Currency Futures – A Welcome development !!

The Currency market which was till now restricted to banks and companies having foreign exchange exposure, is now being opened up to the retail investor. The NSE will launch currency futures from August 29th. Let us ponder over some of the key features on this new instrument.

The need for Currency Futures:
1. The opening up of the currency markets through derivatives seems to be a move towards the ultimate goal of the government - introduction of Full Capital Account Convertibility (FCAC). A well balanced and robust derivatives mechanism can surely give the government the needed confidence to move ahead with FCAC.
2. Secondly the recent volatility in the Rupee dollar in India (along with the above normal volatility in the currency markets the world over) may be curtailed, at least to some extent, by increasing the number of players. This can be achieved through the currency futures.
3. The introduction of currency futures is likely to bring down the transaction cost of many companies who currently have to deal with banks at a relatively higher cost.
4. Also the opening up of the commodities exchange necessitated currency futures. The reason was that many internationally traded commodities like base metals, precious metal and crude oil were traded on the Indian commodities markets in Rupee terms. However, currency fluctuations do affect commodity prices to a large extent, while the traders in Indian commodities market could not hedge against it..

Meaning: Currency futures are standardized foreign exchange contracts traded on an exchange to buy or sell one currency against another on a specified future date.

Some key features of the currency futures in India are as follows:

a. At present trading will be allowed in only USD/INR
b. Each currency futures contract will be worth $1000 (USD One Thousand)
c. Each currency futures contract will be quoted in Rupee terms but the outstanding positions will be in dollar terms
d. Each contract shall have a maximum maturity of 12 months.
e. All monthly maturities from Month 1 to Month 12 will be available at a given point of time.
f. The currency market will be open from 9 am to 5 pm
g. Settlement will be done on expiry in Indian Rupee only
h. The settlement price will be the RBI Reference rate on the date of expiry. The methodology of computing the RBI reference rate will be publicly disclosed (It is currently not done)
i. The settlement date will be the last business day of the month and time of settlement will be 12 noon.
j. The initial margin will be a minimum 1.75% on the fist day of the currency future trading and minimum 1% thereafter.
k. At present FIIs and NRIs are not permitted to trade in currency futures market.

Conclusion
While currency futures can be used effectively for hedging by companies and traders alike, it is expected to generate a lot of retail participation for purpose of trading and speculation. The small lot size is indicative of this.

Considering the greater transparency, efficiency, liquidity and accessibility that it will bring, it can be expected that investors will lap up this too.

CA Rajiv D Khatlawala

RPL - Caveat Emptor !!!

The Nifty fell below the intraday support level of 4315 and closed lower at below 4300. As indicated earlier, the likely hood of 4225 is higher. Resistance remains at 4355-4375 range.

RPL seems to be witnessing selling pressure and the major support is at 156. RSI as well as the other advanced indicators are suggesting weakness, especially if it breaks and closes below 154/-.



Down target could be initially at 147 and then 141/-. Upmoves are likely to face resistance at 163.50 levels

As they say 'Caveat Emptor' ( meaning 'Buyer Beware')

Happy trading !

CA Rajiv D Khatlawala

Tech Mahindra - short move ahead

The Nifty closed today at the same levels as yesterday. Consider 4380 as crucial resistance and 4300 as support for tomorrow. We have two days of doji candles - indecisions suggesting the confused state of the market.

TECH MAHINDRA seems to be consolidating for some time now before resuming its upmove.



Consider 745 as crucial support. The technical indicators / patterns suggest a move intiially to 865-880 and then a close above 890 will give a further move up.

Happy Trading

CA Rajiv D Khatlawala

Gold - Is the Shine fading ?

The Indian markets continue to reel under pressure as the Nifty / Sensex are not able to sustain upmove / up gaps. Down target of 4225 and 4165 are seeming more likely, seeing the selling pressure. Some relief to the bulls can come only on the Nifty rising above 4405 - till then bulls may go in hibernation!!!



GOLD has been stuck in a range of $ 790 and $ 835 in international markets while in Indian commodity exchanges, it is stuck in the range of Rs 11200 and Rs 12000/-. A break out of this range can provide good trading opportunity to traders.

A break below Rs 11000/- can lead it to test Rs 10450 - 10250 levels while on the upside, gold will resume it's bullishness on close above 12050/-. Watch out for these levels. We may say it is the 'calm before the storm!'

Happy trading

CA Rajiv D Khatlawala

DISH TV . . .Watch IT ! again....!

The Nifty retraced some of it's loss and closed near the resistance level of 4325. Consider 4285 -90 as crucial support level for Monday. There is an expectation of up gap open considering that the Dow Jones was up 200 points. Upmoves in Nifty have resistance at 4380 - 4405 levels.

Dish TV is one stock which has witnessed higher volumes in recent days at lower price levels. They may be suggestive of accumulation.



Condsider up break out at Rs 40.75 for a medium term target of Rs 47 and then Rs 52-53/-. It is likely to face resistance at 52+ levels. Consider Rs 35 as the crucial support for the upmove.

Happy Trading

CA Rajiv D Khatlawala

Nifty - Ooops ...is it Deja Vu ????

The Nifty moved as expected and achieved the target of 4270. Since the crucial support of 4316 was broken , selling aggravated in mainline counters as expected.

The Nifty's recent run up from 3800 to 4600 and it's subsequent fall seems like we have already seens something like this before - not long before !!. It is clear deja vu.



The above chart indicates the movement for the Nifty along with the 'long term' MACD indicator (chart updated as of Wed Aug 20).

The next target for the Nifty in it's fall is 4225 and then at 4165. Upmoves will have resistance at 4325 and then 4370.

Will the Nifty movement be similar to what we saw June and July ? Till will surely tell . Till that time the only alternative for us is to become 'Traders' rather than 'Investors'

Happy trading

CA Rajiv D Khatlawala

CAIRN India . . .

The Nifty went near to the resistance area of 4440. For tomorrow resistance remains initially at 4440 and then at 4480-4490 levels. Consider 4380 as crucial intraday support and 4315 as support on the daily charts.

CAIRN India has been taking support near the 200 DMA for some time. The range has been Rs 230 and 249 and I expect either side break out, however the bais is towards an upside break ...



Buy on break above Rs 248 with Stop near 229 for a target of 275 and then 283/-... Exit any long if it breaks Rs 229/-

Happy Trading

CA Rajiv D Khatlawala

HCC - short term move !!!

The Nifty which remain below the crucial 4360 during the day but rallied in the last half hour to close higehr at 4368. Upmoves will have resistance at 4395 and 4430 while support is at 4350.

HCC has been moving in a channel for some time and yesterday it has taken support at the lower end . It had also give a hammer.



A break above 102 should give a short term target near 112-114 levels and stops must be kept at 95.50.

Upmoves in the Nifty / stocks may at present be treated corrective only. Other technical indicators are suggesting weakness on the daily charts.

Happy trading

CA Rajiv D Khatlawala

Reliance - readying to fall ?

The Nifty remained weak as expected and indicated on Thursday. Consider 4360 as the crucial support below which further selling may be expected. Resistance on upside is at 4445 and 4470 levels.

RELIANCE has broken below it's important support line and is also quoiting below it's 200 DMA. The current fall is with a negative divergence and hence I expect that further selling may be witnessed on the counter. This inturn will affect overall sentiments too.



Consider Rs.2208 as intraday support level for tommorow below which initial target should be Rs 2175 and then 2153/-. Resistance on updie is strong at 2245-2255 levels.

My down target of RPL has been achieved. Presume you all could trade the downside !!!
Happy Trading

CA Rajiv D Khatlawala

Nifty - Warning ...Caution Ahead !

The Nifty broke the important intraday support level of 4465 and fell further to close weak at 4430. In fact the trendline support on daily charts was broken yesterday itself.

Being the last day of the week , i was tempted to see the weekly chart and it suggests caution - extreme caution!



On the weekly Nifty chart, there is a 'bearish engulfing' candlestick pattern which indicates a halt to the past few weeks of upmove. Technically it is a reversal pattern and one should expect further selling pressure in the week to come.

The entire structure would fail only if the current weeks high of 4650 is broken on upside especially with volume. On lower side, likelyhood of downward targets near 4330-4270 is more likely in next few days.

Happy trading

CA Rajiv D Khatlawala

SPARC - likely to create sparks!!!

SPARC an offshoot of Sun Pharma has been seeing some buying interest recently. The technical pattern is that of a rounding bottom.

The scrip is consolidating in the range of 80/- and 90/- for past two months. Upside resistance is at 92-93 levels and I expect that a break above this should give investors a target price of 110 initially and then 118-120/-.

Post break out, all longs must have a stop near Rs 80/-

Happy trading!

CA Rajiv D Khatlawala

IDFC - readying for a move!

IDFC has been consolidating in the range of Rs 90 and 110 for a long time and in the process it has also given multiple positive divergences on the RSI. MACD signal line too is in buy mode and nearing zero line.



The recent price movement is giving indications of a rounding pattern.

The break out is at 112 for a target of Rs 137-140 while Rs 99 remains a crucial support once break out occurs.

Investors may buy partially at current levels of Rs 105-107 and add on break out.

{The blog will undergo a MAJOR change in a couple of days. Till that time, there may be some delays/hiccups}

Happy Trading

CA Rajiv D Khatlawala

NIFTY - Quite indecisive!!!

The Nifty movements have been quite indecisive in the last two days. There were two consecutive 'inverted hammers' suggested selling pressure at higher levels near of 4600.

Consider 4480 as crucial intraday support level and a break below this should lead to profit booking in other index heavyweights. On break of this support, expect levels of 4415 and then 4365.

Upmoves are likely to face resistance at 4585 and stronger at 4640

Happy trading

CA Rajiv D Khatlawala

RPL - signs of Fatigue ????

The Nifty got some resistance yesterday at near 4450-4475 levels but once the break-out came , it was more or less certain that the next target should be 4540+ (This was indicated on 30-July-08 post)

One stock which went ahead of the market was RPL which rose from 160/- to Rs 175 in past five days. Now while the market is rising, this stock is showing some signs of fatigue.



Resistance is strong at 175+ levels and it is under performing the overall market on intraday charts.

Consider 168.50 as crucial support. A break below this can lead to further selling in the stock to a level of 155-158 price zone. Keep stop at 175 for any short positions.

Those who are aware of how to practically use option strategies can take good advantage of the current technical structure !!

Most of the stocks evaluated when Nifty was near 4150-4200 levels have achieved targets in about last 10 days. Presume you have taken advantage and booked profits

Happy Trading

CA Rajiv D Khatlawala

HCC - short term move to test 110!

(Friends, I was away for three days and so could not post on the blog. Sorry for the inconvenience!!)

The Nifty gave a good move up on Friday but is finding resistance near it's earlier support level near 4450-4475 levels. If you remember , post the crash, the Nifty took support near 4450 many times before it fell off to 3800.

During the fall one stock which still has some short term upmove left is HINDUSTAN CONSTRUCTION (HCC) currently quoting at 92/-



I expect that a break above Rs 95.50 should lead it to the 105-110 zone where it should then find resistance. Observe the 'flag' pattern on the charts. Increase in volume in recent trades is an added positive sign.

After break out , keep stop loss near 89/- !!!

AND YES - I SHALL BE MAKING AN IMPORTANT ANNOUNCEMENT IN A COUPLE OF DAYS .. Be Posted on the blog !!!

Happy trading

CA Rajiv D Khatlawala