Nifty: Bear Trap?

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The Week Gone By

The financial year of uncertainties and opportunities is coming to an end. Many small business have perished due to their failure to meet working capital. On the other hand, some businesses have flourished with business opportunities.

As we end the last F&O expiry of FY20-21, the bulls have come back aggressively. Out the 12 expiries of the year, 8 ended on positive note while 4 in the negative. In other words, we have seen gains 66% of the time.

Well, let's see what's in store for us in the Nifty April 2021 expiry.

The Week Ahead

The April F&O expiry stats will excite the bulls as the historic numbers have been impressive for the last 17 years. We have checked the returns on Expiry-on-Expiry (E-o-E) for April. Most leveraged positions are covered in the March expiry due to financial year-end and fresh positions are built from the first of April.

In the last 17 years, bulls have ended the April expiry 13 times. Four times it has been in the favor of the bears. The average returns are 3.39% for the same period.

If we look at the Month-on-Month (M-o-M) returns, the numbers are 12 in favor of the bulls and 5 for the bears. The average returns are 3.19%.

The historic numbers are exciting but is the technical structure in sync with the historic move?

In this edition of Momentum Moves, we will analyse Nifty and compare it with other Asian indices.

The last week's fall below 14,300 has certainly changed the sentiments on D-street and with that most of the March series. In the last 25 years (1996 to 2020), March has ended in the negative zone 14 times, thus changing the sentiments for the bulls.

But the break of 14,300 seems to be a bear trap if we compare the move with other Asian indices.

Year Returns
(E-o-E)
Returns
(M-o-M)
2004 6.13% 1.37%
2005 -4.63% -6.54%
2006 2.61% 4.56%
2007 10.00% 6.97%
2008 3.51% 9.11%
2009 12.71% 15.00%
2010 -0.12% 0.55%
2011 -0.83% -1.44%
2012 0.20% -0.90%
2013 4.11% 4.36%
2014 3.00% -0.12%
2015 -1.93% -3.65%
2016 1.41% 1.44%
2017 1.84% 1.42%
2018 4.98% 6.19%
2019 0.62% 1.07%
2020 14.10% 14.68%
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Disclosure: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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