Moving forward, Nifty has to continue to hold above 11,300 zone to witness an upmove towards 11,500-11,600 levels while on the downside support exists at 11,250 then 11,150 levels.
Chandan Taparia
Greed and Fear Indicator: Volatility moves below 20 levels (VIX CMP – 19.94)
India VIX fell by around 8 percent to 19.94 levels. It has been forming lower tops lower bottoms for the last 9 weeks. Volatility is gradually cooling down suggesting bullish stance with buy on decline strategy to continue in the market.
CBOE VIX: CBOE VIX was flat at 22.54 levels and is consolidating in a range. It formed a Doji candle on weekly frame and continues its downward trend providing support to the US markets.
Fund Flow: FIIs investment brings strength to the market
In the cash segment, FIIs broke their 10-day buying streak on Thursday but concluded the week being net buyers. They were net buyers worth Rs 2,068 crore this week. FIIs pumping money into the Indian market strengthens the index. DIIs on the other hand continue their selling streak of the last 15 sessions and have been net sellers worth Rs 2,117 crore in the week. On the FIIs derivatives front, there was long built up in index futures and long liquidation in stock futures. The Long Short Ratio ranged from 54 percent to 66 percent in the week and is currently 60 percent.
Safe Haven: Gold continues its southward movement (Gold, MCX CMP – Rs 52,043 per 10 gram)
Gold prices continued its southward trend and ended the week down by 0.78 percent in this week. It had peaked to Rs 56,500 levels in the first week of the month but as Nifty picked up strength, people started shifting their money from precious metals to equity. The yellow metal settled the week at Rs 52,000 levels. The precious metal takes support at its 50 DMA and is seen to consolidate on daily frame.
Among other precious metals, silver was down by 0.34 percent on a week-on-week basis.
Option Data: Nifty immediate range 11,200 to 11,600 (Nifty CMP – 11,371, Bank Nifty CMP – 22,299)
Nifty futures closed the week with marginal gains of 0.97 percent with decline in futures Open Interest by 8 percent on weekly basis which indicates short covering activities in the market as every dips are being bought. During the week, Put Call Ratio based on Open Interest of Nifty moved in between 1.50 to 1.65 levels and closed the week with of PCR OI of 1.54 which indicates capped upside and lookout for a decisive range breakout. Maximum Put open interest is at 11,000 followed by 10,000 strike, while maximum Call open interest is at 11,500 followed by 11,600 strike. We have seen Call writing at 11,600 and 11,700 strike while Put writing was seen at 11,200 then 11,300 strike. Option data suggests a trading range in between 11,200 to 11,500-11,600 levels for coming few days.
Bank Nifty futures closed the week with gains of 2.53 percent with reduction in Open interest by 16.38 percent on weekly basis which suggests shorts have covered their position during the week. Put Call Ratio based on Open Interest of Bank Nifty remained in between 0.85 to 1.07 and it closed the week with PCR OI of 0.97 which suggests strength moving forward. IV of Banking index fell to 26 levels as the week concluded. Maximum Put open interest is at 22000, while maximum Call open interest is at 22,500. We have seen Call writing in 22,500 while unwinding at 22,000 strike. Put writing on the other hand was seen at 22,000 and 20,000 strikes.
India Rupee: Rupee picks strength (USD/INR CMP – 74.92)
The USD/INR pair was marginally up by 0.06 percent on week-on-week basis. The Rupee gained strength against the greenback as investors gained strength in the market with the Nifty index heading towards 11,460 levels. The 50 DMA is acting as a resistance on the daily frame.
Crude Oil: Oil moving in a range (Crude Oil WTI, MCX CMP – Rs 3,159 per barrel)
Oil was marginally up by 0.9 percent on week-on-week basis. It was trading flat and is taking support at its 200 DMA and well above its 50 DMA hence positive to range bound movement can be on cards ahead. Markets remained cautious as OPEC indicates that member nations might reduce their production to make up to the oversupply territory. The labour market also decelerated as the claim for unemployment benefits rose unexpectedly in the US.
DJIA: Ready for a fresh leg of rally (DJIA CMP – 27,930)
The Dow Jones negated its lower bottom formation on daily frame and comfortably moved above its downward sloping channel ready for the next move of rally towards 29,000 plus levels. The week saw a less volatility with VIX supporting it and heavyweight counters performing well.
Moving forward, Nifty has to continue to hold above 11,300 zone to witness an up move towards 11,500-11,600 levels while on the downside support exists at 11,250 then 11,150 levels. Bank Nifty has to continue to hold above 22,000 to witness an up move towards 22,500 and 22,750 while on the downside immediate support is seen at 21,750 then 21,400 levels.
The author is Vice President – Research Derivatives & Technical Analyst at Motilal Oswal Financial Services.
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