Market Trade Setup 19th October
Last day of the week but not great way to start with. I had told you on Wednesday to exit your positions and you would have pocketed more than 140 points if you have closed your positions till 10am. What we saw on Wednesday was vertical fall from open of 10710 to 10450. This is more than 250 point fall. Yesterday we were not trading but there was a fall across Asia and that will surely be priced in today’s opening. The Dow Jones fell more than 200 points yesterday on the back of news from Fed minutes that the interest rates cycle will continue and fed will keep rising the interest rates in future also.
There were other bad news as well for the market with dollar index going up to 96 and that means rupee will again go back to 74 level today and might hit another all-time low. Added to that is the China GDP data for Q3 which came in at 6.5% which is the lowest we have seen in the last 9 years. Last time China had 6.5% GDP was in 2009 when World was going through investment banking crisis. The result is entire Asia is in negative. The only good news is Brent crude which is below 80 dollars now trading at 79.5 dollars.
On the domestic front bad news for China is good news for India and Chinese GDP drop might pull FII inflows into India. Crude below 80 dollars is also good for India so it is not such a bad scenario for India. The only negative for us is not so good Q3 results. HUL though the numbers were good the margins disappointed. Same is the case with Reliance which also showed some margins pressure and ACC
On the derivatives front was a massive selling that happened on Wednesday with NIFTY started to fall. The NIFTY premium which was at 5 points at the open ended into a discount of 10 points by the end of the day. The story is clear. A lot of bearish positions were built on Wednesday and a gapdown today means a lot of short covering that can be seen. On the options front the NIFTY put call ratio dropped to 1.11 from 1.20 on the back of increasing demand for calls. 10000 put and 11000 calls still stand as markers but expect that to change today.
What is the Nifty call for the day?
A gap down is expected and if nifty opens below 10400 then expect a short covering for all those positions taken on Wednesday which might take the market past 10500 and even as high as 10580. Adverse news might make nifty test 10300 levels. A day like this is better to wait and watch than take any positions. Weekend is always a time for less risk so no positions for today.