Finally, the break has come!
After 25 days, we have broken the range decisively and we have done that on a unidirectional way, where the lows of the day were at the opening itself and the Nifty closed near the high point of the day. There was no big correction intraday as Nifty kept breaking levels of 11950,12000 and 12050 effortlessly as the day progressed.
So, does that mean that this 11850-12000 range has gone for good and we are now marching towards 12500 levels? US markets climbed to yet another all-time high with Dow Jones crossing 28,000 mark, so with Dow making all-time highs, why should we not do that? Asia, however, is bit flat, unlike US markets and we have Hong Kong trading flat 15 points up, while Japan is up over 100 points. Brent crude is still above 63 dollars trading at 63.7.
On the domestic front, I was always saying that we require a fundamental to break this strong 12000 resistance level and the way 12000 and 12050 were taken out, one would be wondering what that fundamental was.
Maharashtra which is in everyone’s mind could be that invisible fundamental that could have influenced the market. There was a talk that a lot of corporate money to the tune of 600 Cr has gone into this and a positive reaction from the market is an indication that the issue could have been settled in BJP’s favour.
One has to understand that all this is speculation and if things go the other way there would be a huge reaction on the downside. However today, we are likely to celebrate an all-time high and everything depends on SC judgement and how things pan out in Maharashtra. Things go wrong, expect a 100 point fall.
On the derivatives front, yesterday was a bullish day with huge buying happening in both futures and options. The futures premium which was at 0.1 points at the open went up to 22 points during the course of the day, indicative of the buying that is happened there. The overall Nifty long positions in futures jumped to 40% from 34%.
In the options market also the Nifty put call ratio jumped from 1.32 levels to 1.70 level. 1.70 is bullish and that was reflected with heavy shorting of puts. 12000 put saw a record 28.6 lakh positions created followed by 12050 put that saw 10.6 lakh positions. Now 12000 put has the highest open interest on the put side. On the call side, 12000 call saw 21.5 lakh positions unwinding and though 12000 call has the highest open interest things are moving towards 12100 call. So, the new range of expiry is 12000-12100.
What is the Nifty call for the day?
Yesterday, we had the 11850-12000 range being decisively broken as Nifty closed at 12050 mark. But, one has to keep in mind not to fall into the trap of false breakouts. False breakouts do occur sometimes and trap the investor on the wrong side. Today, we will have an open around 12080-12100 range and we will hit an all-time high of 12103 may be at the opening itself.
The real story is what happens after that. If Nifty sustains that starts going up then we can go for a long position at the all-time highs. If Nifty goes through a 50-60 point correction there to 12030-12050 levels, then also you can take a long position there. But one caution is if 12030 doesn’t hold, then don’t take any positions and see where the dip will take you. So, today’s trade should be done very cautiously and not in a hurry.