Yesterday we had a smart recovery from the lows of 11410 which is the 100dma and we are now again closer to 11500 mark. Yesterday, you might have missed out an opportunity of making money post lunch, but those of you who look at safety would agree that at 11400 mark, markets would have gone either way. Globally as well as locally, the cues are not looking very positive as uncertainty prevails with Trump impeachment process officially starting in the US Congress.
Coupled to that, the macro data from China, South Korea and Japan is not looking really positive. Business sentiment in Japan, the main hub of activity drops the the lowest level in 6 years while consumer prices in South Korea goes into deflation for first time ever. However all this is not affecting Asian markets and both Hong Kong and Japan both are up 150 points each.
On the domestic front, its the referring of Lakshmi vilas bank to Prompt corrective Action or PCA by RBI triggered panic among the investors and the market started to correct. Lakshmi vilas bank was to merge with India bulls housing and now this merger is off and that is not a great news. Though all this took Nifty to 100dma, it found support there and has started to go up.
Today, the trigger however will be the core sector data that came in negative for the month of August. Core sector data contracted by -0.5% vs growth of 6.2% in July and that is apparent bad news. Coal out put fell -8.6%, crude oil by -5.4% and electricity by -2.9%. Though this is not a major indicator it will surely have some impact. So, we need to see whether the 100dma will be protected or not, if at all Nifty goes there.
On the derivative front, bullishness returned in the market post noon and suddenly the premium started to jump up. This is mainly on the buying of the FIIs that was seen in Nifty futures. FIIs bought 708 Cr in Nifty futures and as a result, the overall long positions in Nifty futures increased to 37% from 34% seen at the beginning of the day.
The data in options however is bit bearish as there was more demand for calls than puts and the Nifty put call ratio fell to 1.04 from 1.19. 11400 put added 8.2 lakh positions while 11450 put added 3 lakh positions and 11400 put has the highest open interest for this week’s expiry. On the call side 11500 call added 6.9 lakh positions while 11450 call added 4.6 lakh positions and 11750 call added 7.6 lakh positions. 11600 call now has the highest open interest indicating 11400-11600 as range for expiry.
What is the Nifty call for the day?
A green Asia means, today we are likely to open slightly positive though we have the negative news of core sector data to deal with. We are likely to open around 11470-11490 levels and if the contraction of core sector data is taken seriously by the market then we can see the Nifty falling to 11450 levels first and then to the levels of 11410-11430 which is the 100dma.
Protecting this level is important. If Nifty takes support at 11420-11450 levels then I would suggest you to take a long position as Nifty has the potential to go to 11550-11580 levels today. So, you can keep a 50-60 point profit margin in this zone of 11420-11580 levels.