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Yesterday was a narrow day, where 10400 on the upside and 10300 on the downside was protected and Nifty closed above that 10300 mark. There are many cues to watch out for, both domestic as well as global. Globally we had a positive day last evening with Europe closing positive last evening and Dow gaining more than 500 points and today morning Asia seems to have taken the cues from where the US left.

The Chinese manufacturing data for June came at 50.9 vs expected 50.4 and better than May month’s 50.6. China is recovering fast and resuming normalcy and that is being celebrated across Asia. Japan is up 400 points and Hong Kong is up 200 points. Brent crude has started its upward momentum again and now trading at 41.6 dollars after hitting 42 dollar mark. SGX is also trading 65 points higher despite the negative fundamentals coming from India.

Domestic Cues

Coming to domestics, we are loaded with news. First is Prime Minister is speaking at 4 PM and everyone will be eagerly watching what he wants to say. The trigger for that was the news of Indian Govt going ahead and banning 59 Chinese apps including the famous Cam Scanner, UC browser and Tiktok. This is a move that will have an impact on the trade with China and how much it will affect India’s imports from China and Exports to China needs to be seen.

Technically, we have the 20dma at 10100 and 100dma at 10000 which means 10000-10100 will be strong support for any correction. On the upside, we have the 10500 mark which is the 61.8% of the retracement from 7600 levels which will be a big resistance and if taken out then we have the 200dma of 10900. If 100dma of 10000 breaks then 50dma is at 9600 mark and all these technical levels are important now.

Derivatives Action

On the derivative front, we have seen all the bearish signs both on Futures and options market yesterday. There was a 1200 Cr selling on Nifty futures and the discount on Nifty futures is still more than 60 points. The overall long positions, as a result, dropped from 38% at the beginning of the day to 32% now.

On the options front, there were more calls sold and more puts bought indicating strong bearish cues and the put-call ratio dropped to 1.29 from 1.34 mark. For Thursday’s expiry 10300 call added 9 lakh positions while 10700 call added 7 lakh positions and 10600 and 10400 call added 5.4 lakh positions each and 10500 call followed by 10300 call has highest OI on call side. On put side 10100 put added 10.2 lakh positions while 10200 put added 5.3 lakh positions and 10000 and 10100 have similar OI indicating 10100-10300 as the range for expiry

What is the Nifty call for the day?

Today we will know whether markets will go up due to positive Chinese manufacturing growth or go down due to tensions with China and the banning of Chinese apps. Whatever may be the case, its China which is going to dominate the mind space of Nifty. We are likely to open positive due to positive Asian markets around 10330-10350 mark and we have the 10400-10430 which might be resistance.

So, the trade for the day is, if after opening in the first hour of trade Nifty protects 10300 mark and doesn’t go below that, then you can take a long position with 60-80 point target below 10430 mark. If Nifty goes below 10300 then the tensions with China will dominate and that means uncertainty and volatility and its not advisable to trade in such situations. So, if Nifty breaks 10300 then there is no trade for the day. Wait and see where Nifty settles down.