By Ruchit Jain
Nifty has seen a consolidation phase so far in the January series. However, Nifty has managed to form a good base around 17800 in last few weeks and it has now given a breakout above its ’20 DEMA’ hurdle after a month. Thus, the technical structure has turned positive for the short term. Now if we look at the data, most of the data has been positive since last one week. US markets have managed to hold their important support for far. The inflation and the IIP data released last week in our country were positive. The momentum readings on the daily chart have given a positive crossover and the Dollar Index too has recently corrected and has breached its important medium-term support which is good for equity markets.
The only thing that was restricting our markets to go up was the FII’s data. They have traded with a negative bias where they have sold equities worth over Rs. 18000 crore in this month while they were on the short side in the index futures segment too. However, in last couple of sessions they have covered their short positions and their ‘Long Short Ratio’ has increased from 38 percent at the start of the week to 51 percent. Thus, this data too has now turned favorable for the markets. Now, the upmove till now seems more because of short covering, and it would be crucial to see if fresh formations are formed ahead of the Budget which could lead to an upmove in the NSE Nifty.
The Client section has been trading with a positive bias as their Long Short ratio is around 59 percent. In the options segment, 18000 put option have seen open interest addition which indicates that declines towards this support is likely to witness buying interest now. Looking at the above data, we advise traders to look for buying opportunities on declines and trade with a positive bias. On the higher side, 18250 will be the immediate resistance to watch out for. Once that level is surpassed, the index could rally towards 18330 and 18450 in the near term.
The January series have turned out to be a phase of consolidation so far as the indices have traded in a broad range. The index has seen some selling pressure on pullback moves mainly due to FII’s selling in the cash as well as the futures segment. However, the selling has been absorbed without much price correction which is a good sign. In last few weeks, Nifty has been oscillating within a range wherein the range of 17750-17800 has been acting as a support while the pullback moves are witnessing selling pressure. This recent down move has mainly been due to selling from FII’s where they had sold equities in the cash segment to the tune of over 13000 crores in this month so far while they are on the short side in the index futures segment too.
Their ‘Long Short Ratio’ is currently around 38 percent while the Client section has been on the long side with the same ratio at 62 percent. As per the options segment, 18000-18100 is the immediate resistance zone while 17800-17700 is the support range. Market participants will look for cues from the reaction of the global markets on the US inflation data. The other cues have been positive so far with the US Dollar index sustaining its down move and the USDINR too is showing strength against the Dollar which is a positive for the equity markets.
The above data hints at a support in the range of 17750-17800 and resistance in the range of 18000-18100. Only a breakout beyond this range will lead to next directional move. Hence, traders are advised to trade with a stock-specific approach for now and trade aggressively only post a breakout from the above-mentioned range. For the Bank Nifty index, the support is placed around 41500 while 42700 is the near term resistance. Traders should also keep a close watch on the IT space which could provide some leading indications, where the immediate resistance in the Nifty IT index is around 29030. A breakout above this resistance could then lead to a decent upmove in the IT space as well.
(Ruchit Jain is the Lead – Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)