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Market Trade Setup 7th June

We all knew that there is a problem with DHFL and NBFCs almost 6 months ago, we chose to ignore it. There was a default by DHFL on its important NCD and still, we chose to underplay the incident justifying that BlackRock is pumping in money into DHFL and all is well. We didn’t learn anything from IL&FS and that meant, we have to pay a price.

We believe that things are good because crude is at 60 dollars and there is a majority Govt and things are looking positive. That blinded us and bears stuck big time on DHFL sentiment and we saw the biggest fall of 2019 in Nifty as it lost nearly 180 points and we saw 11850 mark again in the markets. 

Globally things are looking fantastic and Dow gained 180 points for the 4th consecutive day Dow closed positive and this week is the best week for Dow in terms of the gains. How ironical is it that we had the worst day of 2019 and the US had the best week of 2019!!! Some of the Asian markets are shut today and the markets which are open are trading in the positive zone.

Japan is up more than 100 points while Shanghai and Korea are in green. Hong Kong and Taiwan markets are shut today. Crude is at 62 dollars now, mainly on the news of the delay in imposing tariffs on Mexico and trading at 62.3 dollars. 

Domestically, the biggest worry for the market is still the NBFCs and how they are bleeding the market. IL&FS has started it all and yesterday DHFL has carried the trend forward. So, though the RBI monetary policy has been good we have not seen anything getting reflected on the market. 25 bps cut was factored in by everyone and though the stance was changed to accommodative it had no impact on the sentiment. Shows how ineffective RBI and Shaktikanta Das have become.

I was wondering if the same would have happened to the market if Rajan was there. PR and personality play an important role and if RBI governor is seen as a puppet in the hands of Finance ministry, this is bound to happen. 

On the derivatives front, yesterday was the Nifty weekly expiry and everyone was looking at 12000 and 11900 levels being protected and Nifty smashed both of them effortlessly and closed below 11850 giving huge losses to all the positions taken. Bulls have ended the day at huge losses and we had a turnover of 24.7 lakh crore volumes but that will not bring any cheer.

The focus has now shifted to 13th June expiry and 12000 call now has the maximum open interest indicating that 12020-12040 will be big wall to climb. On the put side, 11000 put has maximum open interest but realistically still 11800 can be a support. That means we could get support around 11720-11750 mark for Nifty this series. 

What is the Nifty call for the day?

If you were wondering what triggered the biggest fall of 2019 in Nifty it is only DHFL. Nifty chose to ignore all other positives including the monetary policy and the inflation cut that RBI gave and chose to go down with DHFL. Nifty lost 1.5% while DHFL lost 15% of its value. Today can be a different day if the market chooses to look at the positive global factors and RBI monetary policy.

Nifty will open in the flat territory around 11820-11850 mark and that could be the support which can push Nifty up. If there is a further fall the next support will come at 11750-11780 levels and that could hold for the day. So, I suggest that we can go for a long position in Nifty around 11820-11850 zone with 11880-11900 as a target or 50-60 points as a target if you enter at higher levels. Resistance comes in 11880-11920 zone and one can exit around there.