Strangle Strategy for a Volatile Nifty Post the Fed Announcement Tonight

Volatility in the market has been surging of late with the India Vix eclipsing the 20 level of late. I expect this to continue post the fed. A strangle can help capture market volatility on either side.

Nifty Current Spot: 8280

8300 April Call - 35
8200 April put -19
Break even = 54
Break even points -8354, 8146
You make money on either side of 8146, 8354
You loose money if market stays between the above two levels.

Is the Rupee sending a warning signal to the stock market?

The last time there was significant Rupee weakness was back in August 2013 when the Nifty crashed closed to 20% led by bank stocks that crashed over 30%. Fast forward to today and significant Rupee weakness has started to re-emerge with the Rupee recently breaching the 64 level.

This has yet again caused bank stocks to underperform with the bank nifty down close to 10% from recent highs and further under performance is likely if the Rupee sells off further.

This would also prevent rates from coming down in the short term which is not good for the overall economy and the stock market.

Recently Indian stock stock market volatility has significantly exceeded US stock market volatility with the India vix crossing 19, yet another warning sign.

The stage appears to be set for significant equity underperformance in 2015.

Disconnect between the Rupee and the Indian Stock Market Indices

Yes falling commodity prices help narrow our current account deficit and are positive for the Indian market which is correcting lower from recent highs:


These developments are however even more positive for the Rupee taken together with positive foreign institutional flows, so why is the Rupee breaking down in the face of a surging stock market?
Global Dollar strength on fears of upcoming deflation?

Here is some data to consider:
2008 GDP - 9.5%, Dollar/Rupee - 42, Stock market Peak January - 6350, P/E -24, 3 month return from Jan 08  < -30%
2015 GDP - 7.5%, Dollar/Rupee - 68, Stock market Peak in March - 9119, P/E -24, It remains to be seen how much of a decline will occur, as of now -20.0%.

Disconnect between the Rupee and the Indian Stock Market http://t.co/fYMwKrnIPN pic.twitter.com/z3A462djla

— samuelR (@RajveerRawlin) September 5, 2015