What is your trading view for Wednesday 04 August? Do you see the rally of Tuesday sustaining?

At the outset, the extent of the rally took us all by surprise. If Monday betrayed signs of positive sentiments, bulls were on total rampage on Tuesday. The Nifty closed 245 points higher at 16,130 levels while Sensex closed 873 points higher. It was a day when the large caps literally ruled the roost with mid-caps and small caps relatively tepid.

It all began with the Purchase Manager Index or PMI data for the month of July 2021 coming in higher at 55.3 as against 48.1 in June. In PMI data, the figure of 50 is critical as it is the difference between manufacturing expansion and contracting. So, manufacturing not only moved from contraction to expansion, but with lots of positive momentum.

For a change, on Wednesday, even the foreign portfolio investors or FPIs turned net buyers to the tune of a whopping Rs.2,117 crore . The domestic institutions, for a change, sold Rs299 core on Tuesday. Clearly, the PMI number did enthuse the FPIs indicating that growth was back after the 3 months of COVID uncertainty. US indices like the Dow and NASDAQ were strong and SGX Nifty is also up by 50 bps in early trades.

One thing to remember is that after gaining 245 points in the Nifty, a lot of shorts are likely to be squeezed so that short covering will continue for a couple of days more so one can be prepared for another day of positive gains on the Nifty. Of course, it may not be as frenetic as Tuesday, but markets are likely to continue the positive trend.