Market Trade Set-up 8th July
The budget came and went and what is left is the deep scar of red and we are back to 11800 now and 12000 or 12100 that we were talking about looks very very far now. If you have read my budget day post I had spoken about 11800-11850 range if there is a disappointment and that has come through now. Globally also things are not doing great.
Friday the US markets close 40 points down, the reason is the US added 2,24,000 jobs for June as against the expected 1,60,000 job. That has dented the hopes of a rate cut and that is the reason for the disappointment. Trade wars between South Korea and Japan and the Iran issues has put Asia in a total red and Hong Kong is down 550 points and Japan is down more than 200 points.
Coming to domestics, budget is the buzz word for the day and it disappointed the market as it has nothing to deliver to them immediately. Tax is the reason for the fall and Govt plan of PSU restructuring as well as the plan of exiting from PSUs has made no impact on the market. One good thing is the increase in the turnover for 25% tax from 250 Cr to 400 Cr. Aadhar and PAN are now interchangeable and income tax returns can be filed through Aadhar also. On the flip side, 2% TDS will be levied on withdrawals exceeding 1 Cr in a year.
On the development side, there will be piped drinking water to all villages by 2024 and more and more toilets would be constructed across rural India. All this has no impact on the increase in the surcharge for the income of 2 to 5 Cr and that has hit the markets big time. We need to see how markets react today.
Coming to derivatives, there has been a heavy selling that got triggered post noon and Nifty lost almost 150 points. The Nifty futures long positions which were at 62% at the beginning of the day has come down to 58%. On the options front also the Nifty put-call ratio has dropped to 1.09 from 1.49 and this is primarily due to the demand for the calls. 11700 put added 8.7 lakh contracts and it now has the highest open interest followed by 11800 put.
On the call side 12000 call added 23.1 lakh positions which are staggering, 12100 call added 15.7 lakh positions and 12000 and 12100 now have the highest open interest on the call side. For the monthly July series, the highest open interest has moved to 12000 call from 12500 call and that is a significant point that we need to keep in mind in this series.
What is the Nifty call for the day?
Friday saw a big fall of almost 135 points and we are now at 11800 levels and that brought Nifty back into the range of 11650-11850 that it has spent for a long time last month. Are we going to be stuck in that range or will we start moving up is what we need to look at!
For today, the pain will continue because Asia is red as well as the negative sentiment on the budget still continues. We are likely to open around 11730-11760 range and that is a support zone. We need to hold 11750 mark else we can slide below 11700 and might go to 11650-11680 levels.
So, if Nifty fails to hold 11750 and gravitates between 11720-11750 then I suggest you to take a short position with 11650-11680 as the target. It might give you 60-100 points. If Nifty holds 11750 mark then no need to go for short and observe whether Nifty can cross 11780 mark and close above 11800. If that happens then it means downtrend is limited and we need to see if 11850 is taken out or not