- At a time when markets were still recovering from the shock of the post-budget gyrations, the decision to bar further trading in SGX Nifty futures is an added problem for FPIs with open interest in SGX Nifty Futures.
- It is hard to say how the FPIs will react to their SGX Nifty futures OI. An orderly shift to the onshore market will be simple but that is unlikely to happen considering the higher STT and the INR denomination. Expect volatility in Nifty on Monday.
- FIIs were net sellers to the tune of Rs.(-1352) crores while DFIs bought Rs.588 crore on Friday. A lot will now depend on how the FIIs react to their Nifty OI, whether it is a shift to onshore or whether it is an unwinding of positions.
- Friday was a day of absolute carnage in markets with European markets down by over 1.5% while Asian markets like the Nikkei was down by 2.5% while the Chinese markets were down by 4%. SGX Nifty is in the positive but that may be deceptive.
- The abolition of SGX offshore futures on the Nifty is likely to game the rules of the game in the hedging market. While it may not drive the market onshore, it will surely lead to some panic offloading of SGX positions.
- In terms of strategy, the Nifty will most likely find a bottom around the low of 10,276 that it touched on the day of high volatility. But that will still assume that the impact of the SGX Nifty trading ban will not be too huge.
- Strategically we are likely to get most of the stocks at lower levels and hence it would be best to wait and watch. In the meanwhile, use rises to hedge your long positions with Nifty put options as it is a sell-on-rises market now!
- We believe that the current market is most likely to be a value trap and hence would be best advised to wait for the volatility to settle down.
