Will Nifty make new all time high ?

It’s been a roller coaster ride for Indian markets since last month. From its lows of 5120, Nifty has rallied more than 1000 points. How often you see this kind of movement in Index in a short span of 20 days ? Now we are near all time highs and as usual debate has started about scaling of new highs of 6339 on Nifty. Lot of market participants are still skeptical of this rally and feel it is liquidity driven rally and fundamentals don’t support new high on Nifty. In fact it would be bit ironic if we make new highs on Nifty given the decade low Q1 GDP growth of 4.4 percent. But who can argue against the force of liquidity ? Indian markets along with all emerging markets have been receiving large inflows. FII’s have bought around Rs 11000 crore in Indian market in September alone.

US Fed had also decided not to proceed with QE taper in its September meet. It was a hugh sigh of relief for all countries running current account deficit. All these countries have been given time to set their house in order before funding deficit becomes difficult some months down the line. RBI played party spoiler in its policy review by increasing policy rate (repo rate) by 25 basis points to 7.5 percent. Market was expecting status quo on repo rate from RBI. More than increase in policy rate, RBI sounded hawkish on inflation front and further increase in repo rate this year cannot be ruled out. With both key events out of way, Market will now start focusing on Q2 results which are expected to be bad.

Nifty is just 5-6% away from its all time high so new high cannot be ruled out all together. But more important question is that will market sustain at those elevated levels ? Normally I prefer trading in options but if Nifty crosses 6300 and beyond, I will be tempted to go short on it via futures. Given macro backdrop, I don’t think those levels will be sustained. But before going short one need to watch FII inflow/outflow numbers carefully.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies.


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