Elections results are done and dusted. BJP did not do well. Political semantics about a good fight etc apart, it is a fact that the party lost the three big states it was ruling and did not make any inroads in Telangana despite the big bluster.
This loss of power can lead to a rethink of economy and government can chose to go populist before the General Elections in 5 months time.
Well, we are not here to discuss the economy. Yesterday the market perfectly did what it always does. Taken everything in its stride and moved on.
Urjit Patel resigns.
BJP losing the three states.
When the rumor becomes the news ( in this case the Exit Polls outcome) , markets just moves on. Whatever action is expected was already done. Didn’t we get a 205 points drop a day earlier out of nowhere? It was time to move up. Sadly it damaged our positions considerably.
The green tick of 60 points did not come about easily. In the early trades, NIFTY fell to below 10350. Then recovered in a slow and uncertain manner.
On Friday, NIFTY was up 92 points. Lost 205 points on Monday and gained 60 points yesterday. Still uncertain which way it will go.
Yesterday SUNPHARMA, RELCAPITAL, TATAMOTORS, VEDL, TATASTEEL made the new 52 week lows. Then all of them recovered from those lows and SUNPHARMA and RELCAPITAL turned positive in a big way. Not good news for us.
TITAN too recovered sharply and our only CALL for this month recovered some of the loss.
These movements combined with the fact that now election results are actually done and dusted, option premiums came down in a big way. That was additional loss for us. These are the ways markets work and we just have to bear with this.
We are still in with a profitable position though not as good as a day earlier.
Normally, I would be concerned but not much at this time. With 5 of the stocks making new 52 week lows, I expect at least 2-3 of them to revisit these levels and even breach them over next few days. That should make up for the profit given away yesterday. There shall be more trades in the days ahead. From now on it should be a normal month with lesser volatility but our stocks are inherently volatile. We shall either derive benefit from this fact or else we know what can happen in the worst case.
New Trade :
M&M ( Mahindra and Mahindra) is down 7.5% over 30 day period. It is flat over 7 day period. Normally we should not be taking a trade. But the fact remains that it made a fresh 52 week low yesterday at Rs. 694.
We still have 11 trading days to expiry and a simple 5% fall from the current price can take it to Rs. 690 levels.
Yes, there is some risk in the trade but which trade is not risky?
I will go for PUT 700 in a price range of Rs.9.00-10.00.
Maximum risk is Rs. 10000. ( Lot Size 1000 )
Disclaimer: This post and examples are for teaching purpose only and are not meant as advice/suggestion to trade in these stocks. Trading in Futures and Options can lead to big losses and should be done with appropriate knowledge and advice only. Mentioning the stocks here does not imply that I have a trading position or likely to take a trade in these stocks.