12 Sep ’23 Post Mortem on Nifty & BankNifty — What a pullback in MidCaps & SmallCaps
Nifty Analysis
Recap from yesterday: “For tomorrow I wish to continue with the bullish stance, although I would like to take some safety net via long PUTS as we have the CPI (Inflation) data coming up this week.”
The opening 45mts saw huge profit taking, few of the candles were deep red sending out a message that it may not just be a profit taking. I usually do not check the midcap and small cap indices as their weightage rarely moves Nifty.
But seeing the aggressive price moves, I did peep into those sub indices and this is what happened.
nifty smallcap down 4.1%
midcap 150 down 2.97%
nifty metal down 2.67%
nifty energy down 2.49%
nifty next50 down 2.3%
nifty auto down 1.86%
nifty commodities down 1.85%
Usually we do not have these high aggressive moves. I even forgot the last time Nifty moved 2% intraday. The puts that I had on Nifty did appreciate in value in the opening 30 to 40mts but the fall got arrested there. So I still have those long PUT positions active for tomorrow.
The options premiums were also a bit off today, the OTMs having an unusual surge in prices — totally irrational. By around 14.45 — the options flow suggesting further downside. Whereas by 15.20, I got conflicting signals from the PE side.
I wish to just wait and watch for tomorrow and not get into an aggressive long position until Nifty50 has consolidated at the current levels. I wish to modify my stance to neutral from bullish. If we break the 19870 levels tomorrow — I wish to go short (bearish).
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BankNifty Analysis
Yesterday I had a long call on BankNifty — just because there was some room to catch up. In fact the banks did really well today not to concede the gains. Opening was a gapup like Nifty and we fell 424pts ~ 0.93% by 09.55. From there we had a minor reversal and went uptil 45620 (yesterday’s close levels) and then started falling from there.
The leg 2 had a fall of 297pts ~ 0.65% and we hit the lows for the day by 12.55. The recovery from the leg2 was not that strong. ICICI, HDFC bank did well today and did not succumb to the broad based selling.
The real reason Nifty50 had a flat close today was due to NiftyIT that rallied 2.1% between 09.55 to 12.00. 09.55 is the exact time stamp from where Nifty50 and BankNifty started its pullback.
BankNifty is yet to play out the breakout pattern. Agreed that we had a good surge from the 44068 levels — but its not enough. Whether it will go up from here really depends on many factors. Globally things are not looking that great because the OIL prices are hovering around 92 USD.
I wish to change the stance from bullish to 50% bullish & 50% neutral. My stop loss will be the 45275 levels below which I wish to reverse and go short.
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FinNifty Weekly Expiry Analysis
Between the last expiry and today, FinNifty has gone up an impressive 2.64% ~ 521pts. The financial services companies really took the lead this time to get Nifty out from the bearish zone.
Today might be the only day in this year wherein I did not actively trade FinNifty for expiry. The options premiums were juicy enough, but I was more attracted to the Nifty50 premiums. Although I got into FinNifty twice, I exited it both times to switch to Nifty.
Since we have consecutive expiries now and since the trader pool remains more or less constant, the best opportunities are now getting presented by liquidity or lack of liquidity. I am guessing that is going to be the new normal unless we have more people coming into markets.
FinNifty has a similar chart pattern like banknifty but has a higher gap to take out the ATHs. Also the breakout rally is not completed yet.