What we have seen yesterday was the mirror image of what was witnessed on Saturday. If the budget fall was unexpected and came out of nowhere, what happened yesterday was also unexpected and came from nowhere. A 300 point fall was matched by 270 point rise and 310 points rise if you take Monday also into consideration. Now we are at where we were when the budget started.
Coronavirus scare seems to have reduced a bit as US markets rallied 400 plus points yesterday and NASDAQ hit an all-time high. Now the talks of all-time high are back now. Asian markets are all in the positive territory today morning with Nikkei up 250 points and Hong Kong up 200 points. Even Brent crude also fell and Brent crude for a while went below 54 dollars but now it is trading at 54.4 dollars which could be very positive for us.
On the domestic front, Nirmala Sitharaman could be smiling seeing the market move as Nifty gained close to 300 points, Sensex over 900 and Bank Nifty almost 650 points. She has always been maintaining that once FIIs understand and digest the budget you can see a reversal and that has happened.
The big news that might have triggered this rally is also the manufacturing PMI for January that came in at 55.3 vs estimated 52.7 levels and 52.8 seen in December 2019. This 55.3 is the highest in the last 8 years and that puts to rest many fears of manufacturing slowdown. Technically, we have formed a base at 200dma and have decisively conquered 100dma of 11830 and now the next level to conquer is the 50 and 20 dma which coincide at 12120-12140 range and that is going to be a big challenge for Nifty in next couple of days.
On the derivatives front, yesterday saw a huge short-covering rally once Nifty has crossed the 11850 mark but the overall long positions are still at 21% indicating that there are still a lot of shorts that need to be taken out. Nifty Futures saw a buying of 607 Cr yesterday and if we look at the options market it is very bullish as Nifty PCR went up from 0.91 to 1.24 mark. Many shorts were added on the put side and unwinding was seen on the calls side.
11900 put added 20.7 lakh positions and 11800 and 11850 puts added 17.2 and 11.8 lakh positions respectively. 11800 now has the highest OI on the put side putting a cap on the downside, while on upside 14 lakh positions were unwound at 11800 call and 12000 call shed 7.2 lakh positions and that brings 12200 call as strike with highest OI making 11800-12200 as a range for tomorrow’s expiry.
What is the Nifty call for the day?
Yesterday was a complete reverse of Saturday and all those who were holding their positions from Saturday’s downfall would now have come to the budget day morning level. Still, a lot of ground needs to be recovered and that is the Coronavirus fall, that took Nifty from 12430 to under 12000. This will take some more time but as of today, things look positive with Asian markets in complete green.
We are likely to open flat around 11950-11980 mark and initially, 12000 might offer some resistance but if it is taken out then 12120-12140 would be the next target. So, the trade for the day is to go long if Nifty consolidates to 11950 mark with 12030-12050 as the first target. Nifty might find its support at 11900-11920 mark if there is consolidation.