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A 300 plus point correction on a Monday morning brought the worst fears of selling in May true. Yesterday was the first reaction to the economic package announced by FM and the reaction of the market was a big thumbs down. The expectations of the announcements by Modi were sky high and FM could just not meet the high expectations.

That is why, even when there was a positive cues our markets were selling off. Yesterday also the positive cues continued and the US staged the biggest recovery in 6 months as Dow gained 900 plus points. This is on the back of the news that the vaccine is almost ready and would be coming anytime in the next 3 to 6 months time. Asian markets are also reacting very positively to it and both Hong Kong and Japan are up 400 points each, and Brent crude is also inching up to 36 dollars on the news of economies opening up, demand picking up.

Domestic Cues

The economic package that Nirmala Sitharaman has to announce, has been announced and there is nothing that Govt can actually do on stimulus front now. Lockdown in India has been extended till 31st May but with many relaxations to e-commerce and taxis and other non-essential services slowly opening up. The biggest worry is, the longer the lockdown the greater the economic damage resulting out of it.

This was the reason why there was a huge amount of selling yesterday. The 9100-9120 support, as well as the series low of 9050, was taken out in the early morning itself and Nifty touched the next support level of 8800 and closed just above that. That technically opens up 8500 mark in the near term and the base of the market might shift from 9000-9800 to 8500-9000 mark. The market moves in the next 2 days will confirm that.

Derivatives Cues

There was a huge selling that was seen across the futures and options market and for a long time, Nifty Futures was trading in discount. The overall long positions in Nifty futures plunged from 34% to 23% and we are again entering into deep bearish zones.

In options, the put-call ratio went below 1 mark to 0.95 from 1.12 at the beginning of the day. Now the rollover cost into the next series is also negative. Yesterday 9000 call added 13.7 lakh positions while 9700 call added 8.6 lakh and 9200 call added 7.5 lakh positions. 9500 call still has the highest OI but a lot of OI is getting accumulated at 9000 call. On the put side 8500 put added 3.5 lakh positions while 8400 and 8800 put added 2 lakh positions each and 8500 put has the highest OI on put side followed by 8600 and 8700 puts indicating an 8500-9500 range for expiry now.

What is the Nifty call for the day?

A very positive Asia and strong global cues mean we are likely to open gap up today. In fact, SGX is suggesting a 200 point gap up indicating an opening around 9000 mark today. We will immediately encounter the 9050 which will be a resistance point and we need to see if there is selling at this level. So, there cannot be a meaningful trade that is possible today.

Yesterday, if you have shorted, you would have made plenty of money, depending on where you exited. But today is going to be different and there is no guarantee that shorting will help you make money. So, the best strategy is to wait and watch if Nifty can protect 9000 and if it can take out 9050. If both are not possible then you need to see if it finds support at 8800 and close above that. So, its a wait and watch day.