RECOVERY continues? Post Market Report 30-Oct-23

The Volatile Market and its Surprises

The market has been incredibly volatile recently, catching many investors off guard. On Friday night, the Gift Nifty closed at 19,26, but Monday morning saw a recovery as it traded around 19,100. However, the market opened flat and even slightly positive before experiencing a sharp 150-point fall. From there, it embarked on a one-way rally of over 200 points on the higher side. This extreme volatility has left investors puzzled and uncertain about the market’s direction.

Reliance’s Resilience

Despite the market chaos, Reliance Industries has been consistently trading in the positive territory since morning. Interestingly, the company’s results were not particularly impressive. However, it seems that there were significant short positions in the system, and investors may have taken cues from previous quarters when Reliance’s results led to a decline in its stock price. This could explain why Reliance’s stock price went up despite lackluster results.

Suspicion Surrounding Foreign Brokerages

The recent actions of foreign brokerages and banks have raised suspicions among market observers. Over the last four trading sessions, foreign institutional investors (FIIs) have sold a staggering 15,000 crores, with 1,700 crores sold in the last session alone. This raises questions about their motives and intentions. It is not uncommon for foreign institutions to upgrade India while simultaneously selling their holdings. This contradiction leads to suspicion and raises concerns about their credibility and ulterior motives.

Geopolitical Tensions and Global Cues

While the recovery in the Indian market can be attributed to domestic institutions stepping in during the panic, global cues also played a role. European markets were trading firmly in the green, despite being down by more than 4.5% for the month of October. However, geopolitical tensions, such as the recent storming of a Russian airport, continue to create uncertainty in the Middle East. This ongoing problem adds a layer of suspicion to the market’s recovery, as it may not be a true trend reversal but rather a dead cat bounce.

US Markets and the Oversold Condition

US futures were higher, indicating a positive start for the US markets. However, it is worth noting that positive news in Europe does not always translate to sustained gains in the US markets. The US markets have experienced a significant decline, with the NASDAQ down by 10% and the S&P 500 down by 10%. The relative strength index (RSI) closed below 30, indicating an oversold market. While this may suggest a potential turnaround, it is important to remember that oversold and overbought conditions can persist for extended periods.

Market Outlook and Options Activity

The volatility in the market has caused the VIX to increase by more than 5%. However, there are some encouraging signs in the open interest data. The 19,000 put option has seen a significant increase in open interest for both weekly and monthly options. This suggests that there is strong support at the 19,000 level. On the other hand, the 19,500 call option has also seen a substantial increase in open interest, but it is currently trading at a low price of 5 rupees. While this may seem insignificant, it is important to be cautious as even small price movements can result in significant losses.

FAQs

1. Why has the market been so volatile recently?

The market has been experiencing extreme volatility due to a combination of factors, including global economic uncertainties, geopolitical tensions, and investor sentiment. These factors have created a highly unpredictable and volatile trading environment.

2. Should I be concerned about the actions of foreign brokerages and banks?

While it is important to be aware of the actions of foreign institutions, it is equally important to conduct thorough research and analysis before making any investment decisions. It is advisable to consider multiple sources of information and consult with a financial advisor to make informed investment choices.

3. What is a dead cat bounce?

A dead cat bounce refers to a temporary recovery in the stock market after a significant decline. It is often short-lived and does not indicate a true trend reversal. Investors should exercise caution when interpreting such bounces and consider the overall market conditions and underlying factors.

4. How can I navigate the current market volatility?

Navigating market volatility requires a disciplined approach and a focus on long-term investment goals. Diversification, regular portfolio reviews, and staying informed about market trends and developments can help investors navigate turbulent market conditions. It is also important to maintain a long-term perspective and avoid making impulsive investment decisions based on short-term market fluctuations.