By Rajesh Palviya
Nifty started off on a flat note last week and has been trading with extreme volatility on both sides all week. NSE Nifty 50 closed at 17110 with a weekly loss of 69 points. On the weekly chart, the index has formed a “Doji” candlestick formation, indicating indecision among market participants regarding direction. The chart pattern suggests that if the Nifty 50 crosses and maintains the 17500 level, it would witness purchases that would push the index towards the 17800-18000 levels. However, if the index falls below the 17000 level, it would witness selling, pushing the index towards 16800-16500. For the week, we expect Nifty to trade in the 17500-16500 range with mixed bias. The daily and weekly strength indicator RSI is moving down and trading below the reference line, indicating a negative bias.
Handy Derivative Outlook
Nifty futures closed negative at 17135 with open interest up 3.47%, indicating a short build. Nifty Futures closed at a premium of 33 points compared to the previous day’s premium of 15 points. FIIs were buyers of index futures for an amount of 441 crore and buyers of index options for an amount of 11271 crore, sellers of the stock futures for an amount of 358 crore. Net buyers in the derivatives segment in the amount of 11050 crore. India VIX index stands at 19.42 v/s 19.37. Nifty ATM Call Option IV is currently at 15.19 while Nifty ATM Put Option IV is trading at 18.89. Index Options PCR is 0.9 v/s 1.36 & F&O Total PCR is 0.84.
Handy Put Options OI distribution shows that 17000 has the highest OI concentration followed by 16900 and 17200 which can serve as support for the current expiration date. Nifty Call strike 17300 followed by 17500 witnessed significant OI concentration and can act as resistance to the current expiration.
Bank Handy Outlook
Bank Nifty started the previous week with a downward opening and selling pressure throughout the week caused the index to finish positive. Bank Nifty closed at 36064 with a gain of 43 points on a weekly basis. On the weekly chart, the index has formed a bullish candle forming a lower high-low compared to last week and has closed below the same value, indicating weakness. The chart pattern suggests that if Bank Nifty crosses and maintains above 36500 levels, it would witness buying which would push the index towards 37000-37500 levels. However, if the index broke below the 35900 level, it would witness sales, pushing the index upwards to 35500-35000. Bank Nifty is trading below 20, 50, 100 and 200 days SMA, which are key short-term moving averages, indicating a negative trend in the short to medium term. For the week, we expect Bank Nifty to trade in the 37000-35000 range with a negative bias.
Bank Nifty Derivative Outlook
Bank Nifty closed positively at 36144 with a 3.79% rise in open interest, indicating a short build. Bank Nifty Futures closed at a premium of 56 points compared to the previous day’s premium of 41 points. Bank Nifty Put options OI distribution shows that 36000 has the highest OI concentration followed by 36500 and 36300 which can serve as support for the current expiration date. Bank Nifty Call strike 36500 followed by 36000 witnessed significant OI concentration and can act as resistance for the current expiration.
Sectors and stocks to watch this week
We expect the cement, chemicals and fertilizers, oil and gas, autos and FMCG sectors to show some interest to buy, while the IT, banking and capital goods sectors may show some weakness. We believe stock-specific activity in the market will continue and Midcap stocks are likely to outperform this week. Stocks like Reliance Industries (RIL), Hindustan Unilever Ltd (HUL), Ambuja Cements, Coromandel International, Indian Hotels, Deepak Nitrites, Hero MotorCorp, Aditya Birla Fashion and Retail (ABFRL) and Asian Paints are likely to outperform this week.
(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. Opinions expressed are those of the author.)