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F&O Cues: Can Nifty hit 26K post Fed rate cut? Check FIIs, retail bets here

F&O Cues: Can Nifty hit 26K post Fed rate cut? Check FIIs, retail bets here

by | Sep 18, 2024 | Share Market



F&O Insights for Wednesday, September 18, 2024: Foreign Institutional Investors (FIIs) and retail investors are said to be at crossroads when it comes to existing positions in the futures & options segment. 


The FIIs have been holding fairly bullish bets in index futures – which mainly include Nifty and Bank Nifty September contracts; while, retail investors barring a brief buying spree last week have mostly been holding bearish bets.


On Tuesday, the Nifty September futures inched a tad higher alongside 2 per cent decline in the open interest (OI). The premium in Nifty futures declined to 31 points from 59 points the day before.

 


Despite the winning streak, the candle formation for Nifty lacks conviction; hence, a cautiously optimistic approach is warranted, said Osho Krishan, Senior Analyst – Technical & Derivatives at Angel One in a note.


On the higher end, 25,500 – 25,600 is expected to pose a moderate challenge for the bulls in the near period. While on the lower end, 25,300 – 25,200 is expected to act as a buffer and could present an opportunity to strategically increase long positions in the Nifty, the analyst from Angel One added.


Following a similar trend, the Bank Nifty futures too edged 0.1 per cent up amid a 3.7 per cent dip in OI. The premium remained steady around 107 points.


The dip in OI – both in Nifty and Bank Nifty – although marginal can be attributed to traders lighting up positions ahead of the key US Fed policy outcome tonight.


Technically, the Bank Nifty sustained above the cup-and-handle breakout level of 51,750, indicating potential strength, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates in a note.


Therefore, the 51,700 – 51,750 zone will act as immediate support for Bank Nifty in the short term. If the index holds the 51,700 support, it could test levels of 52,800 – 53,000 in the short term, the analyst from Asit C. Mehta added.


Echoing similar views, Om Mehra, Technical analyst at SAMCO Securities said the Bank Nifty remains above the 61.8 per cent Fibonacci retracement level. The 20-DMA has crossed above the 50-DMA, forming a bullish crossover, suggesting that the positive momentum will likely persist.


The analyst also highlighted that – the India VIX had dropped to 12.59, its lowest point this month, and a spike above 14, which could introduce minor weakness and signal caution for the next session.


Key Insights from Nifty, Bank Nifty options data:


The Nifty PCR for the September 19 expiry stands above 1; showing higher open positions in Puts versus Calls. This also implies presence of higher Put Writers versus Calls, thus a likely positive bias for the market.


Among Calls, highest OI (open interest) stands at 26,000 Call with active trading seen in followed by 25,500 and 25,400. Active trading was seen in 25,400 – 25,800 Calls. The premium action suggests that consistent trade above 25,550 can trigger some short-covering.


On the other hand, highest OI in Puts stands at 25,000 Strike followed by 25,200. Data shows, that the support at 25,300 holds the key for the present positive sentiment.


Similarly, the Bank Nifty PCR also stands above 1. The contract which expires today, has seen aggressive Call writing at 52,500 and 53,000 Strike Prices; considerable resistance for the Bank Nifty can be expected aroudn 52,350 – 52,450 levels, data shows.


Whereas, heavy Put writing at 52,000 indicated strong support for Bank Nifty 52,050 – 51,950 levels.


FII, DII trading activity in F&O – Here’s all you need to know about who bought and who sold in the derivatives market on September 17?


As per data from the NSE, FIIs net bought 6,800 contracts of index futures on Tuesday worth Rs 425.94 crore. FIIs net bought 7,550 contracts of Nifty futures; while net sold 400 contracts of Bank Nifty futures and 490 contracts of MidCap Nifty futures.


In terms of change in open interest (OI); foreign investors increased the OI by 1.1 per cent on September 17, with noticeable OI addition in Bank Nifty futures – up 7.6 per cent.


Pursuant to which, FIIs long-short ratio in index futures inched higher mere 3 basis points (bps) to 2.14:1; indicating presence of more than 2 long positions in index futures for every short bet.


Meanwhile, retail investors’ increased bets on the short side of trade as the long-short ratio dipped by 5 bps to 0.66:1; A total of 3,499 contracts were added on the short side of trade in index futures, while OI in long positions were reduced by 18,762 contracts.


Whereas, domestic institutional investors (DIIs) added a few long bets; but the overall long-short ratio still implies that DIIs hold near about 2 long positions for every 3 bets on the short side of trade.


Bullish & Bearish stocks


On Tuesday, Mahanagar Gas (MGL) and Hero MotoCorp saw substantial long build-up, as the stocks jumped 4.7 per cent and 3.2 per cent backed by a 20 per cent and 8.2 per cent increase in OI. 


On the other hand, stocks such as Gujarat Gas, Apollo Tyre, Ashok Leyland, Tata Chemicals and Piramal Enterprises (PEL) saw a dip in price alongside rise in OI; suggesting possible short build-up at these counters.


Stocks in F&O ban period on Wednesday


There have been 2 changes in the F&O ban stock list with Biocon and PNB coming in for Bandhan Bank and Chambal Fertilisers. The rest of the 8 are the same – Aarti Industries, Balrampur Chini, Birlasoft, GNFC, Granules India, Hindustan Copper, LIC Housing Finance and RBL Bank.



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Stock Market LIVE Updates: Sensex, Nifty set to open mildly higher signals GIFT Nifty; Fed move eyed

Stock Market LIVE Updates: Sensex, Nifty set to open mildly higher signals GIFT Nifty; Fed move eyed

by | Sep 18, 2024 | Share Market



Stock Market LIVE Updates, Wednesday, September 18, 2024: Indian equity benchmark indices BSE Sensex and Nifty50 were headed for a mildly positive open on Wednesday, as indicated by GIFT Nifty futures, ahead of the US Federal Reserve’s policy decision announcement later in the day.




At 8:30 AM, GIFT Nifty futures were at 25,465, marginally ahead of Nifty futures’ last close.




On Tuesday in the domestic markets, benchmark equity indices, BSE Sensex and Nifty50, had ended with gains. The 30-share Sensex advanced 90.88 points or 0.11 per cent to 83,079.66, while the NSE Nifty50 added 34.80 points or 0.14 per cent to settle at 25,418.55.




That apart, India’s trade deficit widened to a 10-month high of $29.7 billion in August, as imports hit a record high of $64.4 billion on doubling gold imports. Exports contracted for the second month in a row to $34.7 billion due to softening oil prices and muted global demand.




Additionally, the country’s wholesale price index (WPI)-based inflation eased to a four-month low of 1.31 per cent on an annual basis in August, from 2.04 per cent in July, data released by the Ministry of Commerce and Industry showed on Tuesday.




Meanwhile, markets in the Asia-Pacific region opened mixed on Wednesday, following gains on Wall Street that saw both the S&P 500 and the Dow Jones Industrial Average record new highs.




Australia’s S&P/ASX 200 was down slightly, while Japan’s Nikkei 225 climbed 0.74 per cent and the broad-based Topix was up 0.48 per cent.




Mainland China’s CSI 300 was nearly flat, and the Taiwan Weighted Index was down 0.35 per cent.




South Korea and Hong Kong markets are closed today while markets in mainland China will resume trade after a three-day holiday there.




That apart, the US stock markets ended nearly flat after hitting record highs on Tuesday, while the dollar stood firm as strong economic data allayed fears of a slowdown and investors braced for the Federal Reserve’s expected move to cut interest rates for the first time in more than four years.




Signs of a slowing job market over the summer and more recent media reports had contributed in the past week to betting the Federal Reserve would move more drastically than usual at its meeting on Wednesday and shave off half a percentage point in policy rates, to head off any weakness in the US economy.




Data on Tuesday showed US retail sales rose in August and production at factories rebounded. Stronger data could theoretically weaken the case for a more aggressive cut.




Across the broader market, traders are still betting on a 63 per cent probability that the Fed will cut rates by 50 basis points on Wednesday and a 37 per cent probability of a 25 basis-point cut, according to CME Group’s FedWatch tool.




The S&P 500 rose to an all-time intraday high at one point in the session, but flattened in afternoon trading and closed 0.03 per cent higher at 5,634.58. The Dow Jones Industrial Average fell 0.04 per cent, to 41,606.18.




The tech-heavy Nasdaq Composite bucked the Wall Street trend to close 0.20 per cent higher at 17,628.06, while MSCI’s All-World index rose 0.04 per cent to 828.72.




The dollar perked up from its recent lows against most major currencies and stayed higher throughout the day. 




Beyond the US, the Bank of England (BoE) and the Bank of Japan (BOJ) are also scheduled to meet this week to discuss monetary policy, but unlike the Fed, they are expected to keep rates on hold.




The two-year US Treasury yield, which typically reflects near-term rate expectations, rose 4.4 basis points to 3.5986 per cent, having fallen to a two-year low of 3.528 per cent in the previous session.




The benchmark 10-year yield rose 2.3 basis points to 3.644 per cent, from 3.621 per cent late on Monday. 




Oil prices rose as the industry continued to survey the impact of Hurricane Francine on output in the US Gulf of Mexico. Meanwhile, the government in India slashed windfall tax on domestically produced crude oil to ‘nil’ per tonne with effect from September 18 on Tuesday. 




US crude settled 1.57 per cent higher at $71.19 a barrel. Brent finished the day at $73.7 per barrel, up 1.31 per cent.


Spot gold slid 0.51 per cent to $2,569.51 an ounce, having touched a record high on Monday.



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Trading Strategy: Nifty Bank, Private Bank show bullish trend; key levels

Trading Strategy: Nifty Bank, Private Bank show bullish trend; key levels

by | Sep 18, 2024 | Share Market


3 min read Last Updated : Sep 18 2024 | 7:22 AM IST


Nifty Bank Index

 


The Nifty Bank Index is also in a bullish trend on the charts but is nearing a critical resistance zone between 52,275 and 52,575. This zone is expected to act as a near-term top, and traders should consider booking profits as the index approaches these levels. The index is likely to face selling pressure here, leading to a potential pullback. Once the anticipated pullback occurs, traders should look to accumulate the index and its constituents around the support levels of 51,280, 50,964, 50,664, and 50,225. These levels are ideal for re-entry, providing favourable opportunities for traders to position themselves for the next bullish wave.

 


Patience will be key in this scenario, as waiting for the index to retreat to these support levels will minimise risk while optimising future gains. By following this strategy, traders can effectively manage their exposure, booking profits at resistance levels and waiting for pullbacks to accumulate positions for the next upward move.


Overall, the Nifty Bank Index remains bullish in the long term, but caution is advised as the index nears key resistance zones, signalling the potential for short-term corrections.


Nifty Private Bank Index


The Nifty Private Bank Index is currently experiencing a strong bullish trend, with significant gains recorded over the past fortnight. However, it is now nearing an overbought zone, signalling the potential for profit booking in the near term. Key resistance levels on the charts are expected between 26,265 and 26,450, where traders are advised to book profits and secure recent gains. 


As the index approaches this resistance zone, traders should be cautious. For those looking to initiate short positions, it is crucial to maintain a strict stop-loss at 26,650 on a closing basis, as a close above this level could indicate a continuation of the bullish trend and invalidate the short position. Short-term traders seeking opportunities may consider short-selling as the index reaches the overbought levels, taking advantage of the expected correction. 


On the downside, key support levels are anticipated at 25,736, 25,550, 25,380, and 25,000. These levels provide attractive accumulation points after a correction, where traders can look to re-enter the market for short-term gains. By adopting a cautious approach and booking profits on the rise, traders can effectively manage risk and position themselves for fresh buying opportunities as the index stabilises at these lower levels.

The current strategy revolves around waiting for a correction and taking advantage of favourable entry points at the support levels. This approach ensures a better risk-reward ratio, allowing traders to capitalise on the next upward move while limiting exposure during the pullback.


(Disclaimer: Ravi Nathani is an independent technical analyst. Views are his own. He does not hold any positions in the Indices mentioned above and this is not an offer or solicitation for the purchase or sale of any security. It should not be construed as a recommendation to purchase or sell such securities.)

First Published: Sep 18 2024 | 7:22 AM IST



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Markets hinge on Jerome Powell emulating Greenspan to avoid a recession

Markets hinge on Jerome Powell emulating Greenspan to avoid a recession

by | Sep 17, 2024 | Share Market


Jerome Powell, the 16th chair of the Federal Reserve Bank of the US.

5 min read Last Updated : Sep 17 2024 | 11:45 PM IST


By Ye Xie, Jessica Menton and Anya Andrianova


Traders are harking back on 1995, when Alan Greenspan led the Federal Reserve in pulling off a rare soft landing, for a playbook on trading the first interest-rate cut in four years.

 


Like nearly three decades ago, bonds and stocks are rallying ahead of a critical Fed meeting. But this time, the central question for Chair Jerome Powell is which approach — reducing rates by 25 basis points or 50 basis points — is most beneficial for the US economy.


To Kristina Hooper, chief global market strategist at Invesco, the US economy looks set to avert a recession as the Fed starts easing policy just ahead of the US election.

 


“Once the Fed starts to cut, there’ll be a psychological reaction to that,” she said. “That will be supportive.”

chart


The S&P 500 Index and Treasuries, and gold have typically risen as the Fed starts lowering rates, according to Bloomberg News analysis of markets during the past six Fed easing cycles going back to 1989.


In the equity market, the S&P has rallied by an average 13% in the six months after the central bank started cutting — except for during the recessionary years of 2001 and 2007, the data show.


Short-term Treasuries, meantime, have usually outperformed their longer-term notes — a phenomenon known as yield curve steepening — during Fed easing cycles. Six months after the first cut, the 10-year and two-year yield gap often widened by an average of 44 basis points.  


Gold delivered returns to investors during four of the past six Fed easing cycles. The dollar and oil were mixed.

chart

 


Of course, traders are far from certain going into the months ahead. The Fed will be embarking on a rate-cutting path just before former President Donald Trump and Vice President Kamala Harris face off in the November election. 


The candidates are pitching starkly different economic agendas, though both have the potential to roil global markets depending on the outcome of congressional votes.


“The soft landing is the most likely scenario,” said Salman Ahmed, Fidelity International’s global head of macro and strategic asset allocation, who has downgraded his rating of US equities to neutral from overweight partially because of election risks. “But elections are going to matter. It’s probably a unique cycle.”


Republican nominee Trump has pledged to impose steep tariffs and extend tax cuts — a policy mix seen as bullish for the dollar and bearish for bonds. Goldman Sachs Group Inc. economists said that Trump’s tariffs, if implemented, will likely fuel inflation. 


The former president’s promise to cut the federal corporate tax rate to 15% from 21% would provide a tailwind for earnings. In contrast, his Democratic opponent Harris proposed lifting the tax rate to 28%, which would reduce corporate earnings by about 5%, according to the Goldman economists.


Back to 1995


Over the past six easing cycles since 1989, there were only two episodes – in 1995 and 1998 — where the Fed managed to avoid an immediate economic downturn. This time, US equity and bond markets are anticipating that the Fed will get a 1995-style soft landing. 


Back then, Greenspan and his colleagues at the Fed cut rates to 5.25% from 6% in just six months, cooling the economy without plunging it into a downturn. US Treasury yields ended higher in the 12-month period following the first rate cut, while bonds’ total returns trailed cash.


This time around, Fed officials have been holding the target range for their benchmark at 5.25% to 5.5% for 14 months, though policymakers have held off from guaranteeing aggressive action.


Bond traders are pricing in more than 2 percentage points worth of easing over the next 12 months, the S&P 500 is a fraction away from an all-time high and the credit spreads are near historical lows. 


What makes investors hopeful for a soft landing is that households and companies’ balance sheets are strong. Corporate profit and household wealth are at record highs, leaving them less vulnerable to economic shocks. 


“Inflation is no longer the big problem the economy and the stock market face — it’s high interest rates,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “By cutting rates now, the Fed may solve that issue and prevent a downturn.”


What Bloomberg strategists say…

 


“Treasury bonds traditionally rally at the onset of a Fed easing cycle — when it coincides with a weakening economy. In the event of a soft landing, though, bond performance tends to lag stocks.”


Tatiana Darie, Markets Live strategist


That leaves traders to position for lower borrowing costs and a relatively resilient economy. 


The latest equity flows data from Bank of America Corp. and EPFR Global show a rotation into utilities and real estate — two crucial groups closely tied to the economy that historically benefit from rate cuts as long as there’s robust economic growth.

First Published: Sep 17 2024 | 11:43 PM IST



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Street awaits US Federal Reserve's first interest rate cut in 4 years

Street awaits US Federal Reserve's first interest rate cut in 4 years

by | Sep 17, 2024 | Share Market


2 min read Last Updated : Sep 17 2024 | 11:43 PM IST


By the time the next edition of Business Standard hits stands, the US Federal Reserve (Fed) may have lowered interest rates for the first time in four years.


To cool inflation, the US central bank raised rates 11 times between March 2022 and July 2023. After its last rate hike of 25 basis points (bps) in July 2023, pushing rates to 5.25-5.5 per cent, a 23-year high, the Fed has held rates steady.


Last week, US markets, along with domestic equities, rallied sharply as expectations shifted from a conventional 25-bp cut to a more aggressive 50-bp cut. Optimism was driven by recent US economic data showing a slowdown in the labour market and cooling inflation.

 


Experts caution that market reactions to the impending interest rate decision remain uncertain. While a larger cut would typically boost equities, it could also raise concerns about the economy’s health, potentially dampening sentiment.


Conversely, a 25-bp cut might disappoint markets that have priced in a more substantial reduction. In the medium term, the policy trajectory, guided by incoming data, will dictate market direction.


History suggests that the start of a rate-cut cycle alone is not a reliable trigger for market rallies.


“By using history as a guide, we found that equity market behaviour after the Fed starts cutting rates varies depending on economic conditions,” said Chris Galipeau, senior market strategist (equities) at Franklin Templeton Institute.


“The Fed’s decisions have a global impact, and we believe many other central banks will follow suit. Our analysis of historical global equity performance in the 12 months after the Fed’s first rate cut shows that equity markets tend to perform well when rate cuts are not followed by a recession,” he added.


An analysis by Nomura of the past six Fed rate-cut cycles revealed muted performance in both Indian and US markets during the previous cycle. The Nifty gained 4.5 per cent and 1.1 per cent three months and 12 months after the first rate cut on July 30, 2019. Meanwhile, the US S&P 500 rose 1 per cent in three months and 8.1 per cent in one year. Nomura concluded that the economic conditions necessitating rate cuts and the starting valuations at the onset of these cycles hold the key to market performance.

First Published: Sep 17 2024 | 11:43 PM IST



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Donald Trump launches cryptocurrency venture World Liberty Financial

Donald Trump launches cryptocurrency venture World Liberty Financial

by | Sep 17, 2024 | Share Market


3 min read Last Updated : Sep 17 2024 | 11:18 PM IST


Republican presidential nominee Donald Trump launched his family’s cryptocurrency venture, World Liberty Financial, with an interview on the X social media platform in which he also gave his first public comments on the apparent assassination attempt against him a day earlier.


Trump did not discuss specifics about World Liberty Financial on Monday or how it would work, pivoting from questions about cryptocurrency to talking about artificial intelligence or other topics. Instead, he recounted his experience Sunday, saying he and a friend playing golf heard shots being fired in the air, and I guess probably four or five.

 


I would have loved to have sank that last putt, Trump said. He credited the Secret Service agent who spotted the barrel of a rifle and began firing toward it as well as law enforcement and a civilian who he said helped track down the suspect.


World Liberty Financial is expected to be a borrowing and lending service used to trade cryptocurrencies, which are forms of digital money that can be traded over the internet without relying on the global banking system. Exchanges often charge fees for withdrawals of Bitcoin and other currencies.


Other speakers after Trump, including his eldest son, Don Jr., talked about embracing cryptocurrency as an alternative to what they allege is a banking system tilted against conservatives.


Experts have said a presidential candidate launching a business venture in the midst of a campaign could create ethical conflicts.


Taking a pro-crypto stance is not necessarily troubling; the troubling aspect is doing it while starting a way to personally benefit from it, Jordan Libowitz, a spokesperson for the government watchdog group Citizens for Responsibility and Ethics in Washington, said earlier this month.


During his time in the White House, Trump said he was not a fan of cryptocurrency and tweeted in 2019, Unregulated Crypto Assets can facilitate unlawful behaviour, including drug trade and other illegal activity.” However, during this election cycle, he has reversed himself and taken on a favourable view of cryptocurrencies.


He announced in May that his campaign would begin accepting donations in cryptocurrency as part of an effort to build what it calls a crypto army leading up to Election Day. He attended a bitcoin conference in Nashville this year, promising to make the US the crypto capital of the planet and create a bitcoin strategic reserve using the currency that the government currently holds.


Hilary Allen, a law professor at American University who has done research on cryptocurrencies, said she was sceptical of Trump’s change of heart on crypto.


I think it’s fair to say that that reversal has been motivated in part by financial interests, she said.


Crypto enthusiasts welcomed the shift, viewing the launch as a positive sign for investors if Trump retakes the White House.


Meanwhile, Vice President Kamala Harris’ campaign has not offered policy proposals on how it would regulate digital assets like cryptocurrencies.


In an effort to appeal to crypto investors, a group of Democrats, including Sens. Chuck Schumer and Kirsten Gillibrand of New York, participated in an online Crypto 4 Harris event in August.


Neither Harris nor members of her campaign staff attended the event.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Sep 17 2024 | 11:18 PM IST



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