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!!

Friday's crash signals time to 'hide in defensives'; Sun Pharma, Wipro, Dr Reddy’s make good bets

Our strategy should be to hide ourselves in the defensive sector till the Nifty does not cross the all-time high level of 11,770.

 

In the past, the Nifty has a number of times witnessed a steep fall due to extreme sell-off because of unwarranted reasons. It is not new to market participants and instead of thinking and wasting time on what has happened, we should be focusing on the next strategy and learn from such falls and make the most of it.

Our observation has been that since the market has announced the GDP numbers (above 8.20 percent) it has been falling consistently. This is the best example of the famous quote, "Buy the rumour and Sell on the news".

In September so far, the Nifty has fallen 4.50 percent and the index heavyweights are down by nearly 10-12 percent, which is in tandem with the trend of the market.

However, we see that there is some serious damage while going through a stock-specific activity.

The lowest level of Friday is going to act as a major support level for the Nifty. It was the 50 percent level of the entire rise between 9,950 and 11,760.

We must give due weightage to the 50 percent retracement ratio and that is the major reason that we consider it to act as a trend decider level for the market in the future.

If we see increased volatility and further weakness below 10,865 on Monday then one more round of selling cannot be ruled out to levels that could either be 10,650 or 10,550.

Being in an uncertain market, instead of knowing what could be the next level we should try to understand what experts do during such market sell-offs.

Our strategy should be to hide ourselves in the defensive sector till the market does not cross the all-time high level of 11,770.

The reason — currently that the market is in an uncertain zone and due to a number of events which are lined up (US Fed meet/RBI meet and quarterly numbers) there could be increased volatility. These sectors trend higher during uncertainties.

While looking at the current statistics of GDP and the trend of the rupee, we suggest that one should look to add pharmaceuticals stocks over FMCG.

Technology stocks have already delivered eye washing returns in the past 12 months.

Taking a "Bottom Up" approach while selecting stocks from technology, and using a "Top Down" approach is advisable in pharmaceuticals space.

Technically, we like Sun Pharmaceutical with a final stop loss at Rs 550 and Dr Reddy’s with a stop loss at Rs 2,300 from the pharmaceutical space. On the higher side, we can expect 30 percent returns from current levels in both these stocks.

From the technology basket, we would stick to Wipro, which is entering into a multi-year breakout zone, keeping a stop loss for the same at Rs 300 on a closing basis.

Multi-year breakout formation in stocks generally offers hefty returns to investors. We expect Wipro to move to its all-time high of Rs 517 in the next 12 months.

MORE WILL UPDATE SOON!!

Nifty likely to trade sideways ; 3 stocks which could give 5-11% return

Upside for Nifty is expected to be capped on a short-term basis. We remain selective on specific stocks only and avoid aggressive long positions.

 

Despite outlining government’s measures to strengthen domestic currency and narrow current account deficit, the India equity market continued to witness a volatile trade regime on a range-bound level.

Further, the roll out from US administration to impose 10 percent tariff on Chinese imports continued to dent market sentiment, and once again the index breached below psychological levels 11,500 earlier in the week on Monday.

The Nifty index slipped from its important support level of 11,350-11,300 to touch a weekly low of 11,250 levels over a sustained selling pressure towards the closing hour.

Although the index rebounded marginally during the weekend session, it consolidated over the last two days to close at 11,278.90 levels, down by about 0.08 percent on a week-to-week basis.

The drag dominantly came from PSU Banks and Auto index which was down by 5.81 percent and 2.57 percent, respectively. The FMCG index was the top gainer with about 0.33 percent on the weekly basis.

After making a correction for two consecutive sessions to slip below important level of 11,300 levels coupled with a breach below 5-20-days EMA levels, the index formed a solid bearish candlestick pattern on its weekly price chart, indicating a selling regime.

The weekly RSI on chart stood at 59 levels indicating no major divergence in price, while the MACD continues to trade above the Signal-Line. The immediate hurdle for the index is currently placed at 11,523 and the next important support level is placed at 11,176.

The continuation of negative sentiment over falling rupee coupled with the weakening of global sentiment as trade tariff battle continues to escalate between the two giant economies of the US and China.

As internal advance-decline ratio continues to indicate a negative setup for the domestic market, the sideways direction favouring the downside regime is expected to keep the index range bound.

As an upside for the index is expected to remain capped on a short-term basis, we remain selective on specific stocks only and avoid aggressive long position. We maintain a range bound trade for the index at 11,520 levels on the upside and 11,237 levels on the downside.

Here is a list of top three stocks which could give 5-11% return in next 1 month:

Bhansali Engineering Polymers: Buy| LTP: Rs 137.05| Target: Rs 152 | Stop Loss: Rs 122 | Return: 11%

Bhansalli Engineering witnessed a sharp correction in the last six-month from a price band of Rs 217-160 towards Rs 125-120 levels, taking a strong support at Rs 111 levels.

Although it witnessed a periodic correction on a closing basis, the scrip recently witnessed an upward trajectory after bottoming out at Rs 120 levels and thus indicating a decisive buying trend at current levels.

The momentum indicator outlined a positive trend with weekly RSI inching at 58 levels. Further, in the coming session MACD is also likely to make a bullish crossover to trade above Signal-Line. We have a buy recommendation for Bhansalli Engineering which is currently trading at Rs 136.65.

Bajaj Corp: Buy| LTP: Rs 456.65| Target: Rs 490| Stop-Loss: Rs 425 | Return: 7%

Bajaj Corp made a strong rebound on its six-month price chart after consolidating in a range of Rs 496-476. It made a low of Rs 395 levels and managed to breakout from its crucial level of 100-days EMA levels placed at Rs 430.

The scrip touched a high of Rs 468 levels despite closing marginally below with gain of 6.73 percent on an intraday basis, and saw a significant volume build up against its average level in the previous trading session.

The weekly RSI level at 57 has shown a positive price divergence while MACD indicates a likelihood of bullish crossover in the next few sessions. We have a buy recommendation for Bajaj Corp which is currently trading at Rs 457.55.

Tata Motors: Sell| LTP: Rs 252| Target: Rs 240| Stop Loss: Rs 268| Return: 5%

Despite a periodical reverse trend, Tata Motors continues to remain under selling pressure on a weekly basis. It consolidated from a higher band of Rs 364 levels towards low of Rs 248 levels during the last six months.

It further slipped below from its 200-100-days moving-average level placed at Rs 383-370 levels to decline about 9 percent on weekly basis and thus indicating a short-term pressure on price.

The RSI on chart stood at 35 levels while MACD trading below its Signal-Line, indicating selling regime. We have a sell recommendation for Tata Motors which is currently trading at Rs 251.50

MORE WILL UPDATE SOON!!

Global brokerages see limited upside for Indian market. Here are 10 strong buys for 1-2 years

Goldman Sachs, which was strategically overweight on India since March 2014, has turned slightly cautious towards Indian market in 2018 and lowered its investment view to marketweight from overweight earlier.

  

While bulls were in full control until last month, September is turning out to be a lackluster month. The Nifty50, which touched a record high last month, saw sharp selling pressure in this month taking the index below 11,300.

Escalating trade war fears, sharp drop in the Indian rupee, growing concerns of rising current account deficit due to jump in crude oil prices, selling by foreign institutional investors and risk of rate hike by central bankers are some of the factors that weighed on Indian markets.

Global investment banks such as Goldman Sachs and Morgan Stanley, which have come out with their reports on Indian market, suggest that premium valuation could be a concern and the upside from current levels remains fairly limited.

Global investment firm Morgan Stanley has raised its 30-share BSE Sensex target to 42,000 for September 2019 implying a potential upside of 11 percent, on the other hand, Goldman Sachs maintains a target of 12,000 on Nifty which translates into an upside of little over 5 percent.

Goldman Sachs, which was strategically overweight on India since March 2014, has turned slightly cautious towards Indian market in 2018 and lowered its investment view to marketweight from overweight earlier.

Sectorally, the global investment bank has upgraded defensive stocks and exporters. It is overweight on banks, tech and metals. The key downside risks remain a less stable government.

Morgan Stanley, on the other hand, said Indian equities continued to be in an uptrend and investors should bet on favourite underperformers.

"Investors should choose price underperformers with improving earnings outlook and finally broaden their portfolios by adding small and midcaps," it said.

On its Focus List, Morgan Stanley added SBI, Prestige Estates and Apollo Hospitals, and removed Infosys, Havells India and Zee Entertainment, given the recent downgrades.

We have collated a list of top 10 fundamentally strong stocks from various experts which investors can look at buying with a minimum holding period of 1-2 years:

Dr Reddy’s Laboratories:

The company has reported robust first quarter FY19 results, aided by the launch of gSuboxone. According to the management of the company, it has focus on operational efficiencies which helped in significantly improving its margin profile.

In FY19, its priorities are driving productivity improvement, focusing on core therapeutic areas and big brands, and scaling up New Chemical Entity (NCE) launches done through the Amgen deal.

In the medium to long term, management of the company wants to focus on ramping up biosimilars through internal and partnered assets and building differentiated products in relevant therapies accompanied by further ramping up of the base business.

The management expects 15-20 launches in FY19 and also expects emerging markets to grow 16% YoY led by a robust spurt in Russia and ROW.

Zee Entertainment Enterprises:

The company has led the industry in its evolution and transformation. Along the way, it has entered newer geographies, both domestically and globally, launched multiple channels, strengthened distribution, expanded the genres and widened its audience profile.

Moreover, management focus towards expansion and market share would give strong growth to the company in coming years. During the quarter, its consolidated advertising revenue grew by 18.6% to Rs 1,146 crore.

Domestic advertising revenue growth at 22.3% continued to be strong driven by demand across categories and partly aided by lower growth in the base quarter.

Bajaj Auto:

The company has a diversified business model and has a strong focus on the profitable growth, widening reach in export markets and strategic alliances with global majors.

The domestic 2-wheeler market would start growing from the festive season & would continue to grow for next couple of years. The management has assured that the company would see a very healthy top line growth and a very healthy EBITDA increase in coming quarters.

FY18-19 capex plan stands around Rs 250-300 crore. It would look to expand and strengthen the 150cc Pulsar segment in addition to pursuing new three-wheeler markets within India.

Its total current capacity is approximately about 6.6 million. 3-wheelers will be approximately about 7.2 lakh. The company expects 1.9 million export numbers for FY 19.

UPL:

The company has strong fundamentals and a robust outlook. Its strong focus on brand building and customer reach is helping the company in increasing its market share in major addressable markets.

Moreover, with the acquisition with Arysta LifeScience, the company will be one of the world's largest global crop protection companies, with an innovative and differentiated product portfolio.

The management has been focussing on technological enhancement and new product developments which would aid the further financial growth of the company. Moreover, the company believes new launches would bear fruit in the coming term.

Indian Hotels Company:

The Company plans to continue to grow through a judicious mixture of owned and leased hotels, a de-risked model along with its ability to attract management contracts.

Its command and long & successful track record in operating hotels for third party owners would facilitate growth for the future.

Moreover, it has the ability to deliver improved returns on capital would be driven through product renovation, rigorous asset management, revenue maximization, cost control and reduced leverage and exit from non-core underperforming assets.

It has assigned a capex of Rs 3,000 crore for the next five years and hotel industry occupancy levels and average room rate (ARR) are showing upward trends due to a demand-supply gap.

Mahanagar Gas:

Monopolistic nature of the business and ramp-up/expansion in new geographies would drive volume growth in the coming years. Better economics of CNG/PNG versus liquid fuels in an era of a buoyant crude price regime and maintained spreads are tailwinds for the company.

Axis Bank:

Axis Bank has made significant investments to ride the next growth cycle (post-near-term asset quality challenges), with strong capitalisation and an expanding liability franchise.

The worst seems to have been priced in, and the bank is available at attractive valuations as compared to other similarly-placed peers. The new CEO could bring in a fresh perspective to the bank’s growth plans.

Rico Auto:

Post its split with FCC in 2015 Rico Auto has changed its strategy and now caters to PV and CV markets in addition to 2W. Strong order book of Rs 4800cr, capacity expansion and increasing volumes in alloy wheels, changing product mix are expected to improve the OPM.

Rico is in the process of launching 3 more products and improving profitability may help it get re-rated to a PE comparable with other auto-ancillary companies.

Engineers India:

EIL is likely to benefit from the expected capex in the hydrocarbon and petrochemicals industry as it is a market leader for consultancy. It’s a debt-free company with an order backlog of Rs 7229cr (~3.5x book-to-bill). With a healthy cash balance of Rs 2500cr, it may reward shareholders through another buyback or special dividend.

Sun Pharma:

Sun Pharma is amongst the few companies in India to have made large upfront investments in US specialty. OPM are expected to improve on the back of key drugs launch and moderating price erosion in the US.

The company has 422 approved products in USA and 139 pending for approval. Ramp up of generics and specialty business driven by increased investments augurs well for the company as it improves the launch visibility.

MORE WILL UPDATE SOON!!

Macquarie raises Nifty 1-year target to 12,000, says macro risks higher but not alarming

Macquarie feels the valuation risk is limited to benchmark indices while midcap is still vulnerable.

 

Macquarie India believes cyclical recovery is clearly getting broad-based with infra having turned around and real estate is at the inflection point.

The global brokerage house said the macro risks have increased but are not alarming yet.

The Indian rupee depreciated 14 percent this year to hit record low of 72.97 a dollar and crude oil prices jumped nearly 19 percent to $79 a barrel which both hit trade deficit of the country. In addition, escalated US-China trade tensions added fuel to the fire but improving fundamentals is the only positive and enough to support market.

The Nifty50 gained more than 8 percent and the Sensex rallied nearly 11 percent year-to-date while BSE Midcap and Smallcap indices fell 10 percent and 15 percent respectively.

Macquarie feels the valuation risk is limited to benchmark indices while midcap is still vulnerable.

It holds a Neutral stance on banks & metals while it has positive view on cement, real estate, industrials, IT & autos.

The research house raised 1-year Nifty target to 12,000 based on 16.6x FY20 estimated earnings.

MORE WILL UPDATE SOON!!

Stock Ideas

Pharma stocks continued their recovery in the September series after consolidation was seen in the last couple of months. The first round of recovery was seen in May and June when the broader market was under pressure. The Pharma Index gained almost 18% from May lows. We believe a fresh uptrend may be seen in the pharma space where stocks like Cipla are likely to pick up momentum.

Action: Buy, Target Price:  780, Time Frame: 3 Months MORE WILL UPDATE SOON!!

Market Outlook

  

Previous Week

Equity benchmarks extended losing streak for second week in a row despite sharp recovery in second half to settle lower by 0.7% during previous week as concerns over depreciating rupee and global trade war weighed on sentiments. Nifty started the week on a weak note and dragged lower in the first two sessions of the week to form a weekly low of 11393 levels. The index however recovered in the last two sessions to close the week off the low at 11515 levels. Broader markets underperformed benchmarks during the week as Nifty Mid cap and small cap indices declined by 0.9% and 1.7% respectively.
	The S&P BSE Sensex closed at 38090, down by 299 points or 0.8% while the NSE Nifty closed at 11515, down by 74 points or 0.7% for the week.
	Among the Nifty Constituents, Eicher Motors, NTPC, UPL and Powergrid were the top gainers
	Whereas Bajaj Finance, Hero Motocorp, Coal India, M&M, Reliance industries and Tata Motors were the major draggers on the index
	Indian benchmark indices came under pressure earlier in the week amid concerns on the depreciating rupee vis-à-vis the dollar
	However, markets staged a smart recovery and managed to close marginally lower for the week post reports that the Prime Minister would hold a meeting to discuss economic scenario and the volatile rupee situation over the weekend
	On the data front, IIP for July 2018 rose 6.6% YoY largely driven by the manufacturing sector, compared to an increase of 1% in July 2017, mainly due to GST related hiccups
	CPI inflation for August came in at 3.69% YoY, lower inflation in food & beverages of 0.85% helped pull down the headline reading
	On the news front, the government approved over 25% hike in the price of ethanol produced directly from sugarcane juice for blending in petrol in a bid to cut surplus sugar production and reduce oil imports
	The Oil Minister has announced discounts on royalties and cess for production of oil & gas from enhanced oil recovery (EOR) programmes
	The move is to incentivise the upstream oil & gas sector to unlock more resources and increase the country's production in the long term.
	Crude prices closed higher at about US$ 78.4/barrel as compared to previous week's close of US$ 76.4/barrel
	Gold prices also closed higher at $1210 /ounce as compared to last week's closing price of $1206 /ounce
	Bond yields increased to 8.09% from previous week's close of 8.01%. Week Ahead The price action for the week formed a Bullish Hammer like candle with a significant lower shadow indicating buying demand around earmarked support of 11200 levels. Index made a sharp recovery of 273 points from intra week low of 11250, thus, making current week's pull back larger in magnitude than prior week's pullback (210 points), indicating strengthening price structure. In coming week, we expect the Nifty to extend its pull back towards higher band of consolidation (11600-11200) placed at 11600 levels. Our strategy of buying on declines towards support around 11200 worked in last week as price action highlighted continued buying demand at lower levels We reiterate our stance of accumulating quality stocks as index undergoes a healthy round of consolidation and forms higher base around 11200 levels over coming weeks Structurally, index has entered a corrective phase after eight weeks of rally measuring +11%. We believe the Nifty would hold its strong support in the range of 11200-11250 as it is:   50% retracement of eight weeks up move (10807-11760) at 11283 The monthly low of August 2018 placed at 11235 lower band of the rising channel containing the entire price activity since June 2018 is also placed around 11185 levels and January 2018 peak at 11171 which is likely to reverse its role as support now The Nifty midcap index retraced 50% of last seven weeks' (13%) rally and seen forming higher base We believe the broader structure remains intact as the recent pullback off July 2018 low 17700 (of 2388 points) is larger in magnitude than previous pullback in March-May 2018 (2027 points) Hence, the index is likely to enter into a consolidation phase that would help Nifty midcap to form a higher base while focus remains stock specific Hence, one should focus on accumulating quality stocks in a staggered manner Important data releases in next week:   US: Markit US Manufacturing PMI (Sep), Markit US Services PMI (Sep) Eurozone: CPI YoY (Aug), Markit Eurozone Manufacturing PMI (Sep) UK: CPI YoY (Aug) Japan: BOJ Policy Balance Rate (19 Sep), Natl CPI YoY (Aug), Nikkei Japan PMI Mfg (Sep) MORE WILL UPDATE SOON!!

Market Strategy

Market Strategy

  

NIFTY

Nifty is likely to consolidate around 11400 levels in the coming week. The highest Put base has remained at 11400 strike for major part of this series and the index is expected to remain around these levels for sometime. Nifty range for the coming week is expected to be 11350-11550. The volatility is still hovering near the key resistance of 14%. The moment it starts moving lower, it would be positive for the market. Nifty Futures open interest has come down from 30 million shares to 28 million shares since the last series on account of closure of long positions. In addition, certain outperforming segments in the market like FMCG has also seen long liquidation. If Nifty starts forming a base above 11000 levels, slowly the money will start flowing into such spaces.

The Nifty is likely to consolidate around 11400 in the coming week. The highest Put base has remained at the 11400 strike for a major part of this series. The index is expected to remain around these levels for some time. The Nifty range for the coming week is expected to be 11350-11550

 • Volatility is still hovering near the key resistance of 14%. The moment it starts moving lower, it would be positive for the market • Nifty futures open interest has come down from 30 million shares to 28 million shares since the last series on account of closure of long positions. In addition, certain outperforming segments in the market like FMCG have also seen long liquidation. If the Nifty starts forming a base above 11000, slowly the money will start flowing into such spaces

 • The pharma space, which was a late mover, can still participate in the up move. Some pharma stocks are exhibiting good short covering patterns. In addition, the market is expected to become more stock specific. Certain stocks that were under performing so far can start witnessing pullbacks 

Bank Nifty: Index likely to consolidate with positive bias.

Volatility in the currency market remained extremely high throughout the week. As US$INR appreciated from level of 73, a reversal was also seen in the Bank Nifty from 26700. The index rallied nearly 500 points from the lows with stocks like Kotak Mahindra Bank, HDFC Bank and Axis Bank providing cushion. Participation was also seen in midcap stocks like IndusInd Bank.

.

 • Despite the index falling nearly 1000 points from the highs, no major addition was seen in open interest. However, as the index reversed from 26600, marginal addition was seen in OI with a rise in price indicating buying interest is coming at lower levels. The current leg of covering can be on the back of fresh long additions

 • As the index moved above 27000, Call blocks were seen in 27200 strike followed by 27500 Call. The index has been consolidating near 27200. We feel a close above these levels is likely to take the index towards its sizable Call base of 27500. However, in case of a correction, Put writers of 26900 are likely to provide a cushion.

 • The current price ratio of Bank Nifty/Nifty remained near 2.37 levels. Multiple support was seen near 2.36 levels. Hence, we feel a reversal can be seen in select banking stocks, which are likely to provide the required push to the index in the coming days.

MORE WILL UPDATE SOON!!

Market Week Ahead: Rupee, trade war likely to weigh on markets; oil and macro data to be in focus

Here are top 10 factors that will keep traders busy next week.

  

The market took a breather as bears managed to get full control at Dalal Street for the first time in last seven consecutive weeks, thanks to a sharp weakness in rupee owing to dollar demand and higher crude oil prices.

The 50-share NSE Nifty corrected 0.78 percent to close the week at 11,589.10 and the 30-share BSE Sensex lost 0.66 percent to 38,389.82 after rising 6 percent in previous six straight weeks. But the weekly losses trimmed due to short covering or value buying in last couple of sessions on stability in rupee and crude oil prices.

Broader markets underperformed frontline indices with the BSE Midcap index falling 2.2 percent and Smallcap 1.7 percent in the week gone by.

The weak start to September month does not mean bulls are out of the game. Consolidation may continue for a while until things like crude, rupee and trade war stabilise.

sentiments will continue to remain sluggish. Global clues, macroeconomic data, movement of rupee against the dollar and crude oil price movement will dictate the sentiments in the near term.

Indications are mixed at present and we feel Nifty would face pressure at higher level. Traders should limit leveraged positions and use bounce to reduce exposure. Also, maintain extra caution in stock selection.

We does not expect big fall as fundamentals are improving and a lot of companies in Nifty 50 already benefited from rupee fall. The fall in rupee is a bit of catch-up to other emerging market currencies like Argentina peso, Turkish lira, etc. but the market has done very well despite a sharp fall in the currency.

After the recent correction emerging markets (EM) are good buying opportunities, unless something happens bad in China, which will affect the EM contagion. "Stable dollar and China can get EM out of the woods.

The stock market will remain shut on Thursday for Ganesh Chaturthi.

Here are 10 key factors that will keep traders busy next week:

Rupee

The first key thing to watch out for in the coming week would be the Indian rupee that has seen sharp depreciation to hit a historic low of 72.10 against the US dollar last week, but managed to recover on Friday.

It corrected a percent from 71 to close the week at 71.74. Year-to-date fall in currency was 12.32 percent due to persistent global headwinds and concerns on macroeconomic front.

Experts think rupee will stabilise in next few weeks due to likely intervention by RBI and government, but if it falls more than expectations, the currency depreciation cost could outweigh benefits like exports and automatic adjustment of trade deficit in policy circles.

We believe, policy makers should be equally mindful of the costs of rupee depreciation. There are many components of such cost like India's short term debt obligations at $218 billion due on Dec’18, oil import bill, inflation, consumption and fiscal cost.

On the other hand, dollar demand structurally continued to be strong as data remained solid whether it is jobs or manufacturing.

Crude

Crude is another important key point to look at as after stabilisation from $80.50 a barrel levels to around $71-72 in two-month period moved up again towards $80 followed by correction in last couple of sessions.

Brent crude oil futures lost 0.8 percent during the week and corrected 3.6 percent from the weekly high of $79.72 a barrel on stronger dollar, weakness in equity markets and tropical storm Gordon.

Crude is always a risk for country like India, which imports more than 80 percent of oil requirement.

The key risk is a rise in crude price accompanied by a fall in rupee. Beyond a threshold, this combination is going to push current account deficit to a point where it becomes highly inflationary for the economy and can disturb the fiscal balance. The recent rise in bond yield is indicative of the same and that surely implies the possibility of both earning downgrades and valuation multiple ranges shifting downward.

Trade War

Trade war between world's largest economies US and China seems to be endless as both countries have been playing tit-for-tat game.

After the expected implementation of tariff on $200 billion worth of Chinese goods very soon, US President Donald Trump on Friday announced another tariff list saying the US is ready to put tariff on an additional $267 billion worth in Chinese goods.

Hence, experts said the possibility of talks for trade deal between both countries are fading as there is likely revamp of North America Free Trade Agreement (NAFTA) from the US. "We are surprised by the market which has not reacted to recent US tariff on $200 billion worth of Chinese goods," Mihir Vora, Chief Investment Officer of Max Life Insurance said.

Macro Data

The most important data point to watch out for would be July industrial production and August CPI inflation due on Wednesday. WPI inflation data for August will be announced on Friday.

Industrial production rose to a five-month high of 7 percent in June while CPI inflation fell to 4.17 percent in July, lowest in nine months, driven by cheaper food items.

Foreign exchange reserves for the week ended September 7, deposit & bank loan growth for week ended August 31, and balance of trade for August will also be released on Friday.

Fund Flow

Foreign institutional investors turned net buyers of around Rs 1,900 crore in September so far against more than Rs 2,000 crore worth of selling in August. In FY19 so far, they have been net sellers of about Rs 13,000 crore in India compared to Rs 1,000 crore worth of buying in same period last fiscal.

Experts believe the FII flow is unlikely to improve soon as investors will closely watch indication of general elections before entering in India big way. They expect a consistent flow from domestic institutional investors (DIIs) will continue.

DIIs continued to be net buyers since April 2017 helping the market to remain positive in terms of returns. These investors bought more than Rs 1,100 crore worth of shares in September so far, as per provisional data.

Technical Outlook

The Nifty50 after recent correction moved towards near term resistance level of 11,600 and got support at 11,500-11,550.

The recovery in the last couple of sessions indicated that the index may make an attempt to move towards 11,700-mark but formation of 'Hammer' kind of pattern for last three consecutive days suggested that the consolidation is expected to continue for a while before getting directional move on either side.

Bullish reversal candle on daily scale (Friday) suggests a bounce back move while Bearish Engulfing candle on weekly scale suggests a limited upside, thus a tug of war between bulls and bears are likely to continue.

The index has to continue to hold above 11,550 zones to extend its up move towards its 61.80 percent retracement of 11,620 then 11,666-11,700 zones while on the downside supports are seen at 11,500 then 11,450 zones.

With trade tensions coming into limelight once again, Amit Gupta of ICICI Securities expects Nifty to remain volatile with major support around 11,450 levels.

F&O Picture

Options data indicated that maximum call open interest (OI) of 40.01 lakh contracts was seen at the 11,800 strike price, which will act as a crucial resistance level for September series, followed by 12,000 and 11,600 strikes.

Maximum put open interest of 47.64 lakh contracts was seen at the 11,500 strike price, which will act as a crucial support level for September series, followed by 11,400 and 11,000 strikes.

Call unwinding was seen at immediate strikes while Put writing was seen at 11,500 and 11,600 strikes.

Option band with its early OI inventory signifies an immediate trading range in between 11,500 to 11,700 zones. India VIX had a spurt of 10.24 percent at 13.89 and rise in VIX suggests limited upside in the market.

Stocks in Focus

Tata Motors: Jaguar Land Rover reported total retail sales of 36,629 vehicles in August, down 4.9 percent YoY. Jaguar retail sales up 7.7 percent YoY at 11,802 vehicles and Land Rover sales down 9.9 percent to 24,827 vehicles. Retail sales up 64.9 percent in UK, overseas markets 20.2 percent and North America up 2.5 percent, with Europe slightly below last year (up 3.1 percent) while China sales down 38.1 percent YoY.

Reliance Capital: Company has received Certificate of Registration from the Reserve Bank of India as Core Investment Company - Non-Deposit Taking Systemically Important Institution.

HDFC Life board to meet on September 12 to consider appointment of new MD, CEO

Jet Airways gets government approval to appoint Sharad Sharma as independent director

Axis Bank appoints Amitabh Chaudhry as MD & CEO, to take charge from Jan 1

Adani Enterprises: Adani Agri Logistics (AALL), a wholly owned subsidiary of the company, has incorporated a WOS namely Adani Agri Logistics (Samastipur).

RITES: Company has secured an additional work of Rs 294.67 crore from Ministry of Railways for doubling of Dharmavaram Penukunda rail lines (41.5 Kms) in South Western Railways.

Cyient: Cyient Australia Pty Ltd, a wholly subsidiary of Cyient Limited has acquired 86 percent in Cyient KK (another subsidiary of the company).

Goa Carbon: Production for August at 13,730.8 MT and Sales at 14,726.8 MT.

Akzo Nobel India: Jayakumar Krishnaswamy will be stepping down as the Managing Director of the company with effect from September 12 and Board appointed Rajiv Rajgopal as Managing Director with effect from November 1. Pradip Menon will be stepping down as the Chief Financial Officer of the company with effect from September 14.

Zenith Exports: IL&FS Securities Services released 3,08,224 equity shares of the company, representing 5.71 percent of the paid-up capital on September 6.

Omax Autos: Board has approved the proposal for establishing a new manufacturing unit at suitable location in Uttar Pradesh, for manufacturing products and equipment supplied to Railways.

CES Limited: Company has withdrawn record date of September 21 for bonus issue of 27 equity shares for every 1 equity share held.

Indo Count Industries: ICRA reaffirmed its long term rating as AA minus and revised outlook on the long term facilities to Stable from Positive. CARE reaffirmed long term bank facilities as AA with outlook as Negative.

Mcleod Russel: HDFC AMC through its three funds hold 5.29 percent stake in the company.

Divya Jyoti Industries: Ankit Maheshwari has resigned from the post of Chief Financial Officer of the company w.e.f. September 6.

7NR Retail: Due to pre-occupation Deepak Rawal has resigned from the post of internal auditor of the company for the financial year 2018-19.

Williamson Magor: Board approved the proposal to issue secured redeemable non-convertible debentures of face value of Rs 10,00,000 each aggregating to Rs 100 crore on private placement basis to IL&FS Financial Services.

Sical Logistics: Board approved issue of equity shares on preferential basis.

Reliance Power & Reliance Naval: Both companies pledge shares with Yes Bank.

Bank of Maharashtra: RBI imposes penalty of Rs 1 crore for contravention of master circular on fraud.

Bank of India: RBI imposes Rs 1 crore penalty for contravention of circular on fraud.

Union Bank Of India: RBI imposes penalty of Rs 1 crore for contravention of circular on fraud.

MORE WILL UPDATE SOON!!