- Closing Data
Nifty opened at 5298.2 ,made a lower high of 5303.25 (5342.8 was the high on Thursday) and fell to 5238.9, finally closing at 5258.5. Volumes were about 22% higher than normal. Nifty accelerated in downward direction following the poor GDP data, which was lowest in 3 years. About an year back, writing on this blog, the author had pointed out that GDP growth would eventually fall to 6% or below, while the state media, and blue channels on idiot box, were talking about 8 to 9 percent growth, some sensationalists were even talking about a double digit growth. At that time it was pointed out that GDP growth was lagging the inflation, and somewhere down the line all the state statistics is crap, a big lie or mass opium. Same is true as of now. Although the data released to day shows growth on papers, and the Government machinery must be patting on their own back, while it is a matter of grave concern. The deficit financing techniques, steering the economy clear of any threat of recession has it's own price, which the country is paying through runaway inflation. It has done any good to anyone but the lower strata of society would bear the burnt of outdated economic measures (read manoeuvres) employed by the babus of North Block. They could always plead that they are not economists, and the economic advisory committees formed are too academic to be be of any practical use to the country. Moreover there are political constraints, like didis, ammas, and a bunch of aging jokers called opposition.
So what needs to be done? Policies should be formulated on both Central and State levels, to put a basic infrastructure in place , conducive to business, in a time bound manner. Efforts should be made to seek private partnership, to best utilise the resources at the disposal of the country.
When we talk about something even 200 years old we look down at it with great contempt, assuming that people of bygone era were too simplistic and possessed little knowledge. But when it comes to economics and finance we are sticking to direct taxes. Does that make sense Mr P. Chidambram?
- Moving Averages and Pivot Points
The Short term average is 5310, while medium term is at 5260 and long term is 5120. Thereby, maintaining a bullish structure of the market. Nifty closed below 5313 on Friday, 31st August 2012, the Market as a whole would continue to remain rangebound for at least another month. With the kind of mad shopping the FIIs are indulging in, it seems that the scenario would change sooner than later.
The COC of the September series went up by 4% from 4% to 8% while open interest went down by 4%, thereby indicating short covering, owing mainly to dumb money and Noise Traders. The October series Open Interest went up by 5% as compared to 5% yesterday, with COC increasing by 1%, probably indicating build up of more short positions. All this basically indicating rollover and fresh short positions into the October series. The rollover activity was more pronounced for noise traders than smart money.
A major build up of positions in in 5500 Strike Calls might define the upper cap of the current range. The largest change in Open Interest figures was noticed in 5400 calls. As for Index Put Options 5200 Strike Puts continue to be written in a brisk manner. The largest change was noticed in 5000 Strike Index Put Options. Call Option Writers continue to far outnumber the Put Option Writers. The sort of confusion that prevailed yesterday, among the option writers, seems to have cleared off, with a clear understanding that Nifty would test 5200 odd levels, in next two three trading sessions, so until then enjoy the time decay. PCR continues in a downtrend, and unless suddenly crosses 1.3 it would continue to trend downward. This view is based on observing the Options Derivatives of the current, mid and far series.
Volatility is very low even though Nifty has declined more than 190 points from the swing high in a linear fashion. Now VIX is actually in an uptrend, if it doesn't break the important 15.9 odd levels and ATR continues to be low at 59, these are the lowest readings since August 2010. Prior to that such low readings were registered in 2006! Unless ATR crosses 60 level, it should be considered to be trending down.Partly the reason is that ATR tends to fall in August, and peak in October. To overgeneralise, low volatility is generally observed to occur at Market tops, and vice versa.
- Market Breadth
Market Breadth was very good, quite unexpectedly. The Advance-Decline Ratio was 0.76 today as compared with 1 yesterday, surprisingly second highest value in last six sessions!!! The present up-move wasn't supported by Breadth Indicators at all! Now they are beginning to exhaust, indicating oncoming whipsaws and sideways trading. This could also indicate that it's the blue chip companies that are being subjected to selling pressure.
Cash Volumes had been drying up lately, but for last three days it is on the rise. Volumes were about 22% higher than normal. Even the last up-move failed to bring any cheers from the Investors, and the current down, move would shoo them away. Money Flow Index is at 38, the same reading as yesterday, now, far from oversold range, and sort of toying with the idea of turning up again; while CMF is still in positive territory. Delivered Quantity to Traded Quantity was 45.74 as compared to yesterday's 46.83%, on BSE, which is returning to it's normal value, slowly. While on NSE it was still poor 27.90%.
- US Dollar
Rupee weakened against US Dollar by 10p. OI seems to have disappeared today. Volumes were little better than yesterday, which were lowest since 28th February 2012. Probably no one wants to take any risk on Friday, when the worst GDP report in last 3 years was out, shaking off whatever little confidence that the speculators had in the economy.
- Institutional Activity
FIIs were building Long Positions in cash segment as if there was no tomorrow, in the previous series. Today they were net sellers for 211 Crores. And they have purchased 52,058 Crores in this year. Whereas DIIs were net sellers today for 172 Crores. Since 1st January 2012 they have sold for 28,271 Crores. So basically, FIIs are buying and DIIs are selling. FIIs take positions for a longer period of time. They sort of buy and hold. And DIIs try to outsmart them by overtrading. So probably DIIs are looking to buy at lower levels than currently prevailing levels. FIIs have exited most of their positions in Index Futures, with almost a 8% fall in their Open Interest figures, today. They are back to writing 5200 Puts I guess. It was also observed that they had been taking Short positions in Stocks Futures, a greater part of which they have closed out today and yesterday. In Stock Options the FIIs are briskly writing options, as if it is a plundering opportunity. This generally happens when Markets are likely to get rangebound after a trending period. Also since VIX is continuously rising it is beginning to make sense to write Options as of now with a view of holding onto the open positions for 10 days or so, when VIX also begins to fall.
RSI is at 51, whereas ADX slipped to 17.00 from 17.04. Nifty seems to be in a mild uptrend, although correcting as of now. The volumes are low due to lack of retail participation. This is a standard text book scenario. Large Institutions, corporate speculators are accumulating stocks at every price available, while the market is rangebound, and finally when it begins to move North (of Alaska!!) the retail investors join the party.
Nifty could STILL correct up to 5120 without disturbing the mild uptrend, but probably won't go that deep. On the other hand Nifty would have to trade and close above 5370 to remain buoyant, but it seems market participants were nervous ahead of the GDP Numbers and FX Reserves Disclosures on Friday, 31st August, and they would take a fresh view of the current scenario after the weekend. Since Nifty has closed around medium term average 5250, it has a bright chance of testing 5160 odd levels and then maybe 5120 and 5080 . NO short covering took place today. All these things point to a clear mandate about the next move. But all in all Nifty continues to be in a mild uptrend and correcting, so right now it is correcting.....
Nifty would be bearish if it is below the Medium Term Average (5250) and 3 day Swing Low (5238), and sideways otherwise