NIFTY-VIX
It starts with dismay, overnight unwinding continues, NIFTY BANK starts to ascent, aided by Energy, held by the Metals. MSCI rejig has very minor impact on very selective spaces. It looked as if all is well at the close.
Two indexes that needs the narrative to move on is VIX, India VIX it hit high and then closed again around 16, this one is not tradable. CBOE VIX, which is tradable hits 18 and closes near 16.
VIX calls are bought, typically when markets expect down move, as the relative up move in VIX far outweighs the down move. This results in the put options on the Index buying as part of the dynamics.
So, the Volatility or the Vol is rising. Analogy brings this rise almost like that one witnessed in Oct 21. We did loose near 12% from the ATH.
The cause is the US Inflation report. It prints more than what the market bargained for, the Core has gone thanks to the services. The last six months of core up move alone on an annualised basis shoots upwards of 6% against the 2% path.
The rate cuts move past the half year and may be four. Everything that is sensitive sold, nothing spared not even safe heaven Gold. Yields spike, Dollar Rallies, more to go than less.
The cues, this time nothing ordinary a cut of near 1% looks reasonable that takes the base of 21500 under attack, once given we stare around 21000. The dynamics moved now, and one can expect slightly deeper cuts too, as long as we stay below the 21830-850 area.
Later our Inflation numbers, then the UK inflation. Markets still digesting yesterday numbers, follow through is to be seen. Global Equity looks set for another 3-5% fall before we see any stabilisation.
Difficult to push fresh shorts in picture, in any case the high of the first half hour remains the stops for shorts ditto for the longs the lows. Choose the time frame that suits, but for intra-day 30 min is apt.
While capped 21830-850 bulls stare at 20900.
NIFTYBANK
The reluctant sell zone, get the reality buy check. Bounces and move past the upper zone of 45200-300. Fin Expiry adds to the spice.
While the close is encouraging, the last couple of days of moves if anything to go buy is lower lows and lower highs. Save yesterday.
The PIP graph is the Intra-day graph. Let's dwell on the overnight cues the CPI. This is relevant not only to the global trajectory on yields and currencies, this also is part of the comments from the recent MPC.
US CPI core services print 0.7%, while the super core (excluding shelter) prints 10.2% YoY surge of 85 bps. This is one of the indicator J Powell watches.
It is usually after 8 months of pause the first cuts unfold, but there are periods when the first cut has not materialised before the 18 months, year 1969 and 1997. This logic can push the first cut to 2025. Not an outright rejection of the probability.
While Asia inflation slightly on the descent, note the easy fiscal and monetary policy means it is only lag effect of inflation to rise again. Europe in the middle with varied, the focus on growth far outweighs the inflationary debate.
What is more worrying this rise in inflation is despite the lower energy costs, Gas as well as Crude Oil. That shakes up the confidence about lower that is near. It is back to higher and longer.
From the Index despite the global cues, it is still stuck in the range of 44000-46000 range, squeeze that you get 44400-45600. Though for the day it is capped yesterday high while 44600-700 is under test.