By Anand James
Rollovers have picked up, but do not seem to be large enough to suggest a hurry or an extension in the ongoing downtrend. They are at 19.25 and 23.57 for Nifty and Nifty Bank respectively, well in line with the last four months’ average. Nifty and Bank Nifty straddles are also priced in line with last expiry levels of similar periods, at 330 and 740 respectively, pointing to the absence of any exaggerated range expectations, especially given how far below Nifty’s 200-day SMA is. Volatility as indicated by VIX is only near 14, again pointing to the absence of peak fear. None of this, though, is an indication towards reversal but is suggestive of a calmer expiry. Among stock futures, while 76% saw long liquidation, 16% saw short covering, when compared to Thursday, pointing to some green shoots towards buying interest. Echoing this sentiment, FIIs, DIIs, as well as clients, were seen reducing shorts in index futures while boosting longs. The sharpest increase in longs was from FIIs, who boosted their long positions in index futures by 5% on Friday.
Nifty leans on history to attempt a reversal from the 24k vicinity
Since the rapid declines from the September peak began there has hardly been a period that witnessed higher highs, underscoring a persistent mood to sell into strength. Such has been the bearish momentum during this period that all eyes are now on the 200-day SMA at 23372, which is about 3% from current levels. That it is taking time to head to the 200-day SMA despite 100 and 50 SMAs being broken a while ago points to the sharpness of the rise in the last 6 months. The distance between 100 and 200 SMAs is the highest since the sharp ascent during the 2020-21 period. We are now at a perfect point to correct this anomaly as we approach the August low of 23893, providing a breathing space for bulls to regroup, arrest declines and possibly affect a sideways move at least. On Friday, the slide’s sharpness got softer by the third hour, whose close was bested by last hour’s close. This is suggestive of a recovery, which will face the first challenge at 24350.
Additionally, the Muhurat session will also usher in some positivity. In the last 10 years, Nifty ended positively on 8 out of 10 Muhurat trading sessions. Apart from that, 80% of the time in the last 10 years, Nifty saw the next two months to be positive. FIIs have remained net sellers during 5 out of the last 10 October and they were net buyers in November during 7 out of the last 10 November which would add to the positive expectation for the next two months. That said, caution still rules, raising the virtues of astute stock picking. In 2022, the only year since 2020 with negative returns in the 30 days prior to Muhurat trading, where Nifty went down 1.18%, the next 30 days saw a 4.86% rise.
Sector cues:
PSE index’s monthly chart is indicating more weakness with minor support near 9900 the breach of which could push the index down towards 8700. The number of stocks in the Nifty PSE index trading below 200 DMA rose to 65% from 40% last week. The monthly RSI is coming off the overbought region. In the daily timeframe, the index has broken below the downward-sloping channel support. Even though extreme short-term momentum indicators are moving into the oversold region which could bring in some relief in the near term, we expect such moves towards 10250 to face resistance.
(Disclaimer: Anand James is the Chief Market Strategist at Geojit Financial Services. Views, recommendations, opinions expressed are personal and do not reflect the official position or policy of Financial Express Online. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)