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Sinclair has made just three starts in two years with City following his £6.2 million move from Swansea in August 2012, and is yet to feature in the Premier League this season.
The 25-year-old hinted this week that he will look for a move in January if he remains without first-team football, but Pellegrini has said that he had opportunities to move in the summer.
"Scott knows perfectly which is his place in the squad," he said at his press conference ahead of Saturday's home match against Swansea. "He must work every day and in the moment I think he is better than the players we have, he will have a chance.
"Maybe he had the chance also to go on loan at the beginning of the season. But he decided to stay here."
Pellegrini has also given a vote of confidence to Eliaquim Mangala, who has endured a tough start to life in Manchester since becoming the most expensive defender in the history of British football this summer.
The Frenchman joined the club for £32 million in August but, after a solid debut against Chelsea, has seen his performances come in for considerable criticism.
His manager, however, has stressed that fellow centre-back Martin Demichelis also had a tough time after first joining the club in 2012, and believes the 23-year-old is primed to become a "great" player.
"Maybe [he has found life tough] for different reasons," Pellegrini said. "Because he started later, because he didn't make all the positions with us, because we work in a different way here, maybe he is not in his best moment.
"I am absolutely sure we bought the right player because I think he is a very good defender. He is a young defender with a lot of experience.
"If you remember, the criticism with Demichelis was absolutely the same as the criticism of Mangala. Maybe they need more time to settle here in the Premier League but I am sure we will see the great defender we have."
Mangala has been coping with a slight injury over the past week, but Pellegrini says he will be in contention for the weekend, along with captain Vincent Kompany, who has been passed fit to return.
Kompany missed City's 2-2 draw at Queens Park Rangers before the international break, as well as Belgium's matches against Iceland and Wales, due to a calf injury.
The skipper is now back in training, however, and Pellegrini is prepared to bring him straight back into the side, rather than save him for Tuesday's crucial Champions League match against Bayern Munich.
"The remaining injuries are the three of them - Dzeko, Aleks Kolarov and David Silva. The three of them are injured and not considered for this game," Pellegrini said. "Vincent is in the squad list and [Eliaquim] Mangala also has a small problem but they are OK.
"Yaya has not played two games in the same week so everybody [who] came back is available to play. They didn't have any problems with their international squad."
With City currently eights points adrift of table-toppers Chelsea, anything less than a win on the weekend would be another blow to the club's hopes of retaining their title, and Pellegrini has demanded a reaction between now and the New Year.
"Of course - we have to play 27 games more. That is a lot of points to fight for," he said. "When mathematics say that you can do it, I think that all the teams can do it.
"That of course will be the best thing we can do, but I think December and this week of November are decisive months for the Premier League.
"We are going to play eight games in the Premier League, we are going to finish the first round at the end of December.
"We have 24 more points to try to win. We have to try to do it, I think that is the only way.
"I think maybe we will not to be top of the table because Chelsea is in a very good moment, but I think it is important to have a good first round. That is more than 41 or 42 points."