So, finally, we have a “scared bear” in the market!! After 7 weeks of rampage and eating away 1400 points, the bears are now running for cover. What started at 10657 levels on Friday, took Nifty to 11057 by Monday evening and that is a gain of 400 points in 2 sessions and all those who shorted nifty heavily, thinking that 10950-11000 is an upper end for this series are now counting on losses as Nifty effortlessly took out the 20dma.
Globally also things are now looking stable as Dow Jones has recovered and went up 200 points from the previous close and that is on the rumours of resumption of talks between US and China. Asia is also largely in the green with Hong Kong flat at 20 points but Japan is up 250 points. Brent also is going up and has crossed 59 dollars.
Domestically, the big game-changer is the RBI dividend that was declared to the Govt. RBI is giving 1.76 lakh Crore to Govt as dividend this year. Out of this 52,600 crore is coming in as surplus reserves and 1.2 lakh crore as a dividend. This is coming on the back of Jalan committee recommendations of maintaining a 5.5-6.5% of its assets as reserves. RBI board chose to keep it at 5.5%. This means bond yields will go down on the anticipation of Govt borrowing less and fall in yields means a rise in Nifty.
Secondly, this liquidity approximates to 0.3% of the GDP and this will also help in containing fiscal deficit by 0.3% with no extra borrowing. Also a piece of good news. Now that we have crossed the 20dma of 11000, the next target is 11150 which is a pivot and 11200 the 200dma. Will these two be taken out in next 2 days?
On the derivatives front, yesterday’s huge rally has not improved the futures long positions but it has forever in this series altered the options market. Put shorting resumed and so is call buying and unwinding of short positions in calls. This brought the Nifty put-call ratio to 1.21 from 1.02 at the beginning of the day. 11000 put added 10.5 lakh positions and now its firmly the base for this series. On the call side, 14.5 lakh positions were unwound at 11100 call and open interest is building up at 11200 call where 3.1 lakh positions were added.
So, if there is an up move today 11200 will emerge as the strike with highest open interest as the gap between 11100 and 11200 call is just 1.5 lakh contracts. So, 11000-11200 might emerge as expiry band for this week.
What is the Nifty call for the day?
Yesterday, I advised you to take a long position and that would have given you a handsome profit. Today, the story is going to be no different. Now this series is just 200 points away from turning into green and we might get 100 out of the 200 points today itself. We are likely to open positive around 11060-11080 mark and Nifty will go effortlessly till 11150-11180 mark and you have a chance of making further money in this market.
The trade for the day is to go long as soon as the market opens in the range of 11070-11090 mark with 11150-11170 as the target. If you get a dip towards 11050 mark then you can go long and that will give you more profit. The 200 dma is at 11200 mark and that will be a difficult mark to cross so, we have the room till 11200 to reap profits.