Nifty Outlook 28th October

Oct 26, 2013 No Comments by

The fight between the bull and bear continues. Markets are taking a breather now. Nifty is literally directionless trading in a very narrow range of 30-40 points. It is trading at 6144 just a bit shy of 6150 level. On Friday Asian markets were weak but Nifty negated all that pessimism and was able to contain the downside to just 20 points.

We had results of two major heavyweights on Friday – ICICI and ITC. ICICI has kept up to the market expectation while ITC has posted better than expected net profit but total sales have grown less than expected. ITC announced the result after market hours. So, we will see a reaction in the stock on Monday.

Next week is an action packed week. Two major events are approaching – RBI policy and expiry. We have RBI policy on Tuesday. Inflation numbers were bad. RBI in its last policy had surprised the markets by hiking repo rate by 25 bps. It had made it clear that it won’t hesitate in taking steps to control inflation. So, the street is expecting a repo rate hike. That is already priced in. If RBI refrains from a rate hike it will lead to a rally. If it hikes we may seen a minor dip. Historically expiry week has been very volatile. So, it won’t be surprising to see some major movement in Nifty. First the market will react to Tuesday’s policy. The gains or correction that day can be reversed in the next two days because of expiry volatility.

US markets are all time high. That won’t affect the Indian Markets for now. On Monday Nifty will trade in a small range waiting for the policy action. Nifty expiry is near. So, the options would be very cheap. Traders can make a strangle¬† by buying 6100 puts and 6200 calls. 50 points move on either side can get them profit. But a move has to come else they will lose their money. It would be better to make the same strategy in Bank Nifty as that tends to show more movement on RBI policy day.

The bottom line is volatility is expected in next week. So, if you are willing to take risk then only you should enter market else stay out. Let the event pass and then enter the markets. Be cautious.

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