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Market Setup 2nd August

A very busy day yesterday as there were two monetary policies to deal with and both went on the expected way. Fed also came up with its credit policy and the rates were kept unchanged in the US. The US inflation rates seems to be settling around 2% and with jobs growing at  faster pace Fed is keeping its fingers crossed and said it will hike the rates slowly and gradually in the future. The other worry for the US and Asia is the trade tensions with China that are not ending. Yesterday it was expected that some solution might be arrived at, but with nothing happening, Dow Jones fell more than 80 points and Asia today in red with Hong Kong losing more than 300 points.

Domestic Cues

On the domestic front, we also had a credit policy to deal with and there was a 25bps rate hike with RBI keeping its stance neutral. I had given it in my scenarios yesterday that a 25 bps hike with a neutral stance means markets reacting sideways and it happened exactly that way. The inflation target was kept at 5% which means that there is a chance for another rate hike in the coming months. The good news however comes from the Brent Crude which fell below 73 dollars and now its at 72.6 dollars. This will have a great impact on many crude related stocks today.

On the Q1 results front, the positivity is slowly waning off as more and more results are coming in. Tata Motors was a shocker which we are yet to recover from. Even the Auto sales for July also has been tepid with Royal Enfield and Eicher Motors disappointing. The sales of Royal Enfield have been the lowest in the last 11 months. Looks like the mojo of Royal Enfield is finally coming to an end.

Following are the Q1 results expected today.

1. Godrej Properties

2. India bulls housing Finance

3. JK Lakshmi Cements

4. Marico industries

5. MOIL

6. ONGC

7. Pfizer

8. Torrent Pharma

Derivatives Action

On the derivatives front, there was a lot of buying that has happened in Nifty futures yesterday during the credit policy as many people took long positions around the credit policy time. The Nifty futures premium jumped from 15 points to 28 points by the end of the day and the overall long positions jumped up from 58% to 61% and this is the highest we have seen in last 3 months. On the options front also, the calls have come into demand more than puts and the Nifty put call ratio adjusted to 1.72 from 1.73. 11300 put added 3.3 lakh positions while 11400 call added 3.4 lakh positions. Compared to this 11400 put added 2.7 positions while 11600 call added 2.8 lakh positions.

What is the Nifty and Bank Nifty call for the day?

Asia is down, but India will react more to crude so, we might expect a slight positive start around 11350 on Nifty. You have a long position taken yesterday after credit policy dip at 11320 levels with 11380 as the target and that might be met today. 11380-11400 is a resistance zone and you might have to close your long positions around that level. Today is the bank Nifty expiry and there is a chance for selling a put and the details of it, including the strike and the value will be tweeted by me once the market opens.