IV crushed, shorts trapped 24,200 is the line

So this is not a market story. This is an inflation story, a current account story, and eventually an RBI room to cut story. Gold is trading at 4,842 which is recent high even with equities ripping out. 18, emerging markets are ripping is a textbook signature of a global risk on with a weak dollar tailwind. So let's look at some global markets today morning. So global boards are calling it too. 96% overnight. 98%. 02%. 34%. This is not one market panicking up.

This is a coordinated thing that we are seeing. So let's look at the participant book as well. So here's what makes today uncomfortable for the biggest player in the room, FIIs. So FIIs went in this holiday with a minus 2,86,000 index future shorts. This is a recent high, biggest short book of the year, but deliberately. With a crude shock catalyst, they were fully expected to pay off, but it didn't. Every tick about 24,000 today this morning is making the market losses on that book.

If we hold the gap up and extend towards 24,200, FII has to choose, sit on losses or they cover is what we are going to see today. So covering means buying futures. Buying futures into a thin morning tape is the exact dynamic that creates the 200 point vertical candles at 9:30 AM. Keep a watch on that. And it's not just my read, the option chain is already calling it. 1. Put open interest at 55 lakhs versus call open interest is roughly at 50 lakhs.

20. Put OI is at 9 lakhs versus call OI is at seven and a half lakhs. Both bullish. Put sellers are dominating both indices. Put sellers are smart money in Indian F&O space because 80 percent of the retail options volume is bought not sold. This is the FII paradox I have been tracking for the last three episodes, short on futures, long on bullish options, net equities buyers on cash. The full hedge book tonight is in tension and that is what we are going to see in today's day as well.

So now let's move on to some levels and something important as well, the volatility. 4. Last Friday the same IV was sitting near 17. Monday when the crude shocked us, IV popped past that 22 level mark. 4. That's an IV crash starting and it is starting before the markets are pricing in anything. Here's why it matters. A normal gap up would usually see an IV popping up. Traders panic by protection. You see IV and spot go up together. Today spot is gapping up by 368 points and IV is going down most likely.

That is not a panic, that is conviction. The market is saying this rally has room and the option writers are selling into it confidently. If IV stays below 20 by 11 AM, RISKON holds and we get a clean rally. If IV refuses to fall or worse, turns up while the spot holds, that is the tell that someone big is buying insurance into the strength and that is when we need to be careful once again. Now to the levels. 23,800 is the Nifty gamma flip level on 21st April expiry.

Above it we have a positive gamma territory, below it it's a negative gamma zone. We open at 24,200 roughly. That's a 400 point into positive gamma territory which means pinning, mean reversion, slower moves. 23,900 to 24,000 is the GEX wall. Positive GEX over there. So if we get a pullback intraday towards that 24,000 mark is the first magnet, not the last. 24,000 is the call concentration already breached on gift Nifty. So 24,000 is no longer a resistance, it now acts as a support if we test down.

And 24,200, that's the line we have to watch today. 24,200 is the level where two things happen together. One, FIIs which are sitting at 2 lakh 86 thousand short book is deep underwater. Two, the call wall cluster between 24,200 to 24,300 starts functioning as both as a magnet and a ceiling or a cap. OK so break 24,200 with volume and closing strength and the next leg opens towards 24,400 to 500 level on short covering alone. Failing at 24,200 and we will pull back towards that 24,000 or even 23,900 where option chain wants us to sit or mean revert.

One reference point here, 23,800 straddle is trading at 587 rupees, implies a one standard deviation range of roughly 734 points on that same strike through expiry. So the market is pricing roughly 23,100 on the downside to 24,600 on the upside. That's a one standard deviation cone for 21st April. 24,200 sits inside that cone. But a close above 24,200 would start tightening that cone upward, classic reinforcing trend would be seen about that. So hold, holding 24,200 on close today is critical and you have the first confirmation signal of a real leg higher.

So let's look at some Sensex data point as well. So Sensex weekly expiry is on this Thursday that is 16th, one trading day after the reopening that we are going to see. Sensex closed at 76,847 after a 702 point sell-off. Gift Nifty is pointing towards a gap up and Sensex implied opening we could see roughly around 77,500 to 77,700 levels. The Sensex call GEX peak is at 5 lakhs at 76,800 strike. Call walls cluster between 77,000 and 77,500 strikes. If the Sensex gaps up above 77,500 this morning and holds, the 77,000 strike is unlikely but if we fade through the day back towards that 77,000 that's a buy on dips.

The pin is strong with only one day to expire. Straddle sellers at 77,000 have the setup. They have already sold the straddles so just keep a watch on that. So let's look at some sectors and what they are telling us. So Nifty is strong. Defence is also showing a strong buy. Metals are strong. Energy is strong. Mid cap select is strong and chemicals also stand strong along with finance and pharma as well. So meaning the highest strength is coming through the list and CNX 500 and CNX 200 is also giving a strength which tells you the broader market has a positive breadth, not just the large caps.

Three sectors are sitting neutral or negative that you should track. IT is neutral with a sell. That is surprising given NASDAQ is up by 2%. If CNX IT opens weak today, despite the US tech rally, the message is that Indian IT trade is independent of the US for now. Watch TCS as well. If it fails to hold above 2,588, the gap level, IT is not leading. If it holds, IT joins the rally later in the day. Auto is also neutral. So keep a watch on the weakness around Eicher Motors and Maruti as well.

Both got smashed with 5% on Monday as well. So FMCG is neutral with mixed combination. 3% down, which was the worst sector. If it stays weak today, even on a risk on day, it confirms defensives getting rotated out. Reliance is a strong sell currently and is not showing strength. So Reliance is one of the large cap name that hasn't participated. If Reliance turns today beyond 24,200 that would give strength to the index as well and the VIX crush story is already happening.

IVs are sell on rise as of now. So underdogs that we have to watch for today is defence, metals and mid cap and chemical sector. The screener is telling you that the leadership is rotating away from large cap indices names into high beta capital goods and material names. The classic mid cycle rotation and also don't miss it by staring only at Reliance and HDFC Bank. There are other names in the market as well. So my read for the day, buy on dips continues as we are saying.

That has been my call from last Friday. It played out Monday at the low. It played out again today. If we get a mid morning pullback towards that 24,000 or 23,900, keep a watch on that. But I want to watch volatility as well. 7 and if VIX stays sub 20 today, RISKON holds on and the rally gets a room. If VIX refuses to fall, even with the gap up or worse, spikes above 22, then it's telling you someone is buying insurance into the strength.

And this is where we need to be careful. 24,200 is the line. Closing above it will help us moving higher on Sensex expiry on Thursday. Failing which we are back to 23,900 24,000 on the option chain that we are seeing as of now. And the FII book minus 2 lakh 86 thousand shorts, they are the single largest catalyst for a hundred point squeeze out in either direction today. So that was my read guys. The framework is built, now we trade the reaction, not the prediction.

RupeeCase Nifty portfolio rebalanced on Monday. JSW and Tech M got in. Sun Pharma and Dr Reddy got out. If IT and metals lead today the book works. So this was it for today guys. If this added value, please share it with your friend who needs it right now. com under the podcast section. So see you all once again on Thursday's expiry that is tomorrow. So thank you all for joining.