Pre Market Report 05-Mar-2025

Key Concepts:

• Pre-election levels in US and Indian markets
• Impact of Trump's policies on market volatility
• GIF Nifty and its implications for Nifty opening
• 22,000 as a crucial support level for Nifty
• Selling call options during intraday recoveries
• Potential for short covering rallies
• Expiry day changes by NSE and their impact on traders
• FII selling and its impact on market
• Role of domestic institutions and retail investors
• Reliance and HDFC Bank as key stocks to watch

1. Market Overview and Global Influences:

• The US markets experienced a significant fall, nearing pre-election levels, wiping out the post-election rally within three months. This is attributed to uncertainty caused by Trump's policies, exemplified by sudden tariff announcements.
• Asian markets are largely ignoring the US market volatility.
• GIF Nifty initially indicated a 150-160 point gap down but recovered due to US futures recovery, now indicating a 50-60 point gap down.

2. Nifty Technical Analysis and Key Levels:

• Nifty repeatedly tested the 22,000 level without breaking it, leading to its consideration as a support. However, repeated testing weakens the support.
• If 22,000 breaks down, Nifty could fall 400-500 points to 21500-21600, with 22,000 then becoming a resistance.
• GIF Nifty at 22120-22130 suggests a Nifty spot opening near 22020-22030, assuming a 100-point premium in Nifty futures.
• "If 20 22,000 is being tested many times then if ultimately breaks down then in one day it can fall 400 500 point then Nifty may go to 21500 or 21600 then this 22,000 will become a good uh resistance."

3. Trading Strategies and Option Selling:

• During intraday recoveries of 100-200 points, selling far-away call options is suggested.
• Volatility index (VIX) is expected to decrease during market reversals, potentially reducing option premiums.
• The market is considered oversold, increasing the possibility of a short covering rally if positive news emerges (e.g., reduction in long-term capital gains tax).

4. Regulatory Changes and Impact on Traders:

• SEBI's rule of one expiry per week per exchange has shifted all expiries to Thursday on NSE and Friday on Sensex.
• The shift of Sensex options from Friday to Tuesday was due to traders being unable to take overnight positions for Sensex expiry as margins were released late on Thursday.
• NSE is considering moving the Nifty expiry to Monday, potentially disrupting trading strategies.
• The speaker criticizes these frequent changes, stating, "I really don't know how these people without any concern for the investors Traders they can just at their whims and fancies they can change their expiry days."
• Changing expiry days can reduce the number of trading sessions in a month, affecting time decay calculations for option positions.

5. FII Selling and Domestic Market Support:

• FIIs have been net buyers for only three days since January 1st, with continuous selling pressure.
• The sustainability of domestic institutions and retail investors supporting the market is questioned, especially as retail investors' net asset value (NAV) decreases.
• "At the end of the day domestic institutions are not you know uh the like they are answerable to the investors so retail people keep on putting the money in Mutual Fund mutual fund keep on buying Market keep on going lower you know their net asset value keeps going lower know how long this game can continue."

6. Key Stocks to Watch:

• Banking stocks, particularly Reliance and HDFC Bank, showed recovery and should be monitored.

7. Conclusion:

The market is currently facing significant challenges due to global uncertainty, FII selling, and regulatory changes. The 22,000 level is crucial for Nifty, and a break below it could lead to further declines. While short covering rallies are possible, caution is advised, and monitoring key stocks like Reliance and HDFC Bank is essential. The frequent changes in expiry days by exchanges are criticized for their impact on traders.