India Morning Report: There we are, atop Mt 7550

The puts at 7500 and the Calls at 7600 have more or less lost most of their active trading values, even as US markets bottomed out on volatility again at barely 10% with the bond trade expectedly resuming a prognosis of low rates till end 2014/early 2015.

Yellen managed to duck most pressing forecasts, but that has not stopped commentators from catching up on the Fed is hawkish line as the US sits on the world’s largest repository of bonds not even including the Fed’s portfolio of expiring run off portfolios as the taper gets grounded.  US now expects 2% growth and only 5% unemployment (5.3% – 5.7%) for the long term forecast with deflation exit ensured in the prior 6 month odd period. That means EM debt buying will now resume but the risk trade is in equities and markets like India which remain the last refuge despite the opportunity

Indices will likely resume to Tuesdays level of 7600 with debt markets also resuming the run back to 8% yoelds after the Oil spike intervened briefly on Iraqi shennanigans. The reasons for the Rupee notwithstanding, the Rupee is holding at 60.50 not because of impending buying but in waiting for the Oil price threat to recede to systemic levels.

The Bank trade looks hot again midweek after a quick material yet a single tick reduction in the Banknifty from Tuesday levels back to 15100.

Bharti and ITC as expected have nosed up and DII buyers have finally been making good on the promise to investors, buying on dips both Monday and yesterday.

It does seem like infra funds are up for sweet retribution next, trying to score the now distant performance marks of 50% , 100% and even 200% annual performance from virtual bottoms that lasted since the onset of the crisis in 2008.

In index options again, 7600 puts should be written so go ahead and take a new position with two weeks of active sessions still between the series close and today’s trades. A riskier but probably most profitable trade would be in writing fully fat 7700 puts now as liquidity comes to trade that as the midpoint bringing the best gains for you.

Brent’s peak today may again not surprise trades in currency and Bond markets allowing equities to force the 7600 call writers into losses as the market would probably make one move to 7700 before deciding on closing levels for this June series

The budget news seems to be getting to be a big bag of everyone’s expectations, with the lone MoS batting for the party manifesto as a curtain raiser from the new government. The debate on High speed trains is encouraging but the government has to avoid taking half measures and indefensible policy options preened out before going public with and executing irreversible growth directions.

 

 

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