Opening Curtain: A Surprising Market Turn
It was a day of high drama on the stock market. Anticipation was ripe for an uptrend. But what unfolded was an unexpected morning plunge. In a striking repeat of the past three days, the market took us all on a wild ride.
Caught in the Vortex: A Pattern Emerges
This was no isolated event. Three days in a row, the market opened high, only to descend over 100 points from its peak by the day’s end. Friday, May 9th, 2023, appeared set to follow suit, with Nifty launching strong, then plummeting over 100 points.
A Ray of Hope: A Midday Recovery
Yet, amid the stormy market, a beacon of hope shone through. I took to Twitter in the afternoon, hinting at a potential short-covering surge. My theory? A market falling relentlessly throughout the week may see some relief by Friday’s closing bell. And guess what? It happened.
The Bouncing Back: A Twisted Tale
At 12:30 PM, the European market opened firmly green, but ours continued to reel. It was only after 1:32 PM that the tides began to turn. A rapid short-covering saw a swift recovery of over 100 points from the day’s lowest ebb.
In the Eye of the Storm: Nifty Holds Its Ground
Despite the turbulence, one comforting truth emerged. Nifty managed to stay within its 18,000 to 18,500 range throughout the week. Indeed, those who sold off their 18,000 put options and 18,500 call options must be smiling, assuming they can weather the mark-to-market (MTM) losses when the market plunges.
The Fallen Giants: A Closer Look at Market Movers
Notably, the market’s downtrend this week was largely driven by HDFC twins, Reliance, and ITC. On May 9th alone, their fall contributed heavily to Nifty’s 40-50 points dip. Interestingly, by day’s end, ITC clawed back almost all its losses, while State Bank closed in the red.
The Volatile Dance: Nifty vs. Bank Nifty
In the face of the market’s volatility, Bank Nifty managed to close about 200 points higher compared to the previous week. Nifty, on the other hand, closed 100 points lower. Despite Bank Nifty’s upward swing contributing around 60-70 points to Nifty, the overall Nifty performance was rather lackluster.
The Successful Trade: A Contrarian Approach
In such conditions, a contrarian approach has proven fruitful. Going long in Bank Nifty and short in Nifty could’ve resulted in a neat 200 points gain in the former and a 100 points profit in the latter.
The Glimmering Stars: IT Stocks Shine Through
Despite the tumult, IT stocks began to shine, particularly Infosys, which performed remarkably well. The overall market volatility had domestic institutions trading more than 1000 crore today.
The Road Ahead: A Note of Caution
As we ride out this storm, the market range of 18,000 to 18,500 offers some solace, with Nifty expected to close between 18,200 and 18,300. This stabilization should ensure manageable MTM losses on option premiums.
Wrapping Up: A Peek into the Future
In these turbulent times, managing risk is key. So, let’s hope for a gradual market shift next week. After all, the market’s wild swings may be exciting, but they also bring the threat of significant losses. Stay alert, stay informed, and stay optimistic.
