Just when we were talking about a recovery and the 10850 is the bottom, for now, yesterday’s intraday break of 10850 means the downside is still open and we might be going to that 10585 mark which is the 2019 low. Every event is being seen as an opportunity to sell and it started from the budget.
Yesterday’s monetary policy was another opportunity taken by bears to sell and we lost more than 100 points intraday after the policy. Globally things are looking okay, with Dow closing in a flat territory last night and today morning the Asian markets are in the green territory with both the Hong Kong and Japan both 120 points up. Another big news is Brent Crude which has fallen a big way last night and now it is at 57.6 dollars. But how much impact it makes on the markets needs to be seen.
On the domestic front, we had the monetary policy yesterday that gave a 35 bps cut, which is rather unusual. A 25 and 50 is the usual norm across the World but the RBI Governor who is also a historian by degree decided to take the middle path and gave an in-between cut of 35 bps. This brings the Repo rate to 5.4% which is a 9 year low but with inflation hovering around 3-3.5% the real interest rates are still high.
On the transmission front, SBI has decided to cut its lending rates by 15 bps and looking at it, more banks might follow the trend. But how much it translates into an increase in the demand needs to be seen. The results season is almost coming to an end and today cement major Ultratech cement is going to come up with its Q1. Along with that, we will also watch Emami and Godrej Properties that is going to declare the results today.
On the derivatives front, today is the weekly expiry for the Nifty and Bank Nifty and the next expiry will have only 3 trading days and will be expiring on 14th. Talking about the futures market first, FIIs continued to sell and there was close to 980 Cr selling seen yesterday and that brings the Nifty futures long positions to 24% another fresh low.
However the focus will be on the options today, and there was the unwinding of positions that happened across all the puts yesterday. With this 10800 put has emerged as the strike with highest open interest which means we can expect support there. It is closely followed by 10700 put. On the call side 11000 call has the highest open interest and Nifty crossing 11000 mark today is going to be very difficult. So, today’s expiry will be between 10800-11000 mark.
What is the Nifty call for the day?
Yesterday, I was talking about a sell-off that could happen most monetary policy and it has happened and as a result, we are back to 10850 mark. Today we are going to have a flat start between 10840-10870 mark and the big question is what happens after that. 10780-10800 is very strong support, which in my belief should hold. If that happens then we might actually go to 10880-10920 zone and this series might expire there. This according to me is the most likely scenario.
So, the trade for the day is to go long at a dip around 10820-10840 level with 10900-10920 as the target. But here is the caution: If there is a sell-off which takes Nifty below 10870, then we are opening the doors first for 10730 mark and then towards 10580-10600.
So, a break of 10780 and 10730 means shut all trades and stay out of the market.