Thank God we were shut for the Independence day!
That’s what you would feel after what Dow Jones did on 14th Night. There was a 800 point fall on Dow which was coupled with the fear of recession in the US economy. This is primarily on the yield curve inversion where the short term 3 yr yields have overtaken the 30 yr long term yield that fell to another low of 1.5%.
Added to this are the statements from Donald Trump as he is keeping everyone guessing on the next move in his trade war against China. SGX Nifty fell to a low of 10871 yesterday and recovered and there and closed at 10897. Today morning it is up 60 points at 10947 which is 50 points up but if we open at 10950 mark in Futures it will be almost 80 points down. Brent crude is again below 60 dollars at 58.4 dollars.
On the domestic front, we had celebrated Independence day and things passed off peacefully and the first flight from Srinagar took off last night after 12 days. Its a huge sigh of relief and now Kashmir should slowly come out of the communication shut down seen and that would put things back on track. But the worries on economy still continues and Nifty that gained almost 100 points on Wednesday might again fall and where it will go needs to be seen.
Rate cuts done, liquidity pumped into the system but still the problem remains with the demand and it will take some time for it to pick up. One negative news is Govt refused any rate cuts in GST for Auto sector and all the auto companies representatives who met FM would feel disappointed with this news. Will that cast shadow on FPI taxation also or not needs to be seen.
On the derivatives front, Wednesday was very bullish especially in the second half when Nifty suddenly started to rally. There was a lot of long positions that came into Nifty futures and FIIs bought to the tune of 914 Cr in Nifty Futures. With this the overall long positions in Nifty futures jumped to 28% from 25% and in the options market also the Nifty put call ratio saw a sharp rise from 0.96 to 1.20 level.
For the 22nd August expiry 10900 put added 7.8 lakh positions and 11000 put also added 7.8 lakh positions. Both 10900 and 11000 have the highest open interest now and on the call side 11200 call added 6 lakh positions and 11100 call added 4.2 lakh positions. For 22nd expiry on the call side 11200 call has the highest open interest followed by 11100 call. So, 10900-11200 can be the range for this week’s expiry.
What is the Nifty call for the day?
This is one of the most uncertain markets seen in recent times. One day we see Nifty going up 100 points and next day its down 100 points. It is extremely dangerous to trade in such markets and such high volatility also indicates a bottom formation and by next week we might have a bottom in place. After a 100 points up on Wednesday, today we are going to open around 70-80 points down at 10920-10950 levels and we have a firm support at 10870 levels which should hold. Today is a weekend and with so much uncertainty around, we dont know what will happen on Monday.
So, its best to avoid any trade for today and wait and see if it protects the 11000 mark and closes above that. If that happens then we can conclude that 10800-11000 is the bottom and Nifty will slowly start moving up. If not, then we have some more time of uncertainty left in the market.