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Market Trade Setup 12th February 2019 #NIFTY

A weak start to the week is what we have seen yesterday. The 125 point fall on Friday was followed up with another 50 plus point fall yesterday and that took the Nifty back to sub 10900 levels and now worries are emerging where the Nifty will go from here. Last night Dow Jones also corrected 50 points on the back of non resumption of US-China trade talks and the US Govt Shut down that’s gone into 7th week now. But the main factor remains the worry that the US might go into recession in the last quarter of 2019 or early 2020 which is what is being predicted by many analysts. Brent Crude still remains below 62 dollars and Asian markets are mixed today with Japan Up 400 points and Hong Kong down more than 120 points.

On the domestic front, Q3 results continue to disappoint, especially the automobile sector. Eicher motors came with disappointing numbers and they have reduced the guidance for this year. The effect is shown on the auto ancillaries also where Amararaja batteries has slipped to single-digit growth and now projecting a sub 5% growth for the coming year. Apart from that, some macro data is also expected today with December IIP numbers coming today. It is expected to be in 2.2-2.7% range which is better than 0.5% seen in November. The January CPI inflation data is also coming today and December saw overall inflation at 2.1% and services inflation at 5.7%. This month I am expecting it to be in 2.0 to 2.4% range with services inflation falling a bit to 5.4-5.6%. Both the data will come at 5.30PM today and we will have their impact on Nifty tomorrow. 

On the derivatives front, the first day of the weekly Nifty option had received a fantastic response with 38.8 lakh open interest on call side and 31.1 lakh open interest on put side. That means the put call ratio will be less than 1 but that is mainly because Nifty closed in red yesterday. 6.3 lakh contracts got created for 10800 put and 9.7 lakh contracts got created for 11100 call. So, this week we are looking at 10800-11100 range for Nifty. But if we look at the Feb series the highest open interest on put side is at 10400 level and on the call side, it is at 11000 level. The Nifty put-call ratio fell further from 1.59 at the beginning of the day to 1.47 at the end of the day. Index options saw 4.4 lakh crore turnover yesterday taking the overall value to 5.46 lakh crores. 

What is the Nifty call for the day?

We need to look at the Nifty movement from weekly as well as monthly point of view. For this week, support comes at the 10800 level and the upside goes all the way up to 11100. We might open today on a flat to negative note around 10860-10890 levels and 10820-10850 is a strong support zone. If Nifty goes there then it will present a good opportunity for you to take a long position with 10880-10920 range to exit. The target can be reached today or tomorrow. If Nifty goes below 10820 and 10800 then do not take any long positions. Longs should be taken only if Nifty holds 10820-10850 range.