By Rajesh Palviya
On the daily chart, the Nifty 50 index has formed a big bearish candle and has violated multiple-day support of 18000 indicating negative bias. The index continues to move in a Lower Top and Lower Bottom formation on the hourly chart indicating negative bias. The chart pattern suggests that if Nifty crosses and sustains above 17900 level it would witness buying which would lead the index towards 18200-18400 levels. However, if the index breaks below 17600 level it would witness selling which would take the index towards 17400-17300. Nifty is trading above 20 and 50 day SMA indicating positive bias in the short to medium term. Nifty continues to remain in an uptrend in the medium and long term, so buying on dips continues to be our preferred strategy.
Nifty derivative outlook
Nifty futures closed at 17715 on a negative note with a 3.18% increase in the open interest indicating short build up. Nifty Futures closed at a discount of 12 points compared to the previous day premium of 22 points. India VIX index is at 17.42 v/s 17.91. Nifty ATM call option IV is currently 19.03 whereas Nifty ATM Put option IV is quoting at 13.08. Index options PCR is at 0.90 v/s 0.90 & F&O Total PCR is at 0.81. Nifty Put options OI distribution shows that 17000 has highest OI concentration followed by 17500 & 17800 which may act as support for the current expiry. Nifty Call strike 18000 followed by 17800 witnessed significant OI concentration and may act as resistance for current expiry.
Bank Nifty Outlook
Bank Nifty opened with a downward gap and traded with extreme volatility on either side and witnessed short covering on Friday. Bank Nifty closed at 39116 with a loss of 393 points. On the daily chart, the index has formed a bearish candle with either side long shadows indicating extreme volatility at higher levels. The index continues to move in a Lower Top and Lower Bottom formation on the hourly chart indicating negative bias.
The chart pattern suggests that if Bank Nifty crosses and sustains above 39500 level it would witness buying which would lead the index towards 40000-40500 levels. Important support for the day is around 39000 However, if index sustains below 39000 then it may witness profit booking which would take the index towards 38500-38000 levels. Bank Nifty is approaching its 20-day MA (39070) and a recapture of the same may show some buying interest. Bank Nifty continues to remain in an uptrend in the medium and long term, so buying on dips continues to be our preferred strategy.
The daily strength indicator RSI has turned negative from the overbought territory and is below its reference line indicating sustained downtrend.
Derivative Outlook
Bank Nifty Put options OI distribution shows that 39000 has highest OI concentration followed by 38500 which may act as support for current expiry. Nifty Call strike 40000 followed by 39500 witnessed significant OI concentration and may act as resistance for current expiry.
Sectors & stocks for coming week
We expect cement, capital goods, automobiles, pharma and PSU Banks to do well in the coming week. Stocks such as ACC, Grasim Industries, Ashok Leyland, Minda Corporation, State Bank of India (SBI), United Spirits, Sun Pharma may do well in the near term.
(Rajesh Palviya, VP– Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)
