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Market Trade Setup 6th June

Back from Eid holiday, mid week, things looks mixed. We have positive news coming from US in the form of Gerome Powell’s statement that the Fed is looking at a rate cut now for US and that has triggered a 700 point rally on Dow Jones in last two days.

Domestically there are worries concerning DHFL and monsoon and India has to deal with these things. Dow Jones closed last night 200 points higher and today Asian markets are in mild green with both Japan and Hong Kong both up 50-70 points and the only market which is in red is the Shanghai. Another good news for us is the drop in the crude oil prices which still are around 60.7 dollars. 

On the domestic front, today is the day of the monetary policy and everyone is expecting a 25 bps cut and RBI can surprise it by giving a 50 bps cut. The two bad news however are coming from DHFL which has defaulted 1100 Cr worth NCDs for which the payment was due yesterday. Now it is given one week time to pay up or face default tag. This will have an impact on Bank Nifty to a larger extent and on Nifty to some extent.

Another news is monsoon was supposed to set in today but it was delayed by another 2 days and now will set on 8th June. This means there would be a delay in the onset of monsoon in other places and that will affect sowing in South India in the month of June. 

On the derivatives front, Tuesday saw a fall in the Nifty and with it, there was a lot of call unwinding that happened in Nifty futures and fresh short positions were also initiated there. But today is the Nifty weekly expiry and that will dominate the news.

The Nifty put call ratio came down to 1.54 from 1.76 and this was on the demand for short calls over short puts. 12200 call added 6.4 lakh positions while 12050 call and 12100 call added 4.7 and 3.3 lakh positions respectively. 12200 now has highest open interest closely followed by 12100 so if 12120 is decisively broken we might go to 12180 mark. On the put side 11900 has the maximum open interest offering a support there. 

What is the Nifty call for the day?

On Tuesday, Nifty lost more than 60 points and that was normal after a huge rally on Monday. Still it is above the 12000 mark and today also we are likely open in the range of 12000-12030 levels which is a long holding support level. The DHFL default news might put some pressure and dont be surprised if Nifty breaks 12000 mark and goes to 11950-11980 zone where the support will again come.

There is a monetary policy at 11.45AM and that will erase the bad memories of DHFL. If the rate cut is as expected and if the tone of the policy is accommodative then we can even cross 12100 mark. For today, you already have a long position taken around 12020-12040