Finally the much talked about FED hike has come. As no surprises, FED rate has been raised and it was as per expectations. But has the after effects of the same sunk in? Index goes up 300 points then down 300 points? Volatility will rule in the days going forward, keep an eye on VIX. Sentiment seems a bit uncertain on the street and plus the December anomaly should be at the back of our minds. (it is a consensus event wherein FIIs sell out and take money home for reporting stronger sheets as US year ending is 31/12/2015).
Technically speaking 25000 SENSEX held up firmly and is a reasonable support as far as charts are concerned. This coincides with 7500-7600 range for NIFTY. Traders looking for opening shorts must see the risk-reward ration which is skewed against them. Does that mean it is time to go long? Well technically no, however adventurous longs can be opened as risk-reward is in longs favour. But be prepared to be chopped as we affirm volatility will rule going ahead.
Fundamentally speaking markets are priced at 20x trailing earnings with a dividend yield of 1.4x. This picture is of a reasonably priced markets. It is neither cheap nor expensive. One can do bottom up fishing looking for reasonably cheap stocks however within the index there are counters available at a good entry point given the current bull run we are having. Troubled counters like DRL have ben languishing at 52-W lows and provide a good entry point for very patient and long term investors.
Currency is interestingly poised for the coming week as there are multiple holidays. Technically oversold for the very near term and fundamentally still adjusting to the FED hike, currency has been all over the place with INR getting stronger session on session. Traders are advised to trade longs and shorts with extreme caution and having said that a decent option strategy such as call and put spreads should give comfort as expiry is round the corner.