% at the same time last year as per media sources.
	On the news front, as per a Supreme Court decision, only vehicles compliant with BS-VI emission norms would be allowed to be sold in India with effect from 1st April, 2020. In real estate, as per Anarock Capital report, NBFC's exposure towards the sector is 7.5% accounting for 1.65 lakh crore.
	In oil and gas sector, the government is planning gas pricing reform by permitting trading of all domestic supply on a local exchange, slated for year-end opening. SEBI has formalised in a circular certain provisions relating to mutual fund expenses and scheme performance disclosure.
	It has laid down that all scheme expenses be paid out from scheme accounts only and not from the AMC books.
	Brent Crude was down by ~4.2% to US$ 76.44/barrel as compared to previous week's close of US$ 79.8/barrel.
	Gold prices went up by 0.73% to $1234/ounce as compared to last week's closing price of $1225/ounce.
	Bond yields closed slightly lower at 7.88% as against last week's closing of 7.93%. Week Ahead Historically, within a structural uptrend, secondary corrections of 13-15% have been in a norm. Time wise, since the beginning of CY18, each directional leg in the Nifty has lasted for seven to eight weeks. In the present scenario, Nifty has already corrected 15% over the past eight weeks. As we expect the index to maintain its rhythm, and we approach price/time wise maturity of ongoing decline, we expect Nifty to pose a pull back from the vicinity of 9800 levels. However, for a reasonable pull back to materialize, Nifty need to close above 10200 levels and start forming higher high and higher low in the daily time frame on a sustained basis. Nifty has a major support around 9800 levels being the confluence of the following technical parameters: 38.2% retracement of February 2016-September 2018 rally (6825-11760) at 9870. 50% retracement of December 2016-September 2018 rally (7893-11760) at 9820. Swing lows of March 2018 at 9951 levels. Results during the coming week: Colgate, LIC Housing, Tech Mahindra, Bank of Baroda, Dabur, Tata Motors, Vedanta, Lupin, Marico, HPCL, Axis Bank, Hindalco. Important data releases in next week: US: Markit US Manufacturing PMI (US) EU: GDP SA QoQ (3Q), GDP SA YoY (3Q), CPI Core YoY (Oct), Bank of England Bank Rate (November 1) Japan: Nikkei Japan PMI Mfg (Oct) China: Manufacturing PMI (Oct) India: Fiscal Deficit INR Crore (Sep), Nikkei India PMI Mfg (Oct) MORE WILL UPDATE SOON!!

Markets hit fresh lows on liquidity woes, global cues

National Stock Exchange’s 50-share Nifty shed nearly 1% on Friday to its lowest close in seven months, in tandem with weaknesses in global markets and beset by a host of domestic factors such as the liquidity crunch, weak currency and rising oil prices.

BSE’s 30-share Sensex shed 1.01% or 340.78 points to close at 33,349.31, its lowest close since 4 April, while the Nifty declined 0.94% or 94.90 points to close at 10,030 points, its lowest close since 23 March.

For the week, the Sensex and Nifty declined 2.82% and 2.65% respectively.

Selling is being witnessed across all segments, with macro indicators worsening due to rising oil prices, a weaker rupee, nervousness with regard to future rate hikes by the Reserve Bank of India (RBI) and the US Federal Reserve along with trade wars being the main causes of concern,” said Hemang Jani, head, advisory, Sharekhan, which is owned by BNP Paribas.

“On the domestic front, the investors will take cues from the upcoming state elections. With changes in market sentiments and macros we feel volatility in the markets may persist,” said Hemang Jani.

On Friday, the biggest casualties were Ujjivan Financial Services Ltd and Equitas Holdings Ltd.

Ujjivan Financial Services slumped 17.62% to ₹181.15, while Equitas nosedived 23.34% to ₹99.05 after the RBI clarified that promoters of small finance banks must list their banking units separately within three years of operations.

Both the stocks, which were listed in 2016, now trade below their respective issue prices.

“I think the larger amount of selling pressure for mid-cap is over. Current sell-off is more to do with large caps,” said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt Ltd.

“Foreign investors are incurring losses elsewhere and selling in India and other emerging markets to make up for it,” said Choksey.

Foreign institutional investors sold a net of $4.94 billion of shares in the year to date, while domestic institutional investors have picked up a net of just over ₹1 trillion of shares so far in 2018.

For the week, only two sectoral indices, BSE Realty and BSE Telecom, logged gains.

BSE IT was the worst performing index with a 5.73% decline.

Private lender Yes Bank Ltd was the top loser among Sensex components this week, with a 17.06% decline, as it posted a 3.8% decline in profit in the September quarter owing to higher provisions.

Pharmaceutical major Sun Pharmaceutical Industries Ltd followed with a 9% decline in its share price for the week.

MORE WILL UPDATE SOON!!

Technical View: Nifty forms 'Bearish Belt Hold' pattern; could hit March low of 9,950 soon

Nifty index made many attempts to hold 10,100 levels amid volatility, but failed and finally closed 94.90 points lower at 10,030.

Bears tightened their grip on Dalal Street for second consecutive session on Friday as the Nifty50 closed volatile session sharply lower but managed to defend psychological 10,000 levels.

The index formed large bearish candle which resembles a 'Bearish Belt Hold' kind of pattern on the daily charts as well as weekly scale.

A 'Bearish Belt Hold' pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body. The candle will either have a small or no upper shadow and a small lower shadow.

The index failed to surpass previous support of 10,138 and corrected towards 10,000 zones intraday by making fresh seven month low levels indicated that there could be possibility of breaking March lows of 9,950 levels in coming sessions, experts said.

The Nifty50 after opening flat at 10,122.35 immediately corrected sharply to hit an intraday low of 10,004.55. The index made many attempts to hold 10,100 levels amid volatility, but failed and finally closed 94.90 points lower at 10,030.

Bears continued their strength without giving any chance of pullback as intraday attempts of recovery by bulls from around 10,100 levels were thwarted thrice by the bears before signing off the session with a bearish candle which resembles a Bearish Belt Hold formation whereas on weekly charts it appears to be a strong bear candle with a 400-point range pointing towards the severity of correction.

He said as bulls are unable to make any meaningful recovery the chances of dipping below 9,950 to complete one corrective structure looks bright in next couple of trading sessions.

As markets are remaining choppy and volatile, Mazhar advised traders to take neutral stance till some sort of stability or strength is seen in the markets as even creating fresh shorts around these levels looks risky as markets are reaching critical support points.

India VIX moved up by 3.21 percent to 19.57 levels. Volatility is not cooling down further and that is the concern for the market. It has to go down below 17-16 zones to rescue the bulls after the sharp cut of last two months, experts said.

On option front, maximum Put open interest (OI) was seen at 10,000 followed by 9,800 strike while maximum Call OI was seen at 10,500 followed by 10,800 strikes. Call writing was seen at 10,100 followed by 10,400 strike while Put writing was seen at 10,000 followed by 9,800 strike.

"Now till the index remains below 10,130 zones weakness could continue towards 9,952 then 9,800 zones while on the upside hurdle is shifting towards 10,250 then 10,333 zones.

Bank Nifty breached its crucial support level of 24,650 mark and slipped sharply in last hour of trading session towards 24,350 level. The index closed 396.40 points lower at 24,421.05.

It formed a bearish candle on daily and weekly scale which suggests bears are holding tight grip in the market, experts believe.

Now till Bank Nifty holds below 24,650 it can slip towards 24,000 and even lower levels while on the upside hurdle is seen at 25,000 zone.

MORE WILL UPDATE SOON!!

No Oktoberfest for bulls! Over 35 BSE500 stocks tank 10-40% in 5 days

Some of the biggest market crashes have occurred in October. Earnings and macro data will now dictate the trend for markets next week.

The S&P BSE Sensex plunged 966 points in just five trading session to close at 33,349 for the week ended October 26. For the month, the index has fallen  about 8 percent or 2,878 points.

Similarly, Nifty has fallen 273 points or 2.65 percent for the week ended October 26 and for the month, the index has plunged 8.2 percent.

Both local and global factors led to sharp sell-off on D-Street. Mixed earnings from India Inc and selling by foreign investors who have taken out more than Rs 22,000 crore from Indian equity markets have contributed to the sell-off. Besides, rise in crude oil prices, liquidity concerns in NBFC stocks and rupee fall too weighed in on investors' minds.

The carnage on the D-Street for the month of October can be easily called as the worst since October 2008. The index saw a massive 25 percent fall in the month in 2008, a year later it fell 7 percent, and 2 percent in October 2010.

Markets had witnessed one of the worst October performances on a barrage of negative headwinds both locally and internationally. Historically, the month of October is considered to be the worst for bulls.

Some of the biggest crashes in the past century have occurred in October. October 2008, October 1987 and October 1929 have all seen a major crack in prices not only in India but across the world. Hopefully, now the October omen is behind us and November Diwali could bring back some cheer to the market.

A large part of the carnage was in small and mid-caps which slipped in double digits in a matter of days. As many as 37 stocks in the S&P BSE 500 index slipped 10-40% in just 5 trading sessions, including Infibeam Avenues, 8K Miles, Kwality, Ujjivan Financial, Equitas Holdings, Yes Bank, Jubilant FoodWorks and Zensar Technologies.

In the S&P BSE Mid-cap index, as many as 4 stocks slipped 10-13 percent for the week ended October 26 which include names like Dewan Housing Finance, Kansai Nerolac, 3M India, and Bayer CropScience.

In small-caps more than 90 stocks witnessed a 10-30 percent fall including Bhansali Engineering Polymers, 8K Miles, Arcotech, IVRCL, Jubilant FoosWorks, Zensar Technologies, JBF Industries, Navkar Corporation, Sasken Technologies, DB Realty, Hexaware Technologies, and Prabhat Dairy Ltd etc.

Short Covering On Cards?

Earnings and macro data will dictate the trend for markets in the coming week. The rollover data indicates higher rolls in terms of percentage and also in term of Open Interest for Nifty.

The index had a rollover of around 76 percent for November series in comparison to its three months average of 68 percent, data showed. On a month-on-month basis, the open interest has increased by 28.34 percent.

The rollover data indicates higher rolls in terms of percentage and also in term of Open Interest for Nifty. During the series, shorts build up was seen by the FIIs in the index futures and with higher rollover percentage we can safely assume that the shorts were rolled this time too, suggest experts.

With so much of pessimism in the market, some bit of bounce back cannot be ruled out, suggest experts. If the Nifty holds on to 10,000 levels, there is a higher chance of a technical bounce which will boost sentiment for investors in the Diwali month.

"The distressing October series ended on a pessimistic note during the previous session. The FII derivate statistics show their Long to Short ratio has dropped to 29 percent which was last seen in the month of April 2018. The only hopeful point here is that since they have heavy shorts in the coming series chances are high that there could be a short covering in case of any positive triggers (This happened in April 2018 where the markets made bottom)."We feel that the sellers are getting exhausted while the chances of a sharp recovery during the coming series are quiet high. A move below 9950 shall negate the view and lead to another round of selling," he said.

Technical Setup:

The index formed a large bearish candle which resembles a 'Bearish Belt Hold' kind of pattern on the daily chats as well as on a weekly scale on Friday. The trend is still on the downside; however, the possibility of a short covering cannot be ruled out.

The index failed to surpass previous support of 10,138 on Friday and corrected towards 10,000 zones intraday by making fresh seven-month low levels which indicates that there could be a possibility of further breakdown which could take the index towards March lows of 9,950 levels in coming sessions.

Technically, we are seeing a continuation of the previous bearish trend. This is the third straight week of losses for the index. If the index breaks below 10,000, the next crucial support will be placed around 9900, suggest experts.

The Nifty has its next support placed at 9950 while a breach of this would open the floodgates for 9650 – 9700. Any rebound, for now, may be utilized while only a close above 10200 will call for any buying that too maybe not as strong as previously were seen at these levels in March 2018.

“On the macro front, Manufacturing PMI and Infrastructure output numbers are ahead and will be seen crucially while the leads will also be taken from ICICI bank's result. Mostly the trend will be in tandem with the global markets and indices such as S&P500.

MORE WILL UPDATE SOON!!

Perfect storm’ may hit D-Street in 6 weeks, can sink stocks.

An over 4,600-point fall in BSE Sensex in just 25 sessions may be feeling like disaster! 

 

But wait, the worst is yet to come. At least one analyst is predicting a ‘perfect storm’ on Dalal Street in less than six weeks, and citing solid reasons too! 

The Indian equity market has become ultra-sensitive to weakening macros and negative news flows such as oil price rise, rupee crash and some corporate developments. 

But a few foreseen events could unfold in the day  ahead, which may go against market wishes and trigger a massive correction for domestic stocks: US sanctions in Iran is one, US midterm polls is another  and outcome of India’s own state elections could be the third. 

More pain in the offing 

We believe the Nifty 50 is headed for the 9,900 level.This translates into a further 400 points slide in Nifty and 1,200 points fall in the Sensex from current their levels.

The biggest worry could be Iran sanctions that will come into effect on November 4. India sources 10-12 per cent of its crude requirement from Iran. 

Analysts says the stock market is still under-estimating the possible disruption to crude output, especially in the light of the fact that Saudi Arabia and Russia – two major producers – have ignored recent US calls to increase crude production. A major disruption may cause crude prices to see a major spike .

Testing time for investors 

Foreign equity outflow from India has already topped Rs 17,664 crore so far this year, which is the worst since the Rs 52,987 crore FII outflow recorded in 2008. Foreign portfolio investors (FPIs) have sold equities worth Rs 1,500-1,600 crore in last three consecutive sessions. Should concerns over emerging markets deepen, the FII selling may intensify. 

Foreign investors own a whopping $408 billion worth of holdings in BSE200 stocks. 

Markets move on liquidity. Mutual fund schemes are sitting on losses this year, but they have somehow managed to bring in retail money. Will retail investors to sit tight despite negative returns is something that remains to be seen. They have not faced this dilemma for long .

US mid-terms elections & trade rhetorics 

How the US deals with friends and foes post its mid-term elections and how the outcome influences key decision such as trade war and Iran sanctions remains to be seen. US holds mid-term polls in November. 

One must see whether the rhetoric on trade war starts to recede post the US mid-term elections.

India has deferred its decision on retaliatory tariff in response to the recent US duty hikes till till November 18. Delhi would want clarity to emerge on the US response on Iran sanctions, analysts said. 

In 2013, India had received a partial waiver of sanctions on that country. 

We expect sanctions to adversely impact international crude oil prices, and India will be impacted more due to higher domestic oil prices, inflation, fiscal, bond yields and rupee weakness.

State elections 

Forthcoming state elections could become another pain point ; three major states – Rajasthan, Madhya Pradesh and Telangana – go for assembly elections this quarter, along with two smaller states – Chhattisgarh and Mizoram. 

The results of these state elections could set the tone for the general elections to be held in May, 2019, it said. 

In a bear case scenario, Bhatia said, if even the outcome of state elections  is unfavourable, it will be a perfect storm. 

We can fall significantly more from here on because our premium over some of the other emerging markets will have to shrink significantly.

Meanwhile, the government’s move to cut fuel prices has not been taken positively by the market, as it raised fears of more populist measures as the elections draw near. 

Shares of OMCs plunged up to 25 per cent on Friday, in addition to a similar fall seen in the previous session. 

Analysts noted that during the last two state elections – Gujarat (November 2017) and Karnataka (June 2018) – marketing margins for both petrol and diesel had turned negative in the months leading up to the elections. 

MORE WILL UPDATE SOON!!

Carnage on D-Street! Top 10 mistakes you must avoid in a falling market

Experts feel that investors should avoid timing the market as it is very tough to predict a bottom or top. Stay with fundamentally sound companies which have always braved the fall.

   

The S&P BSE Sensex on October 5 plunged nearly 800 points while the Nifty50 dropped by 282 points to record its largest one-day fall since August 2015. For the week, the Sensex lost 5 percent and the Nifty 5.6 percent.

Investors lost nearly Rs 4 lakh crore in terms of market capitalisation on BSE, taking the total weekly loss to over Rs 8 lakh crore.

When carnage of this magnitude takes place, it is not the money investors lose, it is the confidence that's shaken. A similar incident happened in 2008 when almost 30-40 percent of index value was wiped out in a matter of days.

Retail investors took nearly 5-6 years to re-enter equity markets via mutual fund route and we are already seeing signs of redemption starting from mutual funds which will further exert pressure on markets.

According to data from CAMS, a mutual fund registrar which covers 85 percent of the industry flows, cash plans or liquid funds saw outflows worth a whopping Rs 69,694 crore.

What should investors do? Well, experts feel that investors should avoid timing the market as it is very tough to predict a bottom or top. Stay with fundamentally sound companies which have always braved the fall.

There are multiple parameters which investors can use to select the stock, but in a falling market examining a fundamental of the company is key tools or first layer of the screener. “This fundamental can be linked to revenue trend, growth in profit margin, the attractiveness of return-on-equity and finally valuation.

Given a gravity of fall in the recent period, it is likely to propel investors to take ill-advised moves which can hurt the overall financial plan.

We have also collated a list of 10 mistakes which investors’ should avoid in a falling market.

Avoid withdrawing money

A common mistake most investors do in a falling market is exiting from ongoing investment which is meant for long-term. During a course of the investment cycle, there will be multiple drops in price due to any reasons.

This drop shouldn’t prompt investors to withdraw money as long as the fundamentals of the underlying asset are strong. Further, investors should continue with ongoing SIP in mutual funds.

The market will recover in long-term irrespective of the fall which is also evident from a case of 2008 financial-crisis which fell over 52 percent but gradually it recovered on a long-term basis.

Avoid buying more to average

Most likely investors tend to fall prey for falling knife in its effort to average the cost in falling market regime. Although there is merit in averaging the cost, it should be done on the basis of only fundamental soundness. Otherwise, it is likely to see a further drop in price if it’s backed by deteriorating fundamental.

Avoid value hunt

It is a general tendency among investors to buy the stock at discount, and especially during the falling market, they tend to go hunt for a value stock. Though this is a good bargain, it requires a series of analysis and studies. Making a random handpick just because a stock corrected could turn into value-trap.

Avoid altering long-term strategy

It is usually during falling market when investors try to change their investment strategy due to short-term events like falling market. This undermines the long-term strategy which will slow down the pace to achieve the financial objective.

The effective way to tackle this short-term event by building a proper asset-allocation which is sustainable in long-run.

Avoid using emergency

In order to fuel the portfolio and capitalize from the falling market, they tend to take leverage position by using emergency corpus. However, if decision reverse it will have a serious implication on financial position.

Trying to invest into favourites at one go

It is always prudent to invest in a staggered manner rather than arguing with the prices about how low is too low.

Getting caught in ownership bias

Fall in the market requires one round of introspection along with a fresh listing of potential winners and losers due to shift in the regime.

Past winning sectors may not be the best way to go. Choose better stocks of today than better stocks of yesterday. Respect the sector rotation.

Tying to catch a falling knife:

Single day falls in excess of 10-15 percent attracts a lot of investor attention. One drastic fall must be discounting some crucial information. Till the time we make peace with the new development, do not get in just cause the prices have come off.

Converting Trading into Investment:

A common mistake is to hold on to a trading position. The stock intended to be booked with 3-5 percent profit is held with a rationale of strong fundamentals when starts falling even beyond 3-5 percent.

This disconnect in the objective of deployment is an error along with the fact that the very fall might cause deterioration in fundamentals.

Exit trades with Stop Loss. Study the stock before investing.

Lack of Active Realignment:

Investors should be active in the day-to-day business of the market but a process of realignment is definitely prudent practice. Keep a track of portfolio beta and adjust it to a low beta or high beta by simply shifting weights as and when situation warrants.

Prudence is in reducing portfolio beta in the falling market and raising portfolio beta after a rising course resumes.

MORE WILL UPDATE SOON!!

Buckle up! Stay light as Nifty50 could retest 9,800-10,000 levels in medium term

The market is expected to remain weak on a medium-term basis.

 

The momentum-based oscillators are in ‘sell’ on near and on medium-term basis. Given the sharp fall over the past few weeks, the market is expected to remain weak on a medium-term basis.

The Nifty 50 index formed a “Bearish Engulfing” on the monthly time frame (September 2018). In general, this pattern has a negative implication for the Nifty 50 index and the market in general. 

Further, the Nifty 50 index closed below its 200-days simple moving average (SMA) for the second day in a row which is not a bullish sign.

The momentum-based oscillators are in ‘sell’ on near as well as on medium-term basis. Given the sharp fall over the past few weeks, the

market is expected to remain weak from a medium-term basis.

Our proprietary Greed/Fear indicator, which is a good sentiment measure of medium to long-term trend for the market, is well below its

equilibrium signalling that the capitulation is yet to come.

Taking that into consideration, the Nifty50 index may attempt to test the zone of 9,800 to 10,000 levels in the near-term.

A) The key indices and major stocks are displaying weak trend on the charts. The breadth of the market continues to remain in the negative

zone, as there are more number of stocks hitting fresh 52-week lows, while there are hardly a handful of them scaling to 52-weeks highs.

Given the negative readings, any sharp fall on the Nifty50 index towards 10,000 may attract some contra-trend buying. Therefore, one has to

be very nimble footed while attempting any such contra trades.

We are yet to see a proper capitulation in the market as measured by key indicators followed by us, therefore, there may be incremental

legs of weakness before the final bottom is confirmed.

Till then, it is better to stay on the sidelines.

MORE WILL UPDATE SOON!!

Options for equities as helmets for daredevils in time of stock market crash

Often times in the midst of a highly volatile session the market presents us with great anomalies. Such anomalies generally are short-lived and a corrective course that runs within a session or two would bring in swift opportunist gains.

  

The genesis of the Futures & Options (F&O) is into risk management, more so into the transfer of risk. Let us today discuss how these instruments, especially Options with its non-linear payoff can come in handy.

Often times in the midst of a highly volatile session the market presents us with great anomalies. Such anomalies generally are short-lived and a corrective course that runs within a session or two would bring in swift opportunist gains.

Over course of my trading life, I have had 3 such different types of situations, where it is too lucrative yet too dangerous to take a trade.

Where it’s like trying to fetch treasure out of a snake pit. All we are adding here is a pair of bite proof gloves in Options so that treasure or no treasure, won’t risk our lives.

Case #1 Stock has fallen 30-40-50% … good opportunity to invest for my bottom fishing friends

Here the investor is attempting to catch a falling knife. While there is a possibility that the stock would turn itself around immediately and pivot back to a more reasonable damage, equal chances are that there could be much more left to lose.

Relief comes in terms of Buying a Call. Instead of buying a stock at 100 buy a 100 strike Call. If the view is right, one would get all the benefit.

But, in case things were to deteriorate further from there all that is at stake is the Call Premium. Essentially, a cost paid to get the pair of gloves. On a later date when expiry nears the same can be converted to delivery as the storm calms down.

Case #2 If it has fallen so much at least there will be a recovery if not today maybe tomorrow

Holders of similar view as Case #1 but the class of participants here would be Traders. While the higher premiums are justified in the volatile times, it would ruin risk-reward for traders, who would want to get rid of the position as soon as a day or two if the stock pivots towards to parity.

In such cases, more often than not the premiums are up across strikes (EG 110 Call of Rs100/- stock would be trading at 15 in volatile times instead of 5 in normal times).

To counter this especially when one wishes to get rid of the position with mildest of recoveries. Pair up the Call Buy with a Short position in a few strikes higher call.

While the Call sold would cap the profits, it would give that much-needed funding when the premiums have soared multifold.

Case #3 abrupt move for an Investor Holding stock for Long Term

This is more a wealth preservation technique, instead of a wealth creation. I know the investors would not be tracking the stocks on daily basis, but it wouldn’t hurt to have an alert mechanism in place. (not that difficult in this digital era).

Just a simple drawing of attention would do when the stock starts behaving out of ordinary on the lower side. In such a situation, when there is an above average move Buy a Put Option just till the price stabilizes and shows you signs of firm ordinary behaviour. It is sort of buying medical insurance at the first sight of health irregularities.

God forbid if anything unfortunate were to happen, the pockets are not drained. So, gain all there is to gain if you win but using Options in turbulent times do not lose if you lose.

MORE WILL UPDATE SOON!!

Top lessons from Friday’s market crash and the swift recovery

Indian economy has been on a path of recovery over the last four quarters. There has been a broad-based improvement in growth suggesting tapering of GST and demonetisation disruptions.

  

The current market volatility isn’t accompanied by a live event so all sorts of conjecture on the state of the market are possible. It’s very hard to ignore a high decibel noise and focus on long-term. But here is how I see it:

a. Fake news is real. Do not alter investment or trading decision without fact-based analysis. Cheap doesn’t necessarily mean quality.

b. Avoid bottom fishing or selling based on forwards and rumors. Focus on business which can deliver earnings growth with strong balance sheets.

c. Leverage positions in F&O have to be sized correctly. Smaller positions for bigger moves is ideal when volatility rises. First time traders and investors should not be exposed to the volatility of derivatives.

d. Bear and Bull markets do cause prices to over and undershoot. Remember patience is a great virtue in markets and as numbers improve markets will come back.

What’s concerning?

A) Short term triggers – There were few short Term Triggers which caused Today’s rout.

RBI’s instructions to Yes Bank to replace Rana Kapoor as CMD put a lot of stress on the bank as well as weaker peer set across banks and NBFCs. While the change in leadership could be challenging for Yes bank to maintain its growth momentum and manage the balance sheet quality, generally tight liquidity conditions indicated by tightening yield put pressure across the sector. DHFL and Indiabulls Housing Finance were the other prominent sufferers.

The uncertainty surrounding the future of IL&FS and therefore liquidity conditions are souring sentiment. Though these issues appear to be transient they can be a source of significant volatility in the short term.

B) The macroeconomic landscape remains challenging. India’s external positions remain a key source of trouble for the rupee and interest rates. Pressure on India’s CAD due to stubborn exports and exuberant imports coupled with a lull in FDI/FII flows, a stressful dollar liquidity scenario is emerging. At 8.2% 10-year yield RBI may be constrained to raise rates to fend the rupee as well as contain the rising inflationary tide.

C) An intensifying dollar liquidity vortex is squeezing emerging markets one after the other. US FED, US Treasury and Corporate action combined together is likely to remove nearly $1.12 trillion in Dollar liquidity in 2018. This would keep weaker EMs on the edge.

D) Trade wars which have been pure political rhetoric till now but with $200 billion worth of imports duty on China lurking it may become a stress point.

The silver lining 

A) India’s economic growth is reverting to normalcy although many challenges remain. The current weakness in rupee is a way of markets to self-correct. Once this round of weakness is over and stock valuations become attractive and another round of opportunities will emerge.

B) The reflation of the Indian economy, which is underway, will lead to another secular trend in India’s consumption story. Indian economy has been on a path of recovery over the last four quarters. There has been a broad-based improvement in growth suggesting tapering of GST and ‘demonetisation’ disruptions.

C) Government expenditure has been a source of support for the economy and is likely to be so in a pre-election year.

D) The best news is perhaps on the earnings front where profit growth in Q1FY19 (ex PSU banks) has been close to 20 percent and maybe a harbinger to better tidings as the IIP and core sector data indicates.

MORE WILL UPDATE SOON!!