Market View: January 28

Markets world-wide have been rallying for the past couple of days, and seems like that its going to continue for another day atleast. Nifty has moved from 2650 levels on friday to 2850 levels today, and we might see a 2900 expiry (though I would still like to believe that markets might still come below 2800 tomorrow).

World-wide markets have been moving up on renewed optimism, inspite of below expected earnings from a lot of major corporates. I think this rally has been caused due to short covering of the excessive short positions in the system, and might continue till tomorrow's expiry. We might see another downleg in the coming days, and market may touch its earlier bottoms.

2820-2840 was a good resistance band for Nifty futures, and it has broken through the band today. Tomorrow's opening might decide the day market movement. If it opens on the postive gap, we may see a run to 2900 or even 2950. A down gap opening however may take the markets below 2800 levels.

Nifty futures were trading at a discount throughout this month, and rolls happened at INR 5-6 absolute discount.

UK and its much talked about downgrade

After Ireland and Spain, it might be UK's turn to be downgraded. A lot of speculation has been going on on whether UK would be able to maintain its AAA rating.

The most recent quarterly numbers shook everybody up, and GDP has contracted by 1.5% in a quarter. To get an idea of how bad this number is, none of the G-7 countries have contracted by more than 3% annualized in the last 50 years. In addition, there are talks doing round that GBP as such is an inflated currency, with nothing in real economy to justify its levels. UK as an economy is ruled by a few sectors: Energy, Financials and Tourism. And in the current year, all 3 have been badly affected.

While its much outside my knowledge to comment on whether GBP is inflated or not, I certainly feel that the path going ahead is not very rosy for the country. US is a much better placed than UK to contain its crisis. 2009 might see a massive devaluation of EUR as well as GBP. GBP has already fallen from its >2.0 levels to 1.40 levels, and there are reports doing rounds which predicts a rate of parity pretty soon. Same goes for EUR as well, which after trading above 1.60 earlier last year, is now down below 1.30 levels.

We might end up the year with EUR at 1.0, GBP at 1.20 and Yen close to 100 levels.

Market View: January 23

Markets continued to move down on the back of bad news from all around. Companies around the globe are posting bad results, and latest to join the list are the electronics majors Samsung and Sony. Both of them reported record losses, and further outline the common belief now that the recession has expanded into the main street now.

UK economy offically shrank in the last quarter, and now the world growth targets really look far fetched. GBP has been hammered pretty badly, and currently trades at 1.37 (or 67.70/INR).

Back in India, markets broke their 2700 support levels, and traded below it for most part of the day. However, I have a feeling that we might see a small bounce from these levels in coming days. Not that I have a view that markets are going way up from these levels, but I do not expect too many incremental bad news coming out from India. All the large corporates which have announced their results haven't come out with any 'extraordinary' losses. Results of all the big names like Reliance, Infosys, Bharti, Wipro have been 'not-too-bad'. So, I have a feeling that market may remain range bound at these levels for some time now (in absence of a major worldwide shock).

Strangely, vols aren't picking up. Last time markets were at these levels, vols were at 60s and 70s levels, and this time they are peacefully trading in their 40-50 band. I wont be surprised if we see a down leg in vols towards the 40 support.

Market View: January 22

Markets have already fallen by more than 5% since monday, and we are now below 2700 levels (on 1M futures). Going ahead, I think 2700 would act as a strong resistance, and we may see expiry around these levels.

Today the market moved sideways for whole of the day, without making any convincing moves in either direction. There was good money to be made trading intra-day gamma at smaller intervals. Interestingly, I think in these markets both short gamma and long gamma positions can end up making money. For a short gamma positions hedged at the end of the day, there aren't too many large 1-day moves to worry about, and for long gamma positions, markets really move up and down a lot (even a slightest news from any corner of the world spook the markets). Will be testing the same for January data after the expiry.

The expiry view still remains the same, in the 2600-2700 range. And on the volatility front, now there is a slightly lesser chance of vol spikes in this month. Quite a few results have already come-in, and going by the trend, there are no major surprises to worry about.

Market View: January 19

Today was a holiday in US, and hence it was expected to be a dull day. Indian markets opened at almost their previous closing levels, and traded well within throughout the day. Lately, we have been so much used to the volatility that a day where market doesn't move more than a percent point appears too dull.

Markets slowly kept moving up throughout the day, and even as the bad news kept pouring in (RBS announcing a loss of $41B, Spain getting its rating cut from AAA to AA+), markets kept their momentum. It was only during the final 30 mins that market showed slight -ve bias, and started paring some of their earlier gains. Still, on a day to day basis, they closed higher by more than half a percent points at 2850 levels.

Europe which was trading at gains when Asia closed is now trading close to -2.5% down from its previous close. RBS is trading 70% down for the day, and seems like a very bad day ahead tonight for all the markets. Thankfully, US is closed for today, else we could have had another spooky day for Citi and Bank of America.

As I had said earlier, I expect markets to break from these levels (may be triggered by a bad earnings from one of the large caps) in the coming days. January expiry could be at a level close to or below 2700. On the volatility front, I do not expect vols to come below 40 levels anytime soon. Even though the realized vols are currently at a lower level, I think the implieds would continue to trade in a 40+ range for some time.

Market View: January 16

Indian markets are currently trading on the band of 2700-2900. Today they opened at 2700, and kept moving up for the whole session, and closed at the day's high.

The market were up mostly on expectations of good results as well as more clarity on the situation as Citigroup as well as Bank of America were announcing their results today. Both the stocks had been hammered in the last couple of days by the traders.

I personally have a negative bias on the market, and would be short the market till 2700. I would think that the Jan expiry would be close to 2600-2700 levels.

On the volatility front, I think that the vols would remain high till the general elections in May 09. Currently they are trading in the range 45%-50%, and I think they would continue to trade in the 40%+ range for some time. Going forward, I won't be surprised if there is a spike in vols to the 60% levels also as there are a lot of big names announcing their results soon.

I would be short markets at 2800 levels, and long vols at 45% levels. Lets see how it plays out next week.