We are now at 50dma, something which I had not hoped for, didn’t want to happen but had to watch happening. It was inevitable once Nifty broke 12230 which was the 20dma. Markets run on technicals and one has to respect the technicals. Now Nifty is in negative territory in 2020 and we are seeing a negative series after 3 years for January. Will it last, or will there be a recovery in the last week needs to be seen.
Corona Virus has put the world to caution and US markets closed flat down 10 points and today all the Asian markets are also in red with both Hong Kong and Japan both down 300 and 150 points each. Increasing deaths in China due to the Corona virus is the primary reason for this. Only good news for us is the Brent Crude which fell from 64.5 dollars to 62.4 dollars.
On the domestic front, the biggest disappointment for Nifty is coming from Q3 numbers. We were hoping that the fall has come to a halt and we are on the road to recovery and Q3 numbers will indicate that. But right from TCS, Kotak, HDFC there was disappointment all around and that is a bit too much to take. The list continued with Havells, Zee also disappointing and yesterday, infrastructure major L&T also came up with bad numbers, while Axis bank reported higher slippages and all hopes of recovery are put to rest.
Today, pharma major Biocon and Entertainment major PVR Cinemas are going to come up with their Q3. Technically, we are exactly at 50dma of 12106 and if things continue to go bad then 100 dma if 11750 and the 200dma of 11650 are the next targets. Sounds really scary.
On the derivatives front, initially, there was buying in derivatives even when Nifty was falling, there was buying seen. But now, selling has picked up big time, especially in futures where close to 950 Cr selling was seen and that brought the overall long positions in Nifty futures to 48%. Coming to options, today is the Nifty weekly expiry and we have a put-call ratio of exactly 1. This is bearish and that can be clearly seen in the action yesterday where there was unwinding seen in puts and addition of position seen in calls side. 12150 call added 15 lakh positions and 12200 and 12100 calls added 10.5 and 10.3 lakh positions each. Now, 12200 call has the highest OI on the call side and crossing this mark today is going to be tough. On put side 12000 has the highest OI making today a 12000-12200 expiry range.
What is the Nifty call for the day?
The worst thing that can happen is When an ultra bullish market, without any warning, turns bearish and that is what we are witnessing in last 3-4 days. There is no reason for India to fall, but we are falling. Whether we blame it on Q3 numbers or Corona virus, the truth is when the market could withstand Iran tensions and rising crude and go up, what is it falling now? There is no point in searching for answers, it is just that we need to accept the verdict and change strategies. I am saying this because last 2 days we are stuck if we had taken longs and now the only way out is to wait and hope for a recovery.
Today we will open flat, and being an expiry day there will be volatility and that means no trade for today. We need to see whether 50dma holds or not and if that doesn’t hold then we need to change gears and play for a bearish market, accepting the fact that this market is not bullish anymore.