Markets reacted sharply to a change in policy stance from the Bank of Japan where the Japanese Yen surged by 4% against a basket of currencies triggering a sell-off in global markets in the initial hours. Indian markets felt the brunt of the rise in JPYINR but Nifty 50 managed to recover in late hours to close around 18400.
The Next Notes Nifty 2X Leverage Index which actively trades in Tokyo exchange denominated in JPY has seen a major breakdown from the Rising Wedge pattern and this would mean Indian markets would remain prone to a downside of +17% in the next few days unless India VIX manages to move below 9% mark.
The rising JPY in past has been associated with a major market downtrend that has extended beyond 25% and this occurs due to ‘carry trade unwinding’. As global ‘carry trade’ is involved with multiple times leverage, investment bankers resort to liquidating equity market positions to offset losses in ‘carry trade’.
Time to be cautious!
Nifty 50 Index and Next Notes NIFTY 2X Tokyo
Stocks to watch
Positive Read through
- LT Foods, KRBL in focus- Rice price hike taken by Thailand, Vietnam, and Pakistan as global demand increased
- Dabur promoter confirms selling 1 pct stake via block deals
- Dixon Tech- Rs 59 cr incentives approved for mobile mfg by govt’s empowered panel
- Jubilant Food- Domino’s launched 20-min delivery in 14 cities in India
- UNO Minda- enters into a technical license agreement with Ascentec, Korea
- Sterling & Wilson- OFS gets 153 pct demand from non-retail investors
- Mazagon Dock- Delivers 5th Scorpene class submarine Vagir to Indian Navy
Negative Read through
- Piramal Enterprise- Reports say Cosmea exits race to acquire Reliance Capital
- City Union Bank- Reports says Gross NPA divergence of Rs 259 cr for FY22
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