MUMBAI: The sentiment on Indian equities and rate-sensitive sectors
turned bullish ahead of the Reserve Bank of India's policy review after
near 700-point rally witnessed on Thursday.
However, analysts advise investors to remain cautious as markets might not be able to sustain at higher levels unless concerns over fundamentals of the economy eases as today's rally is just backed by sentiments and short covering.
The monetary policy announcement is due at 11 am on Friday. Rajan took over as governor on September 4.
There are huge expectations of a roll-back of liquidity-tightening measures after the US Federal Reserve's surprise decision to continue with its stimulus programme.
"Currently, the liquidity party is on. Though fundamental factors are not supportive, it's difficult to say where the market is headed," said P Phani Sekhar, Fund Manager-PMS, Angel Broking.
"I don't see much action from the RBI tomorrow. If it acts positively the market will move higher and if it acts negatively the market will see a sell-off for a while but will pull-back close to current levels on high liquidity," he added.
Here are some trading strategies ahead of the RBI policy meet:-
Parag Doctor, Head-Trading Strategies, LKP Securities
Banking stocks have run-up sharply on hopes of some easing measures from the RBI. It's better to reduce positions here and move to call options. Long traders can buy 11,000 put or 11,500 call option on Bank Nifty.
After the RBI event, the market will cool off. It is better to wait for the market to stabilize before taking any positions. The trend is positive and the chances of 6,250 on the Nifty can't be ruled out if it sustains above 6,100 on a closing basis. Keep a strict stop loss at 5,800.
Ashish Chaturmohta, Head-Technical & Derivatives Research, Fortune Equity Brokers
We are seeing some short covering in the market. After US Fed's decision, we are expecting some positive news from the RBI which will help banks move higher from here. IndusInd BankBSE -7.97 % will be the top pick in the private sector space.
We are positive on private sectors banks, midcap PSBs and NBFCs. Auto stocks like MarutiBSE -4.24 % and M&M are likely to give a 5-6 per cent upside from current levels. Traders should be stock-specific and go long on banks and auto and book profits in IT space.
We recommend bull call spread where traders can go long on 6,100 call option and short 6,300 call option. Investors can also buy Rs 360 call option of Bharti AirtelBSE -2.30 % as upside movement in the stock is expected.
Vishal Kshatriya, Senior Derivative Analyst, Edelweiss
Nifty has gained a lot since the beginning of September series. After the US Federal Reserve meet, the RBI policy is an important event. The market sentiment is positive on hopes that the new governor might take aggressive steps to control USD-INR. There is also a possibility that he might tinker with interest rates.
As there is uncertainty, short-term long traders should hedge positions by buying 6,000/6,100 strike puts and can ride the rally on the upside.
by
Muntazir Alam
PGDM -I
However, analysts advise investors to remain cautious as markets might not be able to sustain at higher levels unless concerns over fundamentals of the economy eases as today's rally is just backed by sentiments and short covering.
The monetary policy announcement is due at 11 am on Friday. Rajan took over as governor on September 4.
There are huge expectations of a roll-back of liquidity-tightening measures after the US Federal Reserve's surprise decision to continue with its stimulus programme.
"Currently, the liquidity party is on. Though fundamental factors are not supportive, it's difficult to say where the market is headed," said P Phani Sekhar, Fund Manager-PMS, Angel Broking.
"I don't see much action from the RBI tomorrow. If it acts positively the market will move higher and if it acts negatively the market will see a sell-off for a while but will pull-back close to current levels on high liquidity," he added.
Here are some trading strategies ahead of the RBI policy meet:-
Parag Doctor, Head-Trading Strategies, LKP Securities
Banking stocks have run-up sharply on hopes of some easing measures from the RBI. It's better to reduce positions here and move to call options. Long traders can buy 11,000 put or 11,500 call option on Bank Nifty.
After the RBI event, the market will cool off. It is better to wait for the market to stabilize before taking any positions. The trend is positive and the chances of 6,250 on the Nifty can't be ruled out if it sustains above 6,100 on a closing basis. Keep a strict stop loss at 5,800.
Ashish Chaturmohta, Head-Technical & Derivatives Research, Fortune Equity Brokers
We are seeing some short covering in the market. After US Fed's decision, we are expecting some positive news from the RBI which will help banks move higher from here. IndusInd BankBSE -7.97 % will be the top pick in the private sector space.
We are positive on private sectors banks, midcap PSBs and NBFCs. Auto stocks like MarutiBSE -4.24 % and M&M are likely to give a 5-6 per cent upside from current levels. Traders should be stock-specific and go long on banks and auto and book profits in IT space.
We recommend bull call spread where traders can go long on 6,100 call option and short 6,300 call option. Investors can also buy Rs 360 call option of Bharti AirtelBSE -2.30 % as upside movement in the stock is expected.
Vishal Kshatriya, Senior Derivative Analyst, Edelweiss
Nifty has gained a lot since the beginning of September series. After the US Federal Reserve meet, the RBI policy is an important event. The market sentiment is positive on hopes that the new governor might take aggressive steps to control USD-INR. There is also a possibility that he might tinker with interest rates.
As there is uncertainty, short-term long traders should hedge positions by buying 6,000/6,100 strike puts and can ride the rally on the upside.
by
Muntazir Alam
PGDM -I
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