By Ruchit Jain
Post an extended weekend; our markets started trading with a gap down due to negative opening by Infosys and HDFC Bank post their results. The index recovered marginally from the lows and attempted to recover in Tuesday’s session. However, we witnessed a sharp sell-off in the last hour on Tuesday and Nifty not only breached the 17000 mark but also went on to mark a low tad above 16800. In Tuesday’s session, although FIIs were aggressive sellers in the cash segment, surprisingly bought index futures on that day.
The call writers formed aggressive positions as the market corrected due to which, Nifty PCR-OI declined to 0.68. This indicated an oversold zone for the market and the index was near the support zone of 17000-16800. Also, in spite of this sharp correction we did not see any sharp rise in INDIA VIX.
The positive global markets provided a trigger for recovery ahead of the weekly expiry and on the expiry day, the markets witnessed buying interest which led to the index recovering most of the losses that were seen at the start of the week. Nifty Futures witnessed the formation of long positions on the expiry day and the call writers ran to cover their positions.
For the monthly expiry contract, the highest open interest is placed at 18000 call followed by 17500 strike. This indicates an immediate hurdle around 17500 which if surpassed, then it could led to a positive momentum till expiry. On the flipside, the support base for Nifty has now shifted higher to 17200 followed by 17000 mark. FIIs now have just over 50% of their positions on the long side in the index futures segment while the Long Short ratio of Retail clients in the index futures segment stands above 59%. Looking at the data, we expect a further recovery in the markets in the monthly expiry week and hence, traders are advised to trade with a positive bias and look for buying opportunities on any declines. One should place a stop loss below the support of 17000 while on the higher side; we expect levels of 17500 followed by 17800-17850. Due to its long formation, the Nifty may continue to relatively outperform the Bank Nifty index till expiry.
(Ruchit Jain is the Lead – Research at 5paisa.com. Views expressed are the author’s own. Please consult your financial advisor before investing.)