As expected, we defended 11400 yesterday and closed above that. There was a scare on the multi-cap fund rules had its effect on the market in the afternoon as there was heavy selling witnessed in some large caps except the IT stocks and Nifty from 11570 lost almost 200 points when it went to a low of 11380 and managed to recover from there and close at 11440.

Global cues and domestic factors will continue to influence the market in the next few days and globally, things are positive as Fed meeting is going on in the US and there is an expectation that there could be a sell-off post-Fed policy. Yesterday Dow gained more than 300 points and that trigger seems to have passed on to Asian markets today as most of them except Japan is trading in positive. Japan is down 130 points while Hong Kong is up 120 points. Brent is still below 40 mark trading at 39.6 dollars.

Domestic Cues

On the domestic front, the morning session was dominated by a global rally while the second half had an influence of SEBI’s regulations on multi-cap funds. There was some selling happening in large caps and that can be established by the fact that Nifty lost 0.3% by the end of the day while Midcap gained 2.5% and the small-cap index went up by nearly 6%.

We will have to see whether it will continue or not today. The other news that came in was the August inflation number which came at 6.69% vs 6.93% in July which was revised downward to 6.73%. This is indeed good news and only not so good news was the food inflation which came above 9%. A fall in inflation will give way to rate cuts and the market will surely like that. If there is no selling in large caps today, we might see Nifty taking out 11500-11550 mark on this news of inflation.

Derivatives Action

On the derivatives front, though Nifty lost less than 30 points yesterday, there was bearishness seen across the Futures and Options. There were nearly 11000 short positions added by FIIs in Nifty futures and this brought the overall long positions in Nifty futures from 56% to 51%. On the options front also the put-call ratio which was at 1.49 at the beginning of the day came down to 1.36 by the end of the day on higher call shorting.

For the 17th expiry, both 11550 and 11600 call added 10.4 lakh positions each and 11500 and 11600 have the highest open interest on call side, making it difficult for Nifty to cross the 11500-11600 mark. On the put side, there was the unwinding of positions seen in most of the strikes and 11000 and 11200 put have highest OI indicating that 11200-11500 might be the range for expiry, which might fall to 11000-11600 in the worst scenario.

What is the Nifty call for the day?

We will have a flat opening today for Nifty around 11460-11480 mark and like yesterday Nifty might face resistance around 11500-11550 mark and on the downside 11380-11400 which was yesterday’s low could be the support.

So, the trade for the day is to go long around 11400-11450 mark with 11500-11550 as the target. Unless there is big news 11380 might not be broken, but still, I suggest you keep 11380 as the stop loss and proceed with today’s trade.