The equity markets had a much better than expected day as it not only ended the day on a robust note but also prepared a stage for another phase of a runup. The overnight global traded setup and the Asian trade setup were weak in the morning; however, the domestic equity markets opened on a very resilient. It not only averted a likely gap-down opening but marked its low point in the very early minutes of the day. After opening on a mildly negative note, the NIFTY stayed in a range in the first hour of the trade. It managed to recoup its opening losses and trade flat in the first half of the session. The second half saw a strong return of momentum. NIFTY moved past the 17800 levels and ended near the high point of the day with decent gains of 131.05 points (+0.74%).
The level of 17800 remains an inflection point for the markets for the rest of the week. If the NIFTY is able to stay above 17800, there will be greater chances of it moving higher and trying to move past or test 18000 levels. Going by the options data, the zone of 17600-17800 not only saw an unwinding of Calls OI, but it also witnessed additional Put writing across this area. The 17800 has the second-highest call OI accumulation after 18000. If the NIFTY stays above 17800 for long, even this strike is likely to witness heavy Call unwinding leading to the Index moving higher.
The volatility edged lower; INDIAVIX moved lower by 2.02% to 16.3975. Wednesday is likely to see the levels of 17880 and 17950 acting as resistance points. The supports come in at 17800 and 17710.
The Relative Strength Index (RSI) on the daily chart is 67.51; it remains neutral and does not show any divergence against the price. The daily MACD stays bearish and below the signal line. A strong white body emerged on the candle. This reflects a strong directional bias of the market participants on the upside.
The analysis remains on similar lines for the next trading day; the markets have become stock-specific and will remain that way for the rest of the week. The broader markets have started to relatively outperform the NIFTY once again. Sectoral and stock-specific outperformance will continue in select banks, auto, pharma, and PSE stocks as mentioned in the previous note. We recommend not attempting to short the markets; instead, use the consolidation periods to make select purchases. A cautiously positive outlook is advised for the day.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
