In this blog, we bring you expert insights from Mr. C.A. Nitin Murak, who will provide a comprehensive outlook on the financial markets, focusing on Nifty and Bank Nifty. With Nifty reaching all-time highs recently, there is curiosity among investors regarding the market’s direction. Mr. Murak will analyze the current market scenario, discussing potential moves ahead, including the possibility of a correction, pause, or further market rise. As we approach the June and July expiry, this analysis aims to shed light on the market’s future trajectory.
With Nifty and Bank Nifty hovering around all-time highs, investors are keen to understand the market’s future path. Through the expert analysis of Mr. C.A. Nitin Murak, this blog provides insights into the potential moves in the market, addressing questions about corrections, pauses, or further market rises. The correlation between the VIX index and market trends will be explored to offer logical explanations and a comprehensive outlook. As we approach the June and July expiry, this analysis aims to assist investors in making informed decisions regarding their investments in the current market scenario.
Analyzing the Nifty chart, we can observe a slight correction after a period of bullish momentum. However, considering the longer-term monthly charts, we notice a consistent upward movement, with each month experiencing new highs. Currently, Nifty is consolidating around the all-time high level of 18,888. Despite the possibility of minor corrections, the market is expected to resume its upward trajectory towards a target of 19,000 or higher.
The positive outlook is supported by several factors. Firstly, the monthly breakouts indicate a strong bullish trend. Secondly, there have been long rollovers in recent months, suggesting a positive sentiment among market participants. Thirdly, key stocks in Nifty, such as HDFC Bank, HDFC Limited, and Reliance Industries, are displaying buying signals. Lastly, the historical seasonal pattern of July often leans towards a positive direction, further strengthening the positive outlook.
Bank Nifty has been underperforming compared to Nifty in recent weeks. While Nifty attempts to move higher, Bank Nifty has struggled. This raises questions about a possible correction in both indices, considering that Bank Nifty carries a significant weightage of around 33%. Further analysis is required to understand the correlation between Nifty and Bank Nifty and their potential impact on the overall market direction.
To gain further insights into market volatility, the VIX index is an essential tool. By monitoring the VIX, which measures the expected market volatility, traders can gauge potential market movements. Analyzing the VIX alongside other indicators can provide valuable insights into market sentiment and potential shifts.
Based on expert analysis, market indicators, and the examination of Nifty and Bank Nifty, a positive outlook is indicated for the market. While minor corrections may occur, the overall trend remains bullish, with a target of 19,000 or higher for Nifty. The presence of long rollovers, stock buying signals, and the historical seasonal pattern of July all contribute to this positive outlook.
By examining the monthly charts of Bank Nifty and analyzing the movement of the VIX, we aim to provide a comprehensive outlook. The analysis reveals that Bank Nifty is consolidating around all-time highs, indicating a positive trend. Additionally, the VIX, which measures market volatility, supports the positive outlook as it remains at lower levels. This suggests that any market corrections can be seen as buying opportunities until the VIX trend changes. These factors contribute to the belief that the market may experience some sideways consolidation but ultimately has the potential to break all-time highs and surpass 19,000.
The monthly chart of Bank Nifty indicates that it is breaking all-time highs and maintaining a positive trend. Despite some sideways movement, there are no significant negative signs visible. This consolidation phase can be compared to taking a rest after a strong upward move. While immediate speed may not be evident in Bank Nifty, positive rollovers support a positive outlook.
The VIX, known as the volatility index, plays a crucial role in understanding market sentiment. It reflects fear and greed in the market, with an inverse correlation to the market index. When the market is expected to fall, the VIX tends to rise. Conversely, a lower level of VIX indicates a lack of fear or panic in the market. Analyzing the VIX provides clarity on whether corrections in the market are buying opportunities or potential signs of a larger downturn.
Examining the current state of the VIX, we observe that it is moving downward. According to our theory, when the VIX is trending lower, market corrections are viewed as buying opportunities. As long as the VIX remains below 15, there is no apparent panic or problem in the market. Given that the market is near all-time highs and has experienced a significant rally, a period of sideways consolidation is expected. However, the overall outlook suggests a possibility of breaking all-time highs and reaching levels above 19,000.
For intraday traders, it is important to analyze the intraday chart to gain insights into short-term trends. By examining the daily charts, we can identify recent weakness in the market, suggesting a possibility of profit booking in the upcoming week. This analysis indicates a potential correction towards the 18,500 level. However, it is essential to note that intraday trading is dynamic and relies on intraday levels and data analysis.
To make informed trading decisions, intraday traders should focus on intraday levels and closely monitor PCR data. Intraday levels help identify crucial support and resistance points, allowing traders to plan their entries and exits effectively. Additionally, PCR data, which indicates the ratio of put options to call options, can provide insights into market sentiment and potential market movements. The intraday PCR data has proven to be a reliable tool for intraday trading strategies.
While the overall outlook indicates an upward trend, intraday traders need to shift their focus to intraday levels and data analysis. Analyzing the daily charts, we anticipate a slight correction towards 18,500 in the upcoming week.
PCR represents the ratio of put options to call options. A PCR below 1 indicates a negative PCR, while a PCR above 1 indicates a positive PCR. Higher PCR values signify a highly positive sentiment, while lower values indicate a negative sentiment. To analyze PCR data, traders observe the change in open interest for put and call options. The PCR ratio is calculated by dividing the total outstanding change in open interest of put options by the outstanding change in open interest of call options.
Traders should focus on observing PCR data from 9:30 am to 11:00 am, without actively trading during this period. This timeframe allows for comprehensive analysis and identification of trading opportunities based on PCR data.
Eight Essential Rules for PCR Data Implementation:
- Observe the data every 3 minutes: Exchanges provide PCR data at regular intervals. Monitoring PCR data every 3 minutes allows traders to stay updated with changing market sentiment.
2. Differentiate between negative and positive PCR: A negative PCR indicates a bearish sentiment, while a positive PCR signifies a bullish sentiment.
3. Pay attention to highly positive or negative PCR values: Extremely high PCR values indicate significant sentiment extremes, which can be crucial in identifying potential market reversals.
4. Analyze PCR change in open interest: Focus on the change in open interest for put and call options to gauge the market’s overall sentiment.
5. Calculate the difference in PCR values: Comparing PCR values over time helps identify shifts in sentiment and potential trading opportunities.
6. Consider overall market trends: Combine PCR analysis with broader market trends to strengthen trading decisions.
7. Avoid immediate trading based on PCR data: PCR data should be used as a tool for analysis and confirmation rather than as a standalone trigger for immediate trades.
8. Use other technical and fundamental analysis: PCR data should be complemented with other technical indicators and fundamental analysis for a well-rounded trading strategy
Distinguishing between traders who act impulsively and those who patiently observe and analyze market data is essential. Emotion-based trades often lead to inconsistent results, while disciplined traders who carefully examine data have a higher chance of success. Patience is the key to making well-informed decisions based on facts rather than emotions.
Observing market data from 9:30 am to 11:00 am provides valuable insights into market sentiment. The Autorender software, which offers real-time data updates every three minutes, enables traders to track the Put-Call Ratio (PCR). PCR data indicates the sentiment and allows traders to identify potential trading opportunities. Understanding the PCR ratio, differentiating between negative and positive values, and analyzing changes in open interest for put and call options contribute to more accurate decision-making.
Volume Weighted Average Price (VWAP) serves as an additional tool for intraday traders. Trading near the VWAP helps limit risk and provides a favorable risk-to-reward ratio. By taking entry positions around the VWAP, traders can optimize their trades and improve their profitability.
To effectively manage risk, traders must adhere to stop-loss levels. Stop loss acts as a safety net, limiting potential losses. If trading on the buying side, the day’s low becomes the stop loss, while trading on the selling side, the day’s high serves as the stop loss. It is essential to maintain stop loss levels and never trade options without a stop loss in place.
By following three straightforward rules—trading after 11:00 am, entering positions around VWAP, and maintaining stop loss—traders can significantly enhance their intraday option trading strategies. These rules offer simplicity and clarity, allowing traders to make well-calculated decisions and maximize their trading performance.
To access accurate and comprehensive intraday market data, traders can utilize the Autorender software. This software provides real-time updates and facilitates the incorporation of PCR data, VWAP analysis, and other essential indicators into traders’ charts. By using the Autorender software as an add-on tool to existing charting platforms, traders can benefit from its robust data analysis capabilities.