HBJ Cap Says, “Expectations from RBI/Govt were high, new policies were already factored; Expect Nifty to be directionless with -ve bias".

On Monday, Indian markets are going to react with RBI policies which were announced on Saturday, but it was just a formalities for RBI, news was already floating in the market from last two days. Whole world was aware of how much rate cut and how much stimulus package for various sectors are going to be announced so on...

So, market has already reacted to such news on Thu, and there will be no cheer on Monday because markets look for something new, something more, they are greedy:-), one can expect selling in the market on Monday because expectations from market participants has run out of reality.

If policy announcements beat market expectations either way, expect the key levels to be broken driven by volume expansion. The fence-sitters are waiting for triggers. They will act after absorbing the policy announcements. If volumes come in with a disproportionate seller/ buyer bias, the market will make a breakout in. This is likely to be sharp due to the thin trading over the past few weeks.

Broking firms and mutual funds do not appear too enthused by the interest rate cuts and other monetary measures announced by the RBI on Saturday; the stock markets having factored this in earlier.

HBJ Capital's View for Monday:-
The industry was expecting a higher rate cut, so the rate cuts by RBI on sat was unlikely to affect the market much. Last week on Thursday, the Sensex and Nifty gained around 5 per cent each on expectations of both interest rate cuts by RBI and a stimulus package for industry from the Union Government.

There was some doubt as to whether banks would actually pass on lower interest rates to their customers. “While this move will provide temporary relief to the markets, we have to wait and see if the banks do actually cut interest rates". Trying to create demand by cutting rates to this extent might not be enough to boost the real estate sector, especially because there are concerns of an economic slowdown and of unemployment.

One can expect Indian market to be directionless on Monday with negative bias. If the global clue are positive one can see flat closing for Nifty else Nifty might fall > 1%

Strategies:-

1. As per our reco, one must have booked some profit on their SHORT/PUT on last Friday when market were down 2.5% as expected by us. In case if someone holding Nifty SHORT/PUT Options, just continue to hold, sell only if Nifty falls > 3-4% on Monday which is unlikely but can't be ruled out.
2. If Nifty closes flat or +/-1% on Monday, then one can take fresh SHORT or PUT on Nifty. We don't see any reason why one should take a LONG position or CALL option on Nifty.
3. Under unforeseen situation if Nifty jumped >2-3% on Monday, then it will be food for thought for us, what made Nifty bounce will raise a Q for us and we will let you know the next move if such movement happens which is unlikely.
4. On Friday Indian markets fell down 2.5% but Hang Sang was up 2.5% & in general global trends are –ve (except small bounces occasionally). Our markets will be closed on Dec 9th (Tue) due to Bakri-Id so, we don’t think traders would like to take LONG or CALL Option on Monday and stay till Wednesday. So, bulls will try to keep off from the market and bears will continue hitting it down.

Good Luck.
- Sandeep Jain, Associate, HBJ Capital