Moneycontrol Presented by Motilal Oswal
Days hours minutes
Nerolac
Presented by :

Co-Presenting Sponsor :

Capital Trade

Powered by :

Godrej Properties

Associate Sponsors :

Aegon Life
LIC Housing Finance
Indiabulls

Co-Presenting Sponsor

Capital Trade

Associate Sponsors

  • Indiabulls
  • Aegon Life
  • Image 3
Dec 09, 2017 11:17 AM IST | Source: Moneycontrol.com

Ahead of year-end, FII selling triggers largest decline of 2017 for MSCI EM Index

During the week, almost all EMs saw outflows. South Korea, Taiwan, and India saw outflows in the vicinity of USD 600 million each. Outflows aggregating to close to USD 200 million were also seen from Indonesia and Thailand.

Moneycontrol News @moneycontrolcom

Amit Gupta

ICICIdirect

The Nifty50 bounced back from the crucial support of 10,000 and could now consolidate after the recent correction. The Put base placed at the 10,000 strike is quite high, which can eventually lead to a base formation in the Nifty.

The volatility had increased of late due to upcoming Gujarat election outcome. Otherwise, broadly the consensus was formed on the monetary policy announcements in India and the US.

We believe 14 percent is quite a crucial level to watch for in India VIX. If it starts getting close below these levels, it would be quite comforting for equity markets.

The recent market correction has seen shorting in Nifty futures due to which Nifty premiums have started declining.

Premiums have come down from 35 to 20 points which is a sign of short formation in the index. We believe if 10,000 is eventually held, the short positions would be forced to be covered, which would lead to short covering move in the markets.

Certain Nifty heavyweights that had stayed laggards so far have started supporting the index, limiting downsides.

Image19122017

Bank Nifty: Index likely to continue its upward journey with support at 25,000

The index witnessed a volatile week and saw strong selling from 25,400 on the back of a sharp fall in private sector banks, leading the index to end below 25,000 on Wednesday after RBI’s monetary policy.

However, a sharp pullback was seen from 24,900 on the weekly expiry day. The index finally ended near the highest levels for the week.

The second half of the rally was mainly dominated by private sector players in which Axis Bank and HDFC Bank were leading the chart. Participation was also seen by midcap sector banks.

As the index moved up from the recent low, open interest (OI) concentration was seen in 25,300 Call. However, on Friday, the index moved above this level while the OI concentration has seen shifting to 25,500 and 25,700 strike. On the Put side, huge writing was seen in 25,000 strikes Put indicating major support in coming days.

The current price ratio (Nifty Bank/Nifty) has moved to 2.46 levels. In the past few weeks, the ratio has been hovering near 2.46. We feel Nifty Bank is well placed to move towards 25,700 in coming days, which will push the ratio higher towards 2.50 levels.

Ahead of year-end, FII selling triggers largest decline of 2017 for MSCI EM Index…

As opined in earlier reports as well, while from a yearly standpoint, EM equities have clocked a stellar year with over 30 percent positive returns, but constant FII selling had made it vulnerable to profit-taking.

As we are approaching the close of 2017, FII selling (ahead of book closure for CY17) increased while the MSCI EM Index clocked a decline of over 5 percent (largest decline of 2017).

This happened despite a steady dollar and stable US bond yields along with a relatively stable commodity complex. This backdrop suggests current decline will have elements of year-end profit booking.

During the week, almost all EMs saw outflows. South Korea, Taiwan, and India saw outflows in the vicinity of USD 600 million each. Outflows aggregating to close to USD 200 million were also seen from Indonesia and Thailand.

For the Indian segment, similar to selling in the cash segment, the F&O set-up was weak as well. In the index future segment, there were fresh shorts, adding to over USD 500 million. In the index option segment as well, the index option buying (Put) totalled over USD 200 million.

Global risk sentiment seemed to point towards continued risk-off mode. The sell-off in the emerging markets (EM) space has not abated while geopolitical uncertainties in many Middle East nations are rising. Coupled with this, US tax reform bill and its likely impact on technology companies (FANG stocks were the main driver for strong US Index returns) has kept US markets subdued.

Shoring up the equity sentiment will be key for the fresh allocation for EMs (historically the FII equity is low in the second half of December).

For India based investment, fresh allocation will be based on the upcoming state election results that will be declared in the third week of December.

Image29122017

Disclaimer: The author is Head of Derivative from ICICIdirect. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sections
Follow us on
Available On