Head – Technical & Derivatives, JM Financial Services
The Nifty is expected to see fresh shorts or long unwinding in case 12,000 is broken in the next few sessions, according to technical analysts. Traders can look to buy 30,500 puts on the Bank Nifty for a downside target of 30,000, and look for long opportunities in IT stocks, said analysts.
Where are We? The Nifty has entered into a ‘Catch 22’ situation again after giving a spectacular rally of more than 600 points in the last two weeks. The index has formed a ‘Doji’ Candlestick pattern on the weekly chart suggesting indecision at higher levels. It was a week characterised by under-performance in the Bank Nifty owing to aggressive selling seen in half of the Bank Nifty constituents. The Nifty IT Index had a good week and registered the highest weekly close ever.
What is in Store? Domestically, apart from the Nifty IT, Nifty India Consumption and Nifty Pharma Indices, most of the sectoral indices look under pressure. The Nifty Metal Index looks particularly bearish from a short-term perspective. The Bank Nifty closed at a 6-day low on Friday and trades with a bearish bias below 31,000. As per derivatives data, support for the Nifty is placed at 12,000, and at 30,000 for the Bank Nifty. Derivatives resistance is placed at 12,200 and 31,500, respectively (all spot levels). The India VIX seems to have bottomed out on the daily charts and saw a spike on Friday’s session. USD/INR continues to trade sideways with multiple supports at 70.50.
What could Investors Do? The Nifty is expected to attract fresh shorts/long unwinding incase 12,000 is broken in the next few sessions. On the flip side, unless and until 12,270 is successfully negotiated by the bulls, bears can have an upper hand this week. Traders can look to buy 30,500 puts on the Bank Nifty for a downside target of 30,000. Investors can look for long opportunities in IT Stocks, whereas shorting opportunities are seen in select metal stocks. We continue to remain positive on telecom leaders and advise buying on dips for the medium to long term.
