FED created a panic in the market through extra hawkish outlook on US economy which suggests of further rate cut in the time to come. 10 year old US bond rates have started reducing since more money have started flowing into bond market from stock market after FED’s statement. Need to see whether selling in US market sustains or not.
India news/concerns:
In F&O space, FII, Pro have all taken a bit of bearish position whereas retail has taken a bullish position. So, obviously, smart money had an idea of what was about to come.
In the cash segment, FII net seller and DII is net buyer. Overall, volume is still less than normal.
Technical:
Nifty/BankNifty formed a true inside day candle and the zone 17490-17525 is the support zone as per current chart. Any close below will open up further move towards next support level of 17350.
Nifty option chain, for the expiry of Sep1, more call writing formed at every level from 17600 onwards whereas not many fresh put writing was visible. On Monday, either the put writers may be driven further down the level or fresh put writing emerge after gap down, depending on where smart money wants to take us. OI chain analysis can be done in live market using sites like tradingtick or opstra.
Expectation:
Market likely to open around 150 points gap down given that there was a complete sell-off day in US market. Irrespective of opening, it is more important where Nifty closes. If Nifty, during the day, comes back up above or near 17490, then a fresh positional short should not be made. Any convincing close below that level is ripe for further positional short. Possible trading strategies just for that day are given here.
Depending on the levels shown below, market can go down upto level of 17050 and 16850 at the max in coming week. But, Indian/emerging market is inherently stronger than US market and you may see, on most of the days, daily gap down evaporating by the end of the day. It will be interesting to see whether FII keeps on buying in cash or not.
Nifty and BankNifty levels provided below can be used for rest of the week. Yellow lines are minor support/resistance whereas the red ones are major ones.
