Nifty Trading Ideas

Market Trade Setup 3rd February 2020 #Nifty

The only Saturday trading ever has resulted in a big disaster with 3.6 lakh crore of wealth-getting extinguished all because of the budget. The budget came and went there were usual reactions from politicians and corporate India but the reaction from the market was the worst. Nifty and Sensex saw the worst fall on a single day losing 300 points and 1000 points respectively.

Budget apart, globally there are worries around the Coronavirus getting spread across and as the US declared Corona as a health emergency, Dow lost 600 points in the biggest intraday fall since August 2019. Today, Asia has also opened in red, especially the Shanghai market which opened after 8 days and it’s showing a whopping 7.5% cut. The only silver lining is the Brent Crude price which crashed to 56 dollars from 60 dollars.

Domestically, we now have to recover and digest the longest ever budget by any FM that lasted for 160 minutes and yet market could not find what it wants. There was a cut in DDT but LTCG that everyone is looking for has no mention in the budget. The market expected some big announcements for infusing liquidity and giving a boost to the economy but that also was found wanting. The fiscal deficit has gone up to 3.8% vs targetted 3.3% and the next year’s fisc is kept at 3.5%.

There was a talk on simplification of GST from April but nothing was clearly mentioned. Overall, the budget looked shallow and the result was the biggest intraday fall in a decade. The 100dma was taken out and Nifty touched the 200dma of 11650 mark, went below that but managed to close around that mark giving us a hope that this carnage might end here.

On the derivative front, the action was mostly driven by DIIs as most of the FIIs didn’t participate as it was a Saturday. The Nifty futures premium which was around 32 points at the beginning of the day plunged to a discount of 7 points at the ending of the day. This has been the impact of that 300 point fall.

In the options also the Nifty PCR went to 0.86 mark from 0.97 and this was due to shorting of calls ain 3:1 ratio and buying of puts in 2:1 ratio. 12000 call added 18.2 lakh positions followed by 11900 call which added 15.2 lakh positions and 11800 and 12100 call added 12.4 and 10 lakh positions respectively. 12000 call now has the highest OI on the call side while on put side 11800 and 11600 puts added 2.4 and 2.6 lakh positions and 11500 put has the highest OI for 6th expiry making it a 11500-12000 range for the expiry.

What is the Nifty call for the day?

The twin blows of budget disappointment and Coronavirus might have left you bruised, as not so long ago we were at 12400 and now we are at 11650. Nifty lost more than 5% in a matter of a few days and will be correction stop here or will it correct 10% needs to be seen. 10% will take Nifty to 11100 mark and if that is what is in store for us in February then we need to be extremely cautious while trading.

For today, the open might be around the 11650 mark and the immediate level to watch out for is 11500. We might even get a relief rally which might take Nifty to 11800. In this uncertainty, it’s better to keep the money with yourself and stay away for today and see where we finally end up. Saturday was mostly the DII reaction and today we will see how FIIs will react to the budget.

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