SENSEX NIFTY
Sep 18, 2013, 05.56 PM IST | Source: CNBC-TV18

By expiry, Nifty may be either at 5500 or 6100: Udayan

Chances are high that by the time the markets head for expiry next week, Nifty would be either at 6,100 or at 5,500. So a good 300 point swing on either side is quite likely depending on how the events pan out

Despite some sector rotation, key factors are that volumes are drying off and FII participation is waning, this may well be the calm before the storm, cautions CNBC-TV18's Udayan Mukherjee. "Chances are very high that by the time we head for expiry next week, the Nifty would be either at 6,100 or at 5,500," he says.

He feels one should watch out for today's afternoon session, the last one hour of trade today, because the markets have a habit of preempting events.

Also Read: Nifty may hit 6100 on favourable Fed & RBI decision: Udayan

Below is the verbatim transcript of Udayan Mukherjee's analysis

If we analyse the internals of the last few days, the key one which stands out is that volumes have dipped off quite alarmingly over the last couple of days. That is not surprising ahead of fairly important events. The market has become very range bound. That also is not surprising. So I think trader activity has died down quite a bit. Also tying in with the fact that FII flows while they remain in positive terrain, they have also diminished in magnitude a little bit over the last couple of days.

There has been some sector rotation but the key things are that volumes are drying off, FII participation is waning and that tells you that this may well be the calm before the storm. We have had three very range bound kind of sessions, I don’t think it will continue like this, chances are very high that by the time we head for expiry next week, the Nifty would be either at 6,100 or at 5,500. So I think there is a good 300 point swing on either side, which is quite likely and possible depending on how the events pan out and the market has paused before these events over the last three days.

However, I would watch out for today’s afternoon session because while all of us think that the markets will pause and wait and react after the event, the markets have a habit of preempting events and therefore for right or wrong, sometimes they get it wrong but they will try and make a move just before the event. So the last one hour of trade today even if we get up to a flattish kind of stand, will be quite interesting.

On market performance today

Right now it is one of those junctures where discipline is going to be far more important for a trader than having a view. It is not your predictive ability at this point going into very important events because you could get it wrong on what the Fed says or what the RBI has to say.

It is not about being able to predict the markets correctly at this juncture which is more important, it is your discipline which is more important. So, you could have a position and most traders would still be carrying long positions because the Nifty over the last few days has not violated any typical stop losses that would have been kept by the long trader. Due to that, the positions would still be long in the market, but it is very important because we are about to see volatility pick up over the next few days quite clearly and discipline is going to be most important.

As a trader if you get your call right, you just need to pyramid your positions, add to positions if there is a breakout. If the market turns against you, you need to respect those stop losses that you have in place otherwise you could be staring at fairly deep losses or atleast wiping out of most of your profits quite immediately.

At this point you don’t want to get caught into and therefore, what the market says tomorrow will be wrong. You just say I don’t know what will happen, markets will make a big move, I just want to be sure that I don’t make a mistake at this point and get saddled into a bad position. So, it is one of those junctures where the outcome is uncertain and therefore, discipline is far more important than having a very firm view on what might happen in the next 72 hours.

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