By Anand James
Long to to-short ratio of FIIs’ index futures is still at the lowest this month, as of Friday. These are near historical extremes but have not yet triggered a reversal as the total positions have not been sizable enough, when compared to October, to force an urgency. We had noted the same last week too, pointing to the lack of traction in position building. Both long and short positions saw an increase on Friday though.
Nifty at 200-day SMA
Nifty’s test of 200-day SMA evoked no surprise last week. A 4.2% decline in VIX confirms the same and a lack of panic. The doji candlestick pattern as well as the close below lower Bollinger band sets up the environment for a pullback, with RSI also attempting to make a turn higher from sub 30 levels. We are not certain about a vertical recovery though as challenges are plenty, urging us to look for a push above the 23733-88 region before playing upmoves aiming 24111. That said, short recoveries off 200-day SMAs usually are greeted by another bout of rejection trades. We do not see prospects of going past 22800 though in the event of one more such downside attempt.
Bank Nifty is also similarly poised, with conditions of a reversal permitting a bounce that is likely to be challenged in the 50800-51100 region. Immediate support is seen at 49600, with 46000 as the major support seen deep down, just in case reversals do not gain strength, once in the 51000 vicinity.
Sectoral Cues
Financial Services: After the recent decline, the Nifty Financial Services index seems to have taken support around the trendline of 22980. The index has formed an inverted hammer near the trendline indicating reversal. The Stochastic Momentum Oscillator histogram has shown signs of exhaustion at lower levels supporting our reversal expectation. We expect the index to move towards 23500 and 23600 in the near term. Stocks like HDFC Bank, ICICI Bank, and Kotak Bank, which form around 47% of the Nifty Financial Services Index, have shown early signs of reversal which could help the index in the near term.
FMCG: Nifty FMCG Index has broken below the horizontal support of 58100 which also happened to be the rising channel support which has resulted in a structural shift. Since the extremely short-term indicators are in the oversold region, we could see some bounce back towards 56800 in the near term but expect higher level selling pressure to emerge. Near-term support for the index is seen near 54200-53000 levels. Stocks like Hindustan Unilever, ITC, Nestle India, and Dabur look vulnerable. Look to sell on a pullback.
(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.)
