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After two days of a rally that took Nifty from 10900 to 11100 we had a 180 plus fall yesterday which erased almost all the gains we made last week and we are back to the 10900 mark again. Yesterday we were talking about 11000 coming in as support but that support was taken out effortlessly and the slide after that took it where it is.

Today globally things are looking mixed. US markets rallied last night on the news that there could be a postponement of the 10% tariff to be imposed on Chinese goods by the US beyond September 1st. That made Dow to go up 300 points. Asia is flat today on the news of bad China industrial output data that came in at 4.8% vs expected 5.9%. Hong Kong is up 120 points while Japan is up 150 points and the biggest gainer is crude which crossed 60 dollars to trade at 60.4 dollars.

On the domestic front, there is policy paralysis that made FIIs to go on the selling spree again. It was expected that FM should have taken some concrete decision immediately after the meeting and though the meetings concluded on Friday, nothing came out till yesterday and that made FIIs lose patience. Added to that is the macro data which continues to be worrisome.

The latest CAG report has estimated that Govt has understated the liabilities by 7.9 lakh crore or roughly 5% of GDP. This is added to not too good numbers from Dr Reddy’s lab, ONGC and NALCO which all have reported disappointing numbers. Now Nifty is back to 10900 levels and so the possibility of going back to 10585 levels or at least to 10750 from where it bounced back cannot be ruled out.

On the derivatives front, there was a huge amount of selling yesterday in Nifty futures and that has brought the Nifty premium from 13 points to a discount of 8 points. The overall long positions in Nifty futures also has come down from 29% on Friday to 25% again. In the options market also things were bearish with Nifty put call ratio at 0.96 from 1.24 levels seen at the beginning of the day. There were 10 calls sold for every put and that brought down the PCR.

For today’s expiry 10900 put has the highest open interest now after 11000 put shed 8.1 lakh shares in open interest. 10800 put has the next highest open interest. On the call side, 11200 call has the highest open interest followed by 11100 call. Yesterday 11100 call added 16.6 lakh positions followed by 11000 call that added 14.9 lakh contracts.

What is the Nifty call for the day?

Yesterday, I asked you to take a short position and if you have, then you would have made a lot of money. Yesterday’s fall of 180 points is really huge and today we need to see if 10900 holds or are we back to lower levels again. Today we are likely to open flat around 10900-10930 zone and I would look whether 10870 holds or not. If that doesn’t happen we might go down all the way to 10790-10810 mark where we might find support. On the upside 10950 is a resistance.

So, the trade for the day is if there is a rally and Nifty stays above 10900 mark then you can go for a short position with 10800-10820 as the target. Even if Nifty falls to 10850 then go short with 10780-10800 as the target. Today is the weekly expiry so expect some degree of volatility and the effect of 3 PM move.