A fresh breakout into all-time highs generally attracts a lot of follow-up buying. Doubly so, if it is around the start of a fresh derivatives series, without the baggage of a rollover. Curiously though, the Nifty seems quite tired and sapped of momentum.
Despite a good futures rollover, it still has not managed to clear 4,300 convincingly. The late afternoon weakness in the last few sessions is not a very comforting sign either for the bulls.
Global cues could not be better, Yes, China plunged 8 per cent on Monday, but none of the other Asian markets even blinked. Liquidity flows are very robust, both from FIIs and mutual funds, and every day one hears of NFOs raising more money. Yet, the market looks starved of leadership.
Reliance, Bharti, Infosys, HLL all seem to be lying low for the last few days. Of course, this could just be a temporary lull, as we have seen in the recent past. To be sure, we have not seen any alarming breakdowns yet; but at these elevated levels one worries about every small sign of fatigue. After all, no one wants to be left holding the baby when the tide turns.
The F&O market is reflecting this indecision. There is a lot of concentrated activity around the 4,300 strike price of the Nifty. Implied volatilities have shot up and both 4,300 call and put options are very expensive. In lay terms, that means the market expects a sharp move either way. People are betting on either possibility.
Till the Nifty makes up its mind, mid-caps continue their run. Even there, the churn is furious and the basket of out-performance narrow and highly selective. Interesting market for the smart stock picker, somewhat tricky for the momentum trader.
(The writer is Executive Editor, CNBC-TV 18)