Again markets followed the script yesterday and were in the range of 11400-11550 and its refusing to go away from that range. The FOMC meeting is underway and the Fed is going to come up with their commentary today and from tomorrow we might see a change, mostly on the downside, if the things go the way they are going.
Fed meetings are usually preceded by long positions and post meetings there could be a sell off coming. Dow actually closed very flat up just 3 points, though NASDAQ gained more than 100 points. The news of Apple launching new products has really not enthused the US markets and today morningeven Asian markets are trading in flat zone with Japan up 30 points and Hong Kong up 50 points. Brent crude climbed to 41 dollars on the news on the approaching hurricane on the Eastern coast of US. SGX Nifty is down 20 points as I write this.
On the domestic front, the rally on Reliance seems to have come to a halt and we have a party going on in small caps and mid caps as SEBI’s directives on multi cap funds. On day 2 yesterday there was selling in the large caps and the funds moving to midcaps and small caps. The reason why Nifty held on to its gain is primarily due to FIIs still buying more than 1000 Cr even as DIIs sold off nearly 900 Cr in the cash market.
In the other news the India-China border talks will continue to be in the focus and any adverse news there can trigger a reaction. So, technically Nifty is still above the 20dma of 11440 and that should come as a support for any correction. The 50dma is now placed at 11200 mark and if there is a negative reaction post Fed policy, 11200 will come out as a strong support. For now, Nifty operates within the 11200-11550 range.
On the derivatives front, Nifty futures saw an even action where shorts and longs were created in equal numbers and that kept the overall long position in Nifty Futures constant at 51%. On the options front, there was some bullishness as Nifty put call ratio surged to 1.47 mark from 1.36 and with tomorrow being the expiry, we can expect some action today. In yesterday’s trade 11500 put added 9.6 lakh positions while 11400 put added 6.6 lakh and 11450 put added 5 lakh positions.
11400 put has the highest OI on put indicating that Nifty might find a big support in 11420-11380 range. On the call unwinding of positions was seen across the strikes with 11500 and 11400 call unwinding 4.1 lakh positions each. 11700 call now has the highest OI on the call side followed by 11600 call indicating 11400-11600 as the range for expiry which can extend to 11700.
What is the Nifty call for the day?
We are likely to open in a flat zone between 11490-11520 mark and we have the resistance zone of 11500-11550 which might hold today also. Understand that today is a very risky day and today might start the process of trend reversal for the market, if things dont favor.
So, trading has to be done cautiously today. If 11450 mark is held then I suggest you take a long position with 11500-11550 or 40-60 points as the target. It depends on where you take this position above 11450 mark. If Nifty drops below 11450, then pressure is put around 11380-11450 mark and there can be a squeeze and you should be away from the market. So, wait till 11AM and if by 11am, Nifty stays above 11450, then take a long position otherwise stay away from the trade.