We need to look at things globally if we have to make sense of which way things are going to go from here. What started off as a post-budget correction a month ago when Nifty was at 11950 has lost 1200 plus points till now and the market is trying to find the bottom.
Now there are global worries in the form of trade and currency wars. Yuan is on a depreciation spree and it has crossed the 7 mark against the dollar. Last time it was above 7 mark was in 2008. This has sent the world markets into a free fall. Dow lost almost 800 points yesterday, the worst trading day of 2019 and today all the Asian markets are trading with a cut of 1 to 3% with Hong Kong down 750 points and Japan down 450 points. Crude prices also dropped to 60 dollars but it is helping no one.
Domestically, we had a big news yesterday of Article 370 being scrapped but markets hardly reacted to it. The focus firmly seems to be on the global factors and how FIIs are selling. Today also the sentiment will be driven by what happens to China and Yuan. There is a meeting of FPIs with finance secretary on 9th and that could solve the FPI tax issue.
But now technically all the levels are broken and what we are looking at right now is 10585 which is the 2019 bottom and Nifty might ultimately find support there. Now we have come back from 10850 which was seen as a support and the journey towards 10600 is looking inevitable. RBI is going to come up with the monetary policy tomorrow, but it is likely to be a non-event when so much is happening across the world.
On the derivatives front, the continuous selling on Futures seems to have come to an end though yesterday FIIs sold more than 1100 cr in F&O market. Much of it seems to have happened in the options market and especially in selling calls. The long positions in Nifty futures is still at 27% but the Nifty put-call ratio has undergone a correction and now stands at 1.01 vs 1.18 at the beginning of the day.
10500 put now has the highest open interest on put side indicating that 8th August expiry could occur at this level. Closely behind is 10800 put but it all depends on how today pans out. On the call side, 10900 call added 10.6 lakh contracts and slowly 11000 call seems to be emerging as a resistance. For now, 11200 call has the highest open interest on the call side.
What is the Nifty call for the day?
Yesterday, there was a recovery after falling to 10780 mark and Nifty closed above the crucial support level of 10850 at 10862. But today, things are very bad and we could again see an opening around the 10780 mark and we need to see whether we stop there or fall further. The fall could take us to 10720 mark and if that happens then we might test 10600 mark this series.
But if Nifty finds support between 10750-10780 range, then we can have a recovery all the way upto 10880-10900. If there is a global recovery in the afternoon then we can again go back to 10950 and above. So, the trade for the day is to go long if 10780 mark holds, with the target of 10850-10880 levels. For the last 2 days, we are having recoveries intraday and money is being made on the long side and today also we will hope for the same.