The second day running the rally continued and the first level of 12000 seems to have conquered. Now, will the journey towards 13000 happens or not needs to be seen. Its been 7 months since 12000 was captured on Nifty and till today we are at the same level. This was a level seen post-Modi victory in 2019 and the incremental movement that is pending is likely to be achieved now.
Global factors are looking extremely positive as globally the Coronavirus scare is shrugged off. Now the number of deaths crossed 500 and the infected people have crossed 20,000. Markets have ignored this because globally this virus is contained and it is limited to only one province of China. As a result, Dow closed 400 points higher and today morning Asia is in bright green with Japan up 500 points and Hong Kong up 450 points.
Domestically, we have a very big cue of the monetary policy coming in at 11.45 AM today. This is going to be the last monetary policy and the wider expectation is that it will be a no-action policy where all the rates are going to be kept constant. The inflation forecast is something that is going to be watched out closely as well as the tone of the policy. But there could be a positive surprise of a 25 bps rate cut and if that happens markets will celebrate.
Technically we are now very close to a big resistance of 12120-12140 which coincides with the 50 and 20 dma. This is going to be very tough to cross and only the fundamental event of monetary policy only can break it today. If that level is taken out then it will break the bears and Nifty will go to an all-time high of 12430 in no time.
On the derivatives front, something very very interesting is happening in Nifty futures. Normally as the index moves up the overall long positions also will move up. But when Nifty went up over 100 points Nifty futures longs have come down from 21% to 18.5%. Even after 400 plus points movement, Nifty futures are still trading in discount and never it came into a premium. These things have to be observed carefully. This is not a bullish sign.
Options, however, is showing bullishness with Nifty PCR jumping to 1.34 from 1.21 and today being the weekly expiry we can see a lot of volatility here. On the put side, 12000 and 12050 put added 19.4 and 15 lakh positions and 12000 put has the highest OI. On the call side 12100 call has the highest OI but if 12120-12140 is broken flood gates will open and 12200 and 12300 will become very active. Let’s see.
What is the Nifty call for the day?
For two days running, we were very lucky and we had a close to 400 point movement on Nifty and after all this, we will have a start around 12100 mark today and the resistance zone of 12120-12140 will kick in. There is a possibility that Nifty might be in the range of 12050-12120 until the monetary policy time and then pick up from there, as to which way the policy will go.
So, the trade for the day is to use any dip towards 12050 as a buying opportunity with 12120-12140 as the target. There are huge shorts that have been built and if Nifty crosses 12150 mark then it will go to 12430 and adjust your positions keeping in mind this possibility.