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We are in the second half of May now, and the lockdown is extended by another 2 weeks but with a lot of concessions. Red zones also can now have shops, business establishments, taxis and salons open and the economic activities have almost come back, except in the containment zones.

On the global front, the investigation on the origin of coronavirus by a panel of Europeans, Americans and Australians have begun. Also, as expected Japan becomes the first country to get into recession officially after the Q1 of 2020 GDP coming in at -3.4%, the 5th worst number in last 40 years and the lowest level seen in 10 years. There is no reaction however as everyone is expecting this and we have all Asian markets trading in the flat zone with Hong Kong and Japan up around 80 points each and Crude touching almost 34 dollar mark.

Domestic Cues

The 5 part saga of FM announcing the economic reforms has come to an end on Sunday morning and now we have clarity on the Govt fiscal burden. The direct cash impact is around 1.5 lakh crore which is just 0.76% of the total GDP while more than 19 lakh crore is in the form of RBI policies, bank and Govt credit guarantees, food grain distribution etc.

Apart from that, defence, education and other key sectors have been opened up for FDI and private investment which is likely to bring dollars in coming days. How Nifty takes all this needs to be seen. We have the series low at 9043 mark and the series high is at 9584 and we need to see if this band is broken and Nifty goes lower. If it doesn’t then May could see expiry happening within this range and how economy opens up in June will define the direction of the market.

Derivatives Cues

There was a mixed reaction in the Futures market and the overall long positions in Nifty Futures are still hovering around 34% mark. Remember, we started the series with 64% long and with a lot of promise. On the options front also the Nifty put call ratio further slipped to 1.12 from 1.18 mark on more demand for calls.

For the 21st May expiry, 9400 call added 5.4 lakh positions while 9500 added 4.8 lakh positions. 9800 and 9300 call added 3 lakh and 2.9 lakh positions respectively and 9500 call now has the highest OI followed by 9400 and 10000 call. On the put side, 8600 put added 3 lakh positions while 8900 and 9100 put added 2.6 lakh positions each and 9000 put has the highest OI followed by 8500 put and 8700 put indicating a 9000-9500 expiry range which might expand on the downside to 8700-9500 range for this week.

What is the Nifty call for the day?

Asia is looking more or less flat with a slight positive bias, but SGX Nifty is showing a flattish trend with a negative bias and this could be the reaction of the announcements made by FM. This means we will open around the 9100 mark and 9100-9120 is a strong support zone and if it doesnt hold then Nifty will slip to 9040-9060 support zone which is the series low. On the upper side 9230-9250 is a resistance which is tough to break unless there is a lot of good news.

In my opinion, there is no chance for trade today and you can keep out of the trade and see whether the series low is protected or not. But if in the early morning you see 9100  broken and Nifty trades around 9080 then you can go for a short position with 9000 as the target. This is a risky trade and has to be timed well. If you dont want that, then stay away.