On last Friday Nifty fell by 568 points (-3.76%), Sensex fell by 1939 points (-3.80%) and BankNifty fell by 1745 points (4.77%). All the 50 stocks in Nifty closed in negative? What happened? Why so serious?
Reason given by various news sources- Bond yields in US increased a lot which resulted in USA and global markets to fall. OK… so how much did US markets fell on previous night (Thursday night)? DJIA -559 points (-1.75%), Nasdaq -478.5 (-3.52%), S&P 500 -96 (-2.45%). All the US indices closed much better than Indian markets. How come US markets were not worst affected when crisis is in US not in India? Another thing- how much did bond yields increase so it warranted such massive global fall? The 10 year US treasury bond yields increased from 1.08%, at the start of the month to 1.61%, Thursday morning (US time). So you can see the increase was gradual not overnight; then why sudden panic? So was it triggered by some comment from treasury secretary (Janet Yellen) or fed Chair (Jerome Powell)? As I can see – nothing! No negative comments visible on internet or TV or papers! So then why sudden reaction? Also how the increase from 1.08% to 1.61% explain such huge liquidity pull out from stock market in one trading session? Newspapers/ articles on various sites suggest that market analysts inferred that such rising bond yields will lead to inflation and hence rising of interest rates and hence shortage of liquidity and hence massive pullout now! Ok.. so where are you putting these funds? Gold, the safe heaven – Gold has hit fresh 8 month low- so clearly nobody is investing in Gold, which means they (institutions) are holding on to liquidity. Why?
Let’s look somewhere else- another news flashed Friday morning at around 7am India time – US launches air strikes against Iranian backed groups in Syria. Could that be the culprit? In my opinion, Yes. Any war like situation, any aggression, any attack or even rumour of attack- institutions are fast to pull out money. Throughout the day Indian markets kept falling because no fresh news was being heard on that front and in markets- no news is indeed bad news. So US markets fall was in reaction to rising bond yields in US but Asian markets fell, I think, because FIIs wanted to play it safe. They have reaped massive profits since March end so it does make some sense to book some profits in case anything worse happens. Proof of why I am saying this is found in Friday ( next day’s )fall in US markets which I believe was a result of US airstrikes and FII figures in Indian markets. On Friday FIIs were net sellers by 8295 Crs. And DIIs were Net buyers by 1500 Crs. On Wednesday itself FIIs were net buyers by 28740 Crs (I really do not recall such huge number seeing even during rally in one trading session). Indian markets still are the best investments for FIIs so why will they pullout such huge money just 2 days after massive investment? War like emergeny- does trigger such immediate withdrawals. So the million dollar question is – what now? How do we see markets on Monday? Well, are we seeing any repercussions of Friday’s airstrikes on subsequent days. So far, no negative news is coming off of any sources so I would conclude that war fears are over. Does it mean that Nifty opens gap up and rushes up! Not likely. The hangover will subside slowly. So Nifty may open up flat or gap-down but after some consolidation during the day will surely go up. From which levels it is likely to go up? Friday’s low was 14467 and close was at 14529, meaning Nifty did close above psychological support of 14500. Also, 14502 is 50% level according to Fibonacci retracement. So my guess is Nifty is not likely to go below 14467 but if it goes down then next support is at 14282 which is 61.8% on Fibonacci. So worst comes to worst, Nifty will bounce back from 14280 levels and there are still 4 days to expiry. My thinking is Nifty will start going up Monday itself and FIIs themselves will start buying. However, there is strong selling area between 14880 & 14930 where it will stagnate a little bit, whenever it reaches there, and then go up or consolidate. For us traders, buy on Monday wherever you see Nifty consolidating at bottom and sell at above mentioned selling area.
Happy trading.
Reason given by various news sources- Bond yields in US increased a lot which resulted in USA and global markets to fall. OK… so how much did US markets fell on previous night (Thursday night)? DJIA -559 points (-1.75%), Nasdaq -478.5 (-3.52%), S&P 500 -96 (-2.45%). All the US indices closed much better than Indian markets. How come US markets were not worst affected when crisis is in US not in India? Another thing- how much did bond yields increase so it warranted such massive global fall? The 10 year US treasury bond yields increased from 1.08%, at the start of the month to 1.61%, Thursday morning (US time). So you can see the increase was gradual not overnight; then why sudden panic? So was it triggered by some comment from treasury secretary (Janet Yellen) or fed Chair (Jerome Powell)? As I can see – nothing! No negative comments visible on internet or TV or papers! So then why sudden reaction? Also how the increase from 1.08% to 1.61% explain such huge liquidity pull out from stock market in one trading session? Newspapers/ articles on various sites suggest that market analysts inferred that such rising bond yields will lead to inflation and hence rising of interest rates and hence shortage of liquidity and hence massive pullout now! Ok.. so where are you putting these funds? Gold, the safe heaven – Gold has hit fresh 8 month low- so clearly nobody is investing in Gold, which means they (institutions) are holding on to liquidity. Why?
Let’s look somewhere else- another news flashed Friday morning at around 7am India time – US launches air strikes against Iranian backed groups in Syria. Could that be the culprit? In my opinion, Yes. Any war like situation, any aggression, any attack or even rumour of attack- institutions are fast to pull out money. Throughout the day Indian markets kept falling because no fresh news was being heard on that front and in markets- no news is indeed bad news. So US markets fall was in reaction to rising bond yields in US but Asian markets fell, I think, because FIIs wanted to play it safe. They have reaped massive profits since March end so it does make some sense to book some profits in case anything worse happens. Proof of why I am saying this is found in Friday ( next day’s )fall in US markets which I believe was a result of US airstrikes and FII figures in Indian markets. On Friday FIIs were net sellers by 8295 Crs. And DIIs were Net buyers by 1500 Crs. On Wednesday itself FIIs were net buyers by 28740 Crs (I really do not recall such huge number seeing even during rally in one trading session). Indian markets still are the best investments for FIIs so why will they pullout such huge money just 2 days after massive investment? War like emergeny- does trigger such immediate withdrawals. So the million dollar question is – what now? How do we see markets on Monday? Well, are we seeing any repercussions of Friday’s airstrikes on subsequent days. So far, no negative news is coming off of any sources so I would conclude that war fears are over. Does it mean that Nifty opens gap up and rushes up! Not likely. The hangover will subside slowly. So Nifty may open up flat or gap-down but after some consolidation during the day will surely go up. From which levels it is likely to go up? Friday’s low was 14467 and close was at 14529, meaning Nifty did close above psychological support of 14500. Also, 14502 is 50% level according to Fibonacci retracement. So my guess is Nifty is not likely to go below 14467 but if it goes down then next support is at 14282 which is 61.8% on Fibonacci. So worst comes to worst, Nifty will bounce back from 14280 levels and there are still 4 days to expiry. My thinking is Nifty will start going up Monday itself and FIIs themselves will start buying. However, there is strong selling area between 14880 & 14930 where it will stagnate a little bit, whenever it reaches there, and then go up or consolidate. For us traders, buy on Monday wherever you see Nifty consolidating at bottom and sell at above mentioned selling area.
Happy trading.