There could be 2 interpretations or two logical points of view for what happened on Friday, 30th August and thereafter.
FACT : Nifty opened gap-up, reached to a high of 11024, couldn't sustain and fell to a low of 10874.8 but didn't remain there for more than 10 mins and from there staged smartest recovery seen in last few days. Went on to break previous high of 11024 and created a new high of 11042. From low to high it climbed by more than 165 points.
Interpretation 1: Now on friday traders/investors knew that FM is going to announce something, that GDP numbers will also be announced by NSO and had no doubt that they would be weak. That the vehicle sales data for August will be announced on 1st September and that also would be very weak. Despite the realization of all this bad news, Nifty came up from 10874 and broke previous intraday high almost 150 points up, created new high and closed quite near to it. So it seems all the bad news is discounted and now market seems to be ready for some retracement.
Interpretation 2: The amount and quantum of bad news is so much that it doesn't seem to be discounted and market now will fall again and further down even after smart recovery of friday because market had expected a GDP number of around 5.5 and what came was a super low of 5.0! Vehicle sales also were very low and no improvement is seen from anywhere.
Traders reading this post can form their own opinion based on numbers. But to set the record straight, let me confess I belong to people believing interpretation no.2. Let me state the numbers in nutshell. But before that let me remind something- if a company reports profits and still falls then it is because street or market had expected better profits based on CMP it was trading. That the reported numbers were not in line with existing P/E numbers caused the fall. Extending the same logic, I would say, market at least expectation was expecting a GDP number of 5.3 and best expectation was 5.7. What we got was 5.0- much much lower number! Try to understand that this fall is sequential, meaning Q4FY19 number was 5.8 and just after one quarter we get 5.0. Similar story for GVA - 4.9 (Q1FY20 ) vs 5.7 (Q4FY!9). Even worse for manufacturing sector -0.6 ( Q1FY20) vs 3.1 (Q4FY19); Consumer demand- 3.14 (Q4FY19) vs 7.2 (Q1FY20). All numbers are down than expected.
Vehicle sales for August were also dismal and, Tata Motors and Honda numbers are half of what they had for same month, last year. Except MG hector, all vehicles recorded a significant drop.
Even the amalgamation of banks I will read as bad news. Why? Because rather than stronger banks pulling up weaker ones, in public sector culture, it is quite opposite. Weaker banks will pull stronger bank's performance down. Proof- Bank of Baroda before merger with Dena And Vijaya Bank was trading at around 150 levels, today it is at around 90.
So now what do we do tomorrow? As my reading says, we might open gap-down and go further down. The first support will be friday's low of 10875. If we break that, 10850 is next stop. But if we do not break friday's low, then expect consolidation at 10900 levels. If by some fluke it opens gap up, short at first sight of resistance with a SL of 40 points.
My usual procedure of analysis of FII and DII sales , option chain, etc will be of no relevance for tomorrow since this macro-economic news is much bigger. One more data to be read with caution- FII sales number for friday is showing NET buy of 1163 Crs. But experts are of view that it might include 1600 crs block deal of Gruh finance sale by HDFC. So if any FII has bought that, it has offset a negative number of 437 Crs (read Net sale) by 1600 Crs of buy.
All the best. Happy trading.
FACT : Nifty opened gap-up, reached to a high of 11024, couldn't sustain and fell to a low of 10874.8 but didn't remain there for more than 10 mins and from there staged smartest recovery seen in last few days. Went on to break previous high of 11024 and created a new high of 11042. From low to high it climbed by more than 165 points.
Interpretation 1: Now on friday traders/investors knew that FM is going to announce something, that GDP numbers will also be announced by NSO and had no doubt that they would be weak. That the vehicle sales data for August will be announced on 1st September and that also would be very weak. Despite the realization of all this bad news, Nifty came up from 10874 and broke previous intraday high almost 150 points up, created new high and closed quite near to it. So it seems all the bad news is discounted and now market seems to be ready for some retracement.
Interpretation 2: The amount and quantum of bad news is so much that it doesn't seem to be discounted and market now will fall again and further down even after smart recovery of friday because market had expected a GDP number of around 5.5 and what came was a super low of 5.0! Vehicle sales also were very low and no improvement is seen from anywhere.
Traders reading this post can form their own opinion based on numbers. But to set the record straight, let me confess I belong to people believing interpretation no.2. Let me state the numbers in nutshell. But before that let me remind something- if a company reports profits and still falls then it is because street or market had expected better profits based on CMP it was trading. That the reported numbers were not in line with existing P/E numbers caused the fall. Extending the same logic, I would say, market at least expectation was expecting a GDP number of 5.3 and best expectation was 5.7. What we got was 5.0- much much lower number! Try to understand that this fall is sequential, meaning Q4FY19 number was 5.8 and just after one quarter we get 5.0. Similar story for GVA - 4.9 (Q1FY20 ) vs 5.7 (Q4FY!9). Even worse for manufacturing sector -0.6 ( Q1FY20) vs 3.1 (Q4FY19); Consumer demand- 3.14 (Q4FY19) vs 7.2 (Q1FY20). All numbers are down than expected.
Vehicle sales for August were also dismal and, Tata Motors and Honda numbers are half of what they had for same month, last year. Except MG hector, all vehicles recorded a significant drop.
Even the amalgamation of banks I will read as bad news. Why? Because rather than stronger banks pulling up weaker ones, in public sector culture, it is quite opposite. Weaker banks will pull stronger bank's performance down. Proof- Bank of Baroda before merger with Dena And Vijaya Bank was trading at around 150 levels, today it is at around 90.
So now what do we do tomorrow? As my reading says, we might open gap-down and go further down. The first support will be friday's low of 10875. If we break that, 10850 is next stop. But if we do not break friday's low, then expect consolidation at 10900 levels. If by some fluke it opens gap up, short at first sight of resistance with a SL of 40 points.
My usual procedure of analysis of FII and DII sales , option chain, etc will be of no relevance for tomorrow since this macro-economic news is much bigger. One more data to be read with caution- FII sales number for friday is showing NET buy of 1163 Crs. But experts are of view that it might include 1600 crs block deal of Gruh finance sale by HDFC. So if any FII has bought that, it has offset a negative number of 437 Crs (read Net sale) by 1600 Crs of buy.
All the best. Happy trading.