a) Market volumes in cash segment today stands at 12500 odd crores for Nifty stock – This is the combined volume of NSE and BSE. It is considered to be very high cash volumes for nifty stocks. Normal turnover hovers around 5000-5500 crores.
b) If we look at debt market fii inflows then we may see huge money is coming into it.Now the question is, where is this money is coming from US or other developed markets?. My reading is that FIIs are not foolish to bring in from those markets but shifting it from other emerging markets where a sell off was witnessed.
c) FIIs are buying into cash, index futures and stock futures. There is no sign of an immediate reversal. The markets may hang around these levels and takes support at 6350 level.
d) Till yesterday, options market was giving a different story, as per Black scholes model valuation Calls were trading at discounted Premiums and Puts were at higher premiums. And FII mostly uses Black Scholes model for trading options. As per their algorithms they will buy the cheaper and sell the costlier options .The calls were available at cheaper valuations so they were buyers and puts were costlier so they were put sellers. Now the calls valuation has significantly increased, hence my reading is that they will start selling calls and puts both. Thus indicating choppy markets conditions.
e) Options market is more important because of its sheer scale of operation.Consider average turnover of different sections of nifty alone :
i. Cash Turnover of Nifty Stock (joint) – approx 5000-5500 crores per day
ii. Futures turnover of Nifty Index – 6000 to 8000 crores
iii. Options turnover – average 100000 to 180000 crores. Individually for calls and puts data it is 50000 to 90000 crores.
iv. It must be noted that synthetically if we are buy calls and short puts it gives the same payoff as short in futures and vice a versa. The reward for FIIs come from this segment alone. If SEBI is really serious about retail investors then it should make it mandatory to disclose that what option calls they or any large entity are buying or selling and at what strike price and similarly for Puts, then their game is over. It will be difficult to manipulate the market and make a fool of us, but not impossible.
f) This rally is not backed by fundamentals as our macros are still weak, but amongst the peers, our market it is a better choice, hence money has to go somewhere to earn more . Other emerging markets are not doing well – the coffers are empty and their markets are not generating enough money, hence these global robber barons cannot steal money from them. Coming to India, we are having some pennies left with us and these people are eying our pennies. And once they obtain it they will take their monies along with our hard earned monies, with them. Rather I must say before 1947 we were paying lagans to these people for around 200 years and now also we are paying lagans every year in the form of currency depreciation, stock market fluctuations and other market speculation.
g) We all know that these institutions can control currencies across the globe and can take out markets in any direction with few of their pennies. We have witnessed this in the past and our market does not sufficient depth.By selling 2000-2500 odd crores per day they have taken out markets from 6100 levels to 5100 levels in a few sessions. And Just by investing 6000-7000 odd crores they have taken our markets to 6550 from 5950 levels. And nothing stops them from taking it to 5200 levels either, once again.