By Anand James
We are entering this week with almost all the usual signals of an approaching meltdown. Or a pull back at least, given the proximity to the psychological mark of 18k, as well as previous top, not to speak of the rapid gains of the last fortnight. Event risks are also aplenty, given the impending Fed and RBI announcements as well as US jobs and CPI numbers. However, the persistent decline in VIX through October from the September peak of 22.89 to near 16, is a strong reason why the Nifty may not fall into the usual pattern, and just melt down. VIX’s behaviour is suggestive that market is becoming more and more comfortable the higher we go. Clearly, traders have set their eyes on much higher levels.
Meanwhile, a holiday-marred week had taken the momentum out of the expiry day. Among sectors, long build up was seen in Banking, Telecom, and Realty. Whereas Energy, Media, Metal and Capital goods witnessed Short Covering. Significant short build up was seen only in the FMCG sector. High rollover was seen in Realty, Cement, Auto, Financial Services, Cement and Telecom stocks. Among stocks, high rolls were seen in Oberoirlty, Honaut, Pageind, KotakBank, Cumminsind, BoschLtd, HDFC while NMDC, Alkem, Aartiind, Powergrid, Coalindia, PFC and HCLtech saw low rolls. Meanwhile, Auto sector has moved into the improving quadrant in the relative rotation graph after a long time. Expect positivity to continue.
We had gone into last week expecting 18000, despite having only few trading days to achieve the same. A test of the same is almost a given next week, but we are encouraged to look beyond and see past the September ‘22 peak of 18090 and aim for this year’s peak of 18350 seen in January. The 200 day SMA is still a tad below 17000 and on each of the last three recent occasions when Nifty had stretched thus far this key MA, a correction unfolded. However, none of these points had seen VIX fall below 16, which would be the key motivator to look for Nifty continuing the upside streak. Nevertheless, given the high odds of a pull back, prudence calls for downside marker to be placed at 17470 and to be pushed higher to 17750 once Nifty pushes into the 18090-350 band.
(Anand James, Chief Market Strategist at Geojit Financial Services, Views expressed are the author’s own. Please consult your financial advisor before investing)