Pre Market Report 25-Mar-2025

Pre-Market Report Summary

Key Concepts:

• Trump's potential tariffs and their impact on the US economy.
• Nifty's resistance levels (23800, 24000-24100) and support levels (23300, 22800).
• Option trading strategies (buying put options, selling put options).
• Importance of stop-loss in option trading.
• Market retracement levels (100%, 50%).
• FII and DII activity and their influence on the market.
• Trading range and consolidation.

US Market Performance and Trump's Announcements

The US markets initially showed strength, with both S&P 500 and NASDAQ trading significantly higher. However, news of potential tariffs announced by Trump, specifically a 25% tariff on oil from Venezuela and potential tariffs on auto and metals, caused a slight market dip. The market quickly recovered, indicating a growing understanding that Trump's announcements are often "drama" and may not translate into substantial policy changes. The speaker believes that implementing such tariffs would negatively impact the US economy, potentially leading to recession and increased inflation.

Asian Market Overview and GI Nifty

Most Asian markets are trading higher, except for Hong Kong. GI Nifty indicates a 20-30 point higher opening for the Indian market. The speaker expresses surprise at the recent rally, especially considering that the rally until last week was still okay.

FII and DII Activity

On Friday, Foreign Institutional Investors (FIIs) invested ₹7,500 crore, contributing to the market rally. Yesterday, FIIs and Domestic Institutional Investors (DIIs) were net buyers, with FIIs buying approximately ₹3,000 crore and DIIs buying around ₹100 crore.

Nifty's Resistance and Support Levels

Nifty is approaching the 23800 level, which is considered a resistance point representing a 100% retracement of the February fall. Looking at a broader timeframe since October, the 50% retracement level lies between 24000 and 24100. The speaker advises against taking long positions at these levels and suggests using put options for long positions to leverage time value. Immediate support is at 23300, with a stronger support level at 22800 for medium-term (April/May) positions.

Option Trading Strategies and Considerations

The speaker notes that many traders aggressively sold 23500, 23400, and 23300 put options, which were trading at a decent premium. He cautions that if the market doesn't fall, these premiums will collapse. He suggests trading through options rather than futures, especially when the market direction is uncertain. He highlights the potential for significant premium decay if the market remains stable. The 22800 put option for the April series is trading at a good premium (more than ₹80), making it an attractive option for selling, especially considering the number of public holidays in February (effectively reducing trading sessions).

Important Note: The speaker emphasizes that these are not recommendations and advises consulting a financial advisor before taking any positions. He also stresses the importance of using stop-loss orders to limit potential losses, especially in option selling, which carries unlimited risk.

Market Sustainability and Profit Booking

The speaker believes that the current rally is unsustainable, with Nifty moving 200-300 points and Bank Nifty moving 500-600 points almost daily. He suggests that the market needs to consolidate before making further upward movements. He anticipates some profit booking if Nifty reaches 23800.

Sectoral Performance

Yesterday, all three HDFC stocks were higher. HDFC Bank and IDFC First Bank were up by 2%, while ICICI Bank and Infosys were up by more than 1%. The speaker notes that during such times, overall market sentiment drives stock prices, with most stocks moving up slightly.

Trading Advice and Strategy

The speaker reiterates that the market is at the upper end of its trading range, making it unsuitable for new long positions. He suggests that if there is an intraday dip, selling 23300 put options for tomorrow's expiry could be considered, although the premium will be low. For the next month's expiry, selling 22800 and below put options could be a safer strategy. He emphasizes the importance of trading with a stop-loss.

Conclusion

The speaker believes the market is currently at the upper end of its trading range and advises caution against taking new long positions. He suggests using option strategies, particularly selling put options at appropriate strike prices with a stop-loss, to navigate the market. He emphasizes the importance of consulting a financial advisor before making any investment decisions. The current rally is unsustainable and consolidation or profit booking is expected soon.