I expect a gap up opening tomorrow on positive cues; given a bit of weakness after a big gap up yesterday, the gap up is more likely to be up between 1-2% than higher, but we should see a bit of buying and equally importantly a bit of short-covering coming in. We had a lot of short build-up in this market, the options side can just expire their way to death; in terms of shorts on the 2500, but futures sells should be squared, leading to a futures rally and the cash market implications of it.
The markets look to be forming a double-bottom at their mini-test of October lows. Global market cues should continue to be very positive; we're below a 14 day moving average which is a robust long-term trend indicator and we're on the lower edge of medium-term RSI readings. The S&P rally broke an important level on Thursday - 741 was a key level there. The rally looks to have legs in it and positive cues should take us to 2850 sort of levels here; the market is oversold.
The downside to this trade is that we aren't seeing intrinsic strength in the Indian markets and the peculiarities of March mean that there is a lot of scope for book position pressures leading to a bit of squaring off. There would be tax benefits to squaring certain positions now, so in a year where the dip has been so extreme - there could be a bit of intrinsic March weakness that nips the rally in the bud.
Those considerations shouldn't come into play till closer to contract expiry. This is a solid index trade, which deserves a 10 unit allocation here.
For record keeping purposes, I will update the price based on actual market price on Friday morning.
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