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Market Trade Set-up 3rd July

Yesterday I was talking about Nifty crossing 11900 and closing above that as the most desirable thing and it happened exactly that way. Now we are within touching distance of 12000 and mile by mile we have climbed from 11650 to where we fell after touching 12100 mark exactly a month ago on 3rd June.

But globally things are not looking good at all. US bond yields have dropped to a 30 month low and have gone below 2%. Worst is the German 10-year yield which is at an all-time low of -0.373%. That also has pushed Brent crude down to 62.7 dollars from yesterday’s 64.6 dollars. Today the whole of Asia is trading in red with Hong Kong losing more than 100 points and Japan down almost 150 points. 

Coming to domestics, yesterday we have decisively broken the 20dma and now we have the 20dma which is at 11850 is going to be a support. Nifty is in the bullish territory and it could be attributed to the pre-budget mini-rally that we are seeing.

Coming to fundamentals, the factors which are negative globally are actually positive for India, whether its falling bond yields or Crude prices. Falling bond yields will make the cost of borrowing cheaper and that might create the demand for loans. An example is the present 10 year which was issued at 7.26% is now trading at 6.84%. Fall in yields also means positive to equity market so we might see a rally today. Brent below 63 dollars will also help. 

On the derivatives front, tomorrow is the expiry day and action is now moving to the options. The Nifty put-call ratio has jumped to 1.46 from 1.37 seen at the beginning of the day yesterday. 11850 put has added maximum open interest of 8.2 lakh positions followed by 11900 put that added 6.2 lakh positions.

So, Nifty will find some support at these levels. 11800 put has the maximum open interest for this series. On the call side, 12000 call still has the highest open interest, but we have seen unwinding of open interest at almost all the strikes. 11900 call shed 3.7 lakh positions while 11800 call saw 4.3 lakh positions disappearing. So, 11800-12000 is the expiry band for tomorrow. 

What is the Nifty call for the day?

For the last two days, Nifty is following as predicted and so you might have booked profits on both days. Yesterday, if you have taken positions at 11820-11850 mark you would have made 60-80 points there. Today is going to be another similar day as yesterday and we are likely to open around 11900-11930 mark and those positions which had 11920-11940 the targets would be met.

You have an option of extending the target to 12000 taking it to the budget day or book the profits. If you book profits then you can wait for a dip towards 11850-11880 mark and re-enter again. This 11850-11880 is strong support and 11800-11820 is firm support that is hard to break for this week.