We had an amazing expiry yesterday of 100 points and Nifty shot up over the upper range and expired just above the 10800. I was expecting a 10700-10800 range but it was between 10750-10820 range. The turnover also is as per the prediction as we cloaked 32.5 lakh crore and now all that is behind us. We are into the 3rd week of the 5 week July series now and what we are going to do now is going to be different.

Globally, things look gloomy as the US is back to 60,000 plus COVID cases yesterday and that took Dow Jones down more than 350 points. Today morning Asian markets are also looking red with Japan down 50 points and Hong Kong down 150 points. Rupee staged a minor recovery yesterday and closed above 75 to the dollar while Brent crude also weakened a bit and trading at 42.3 dollars. SGX Nifty as of now is 50 points down from yesterday’s close.

Domestic News

On the domestic front, Q1 started on a weaker note with TCS coming with below-par Q1 numbers. The revenues fell 7% and margins by 50 bps both are below the expected levels and PAT and EBIT also have seen a sharp fall. The only positive is the management commentary that TCS has bottomed out and Q2 forecast is much better. Next week is going to be crucial as IIP and CPI numbers also will be out along with Q1 numbers.

Added to this there is a report which says India’s COVID cases will peak around 14th August at around 6.5 lakh positive cases. As of now, we have 2.7 lakh positive cases, so a long way to go. Technically, we have the 200dma of 10850 which will now be a strong resistance to cross. Otherwise, 10550 levels will be strong support and most likely this expiry week will see Nifty gravitating in this range.

F&O Action

On the derivatives front, yesterday saw a lot of bullish action in the Futures market where 1500 Cr worth buying happened in Nifty Futures and that took Nifty to the premium of 11 points from discount of 10 points. This is the first time in this series that Nifty futures are in the premium. The overall long positions on Nifty futures also is at 66% now and it jumped from 58% at the beginning of the day yesterday.

Yesterday was the Nifty options expiry and the 9th July series expired at a PCR of 1.37 and 16th July expiry now has the put-call ratio of 1.67 which is in the overheated zone. On the put side 10800 put added 10.3 lakh contracts while 10700 put added 7 lakh contracts and 10000, 10500 and 10700 have similar OI on the put side. On the call side, 11000 call has the highest OI followed by 10800 call indicating a broad range of 10000-11000 and a range of 10500-10800 for 16th July expiry.

What is the Nifty call for the day?

A negative close on the US and a weak Asia and a negative SGX means we are going to start gap down and might open in 10750-10780 range and 10680-10700 which is Wednesday’s low is going to act as a support. So, the trade for today’s trade is as soon as the market opens, you can go short on Nifty futures with 40-60 points as target and close the positions around 10700 mark.

Nifty will try to recover after the morning lows, but it might be difficult to predict the direction. Also, today is the weekend and its not wise to carry positions into next week. So, take an early morning trade at the opening and close it as soon as you reach the target and wind up your trade for the day. We can see where Nifty closes today and what happens during the weekend to decide our strategy for Monday.