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The Nifty has seen a small recovery. It is testing resistance in a key zone, just below its own 200 Day Moving Average (DMA). This could be the first corrective rally in a new bear market or it may be a full-scale recovery. On the downside, support between 5,475-5,500 seems to be holding.
Despite the apparent recovery in Monday's session, the breadth signals remain negative and, given a trend of FII selling, there is a very good chance that prices will trend lower in the long-term. Asian markets ex-Japan are weak although the US and Japan seem bullish.
Domestic political instability is likely to build up when the next parliamentary session starts. The results season will exert its own stock-specific pressures. Selloffs in the gold market have impacted jewellery and NBFC stocks but some of that money could come into the equity market.
The Nifty has held above 5,475 so that’s the mark to watch on the downside. On the upside, it has massive resistance between 5,590-5,635. This zone has been heavily traded and the 200-DMA is also in this area. A positive crossover, above say 5,650, could lead to a pullback till 5,750.
If there is a pullback till 5,750, it could mean a period of range trading or a reversion to a full-fledged bull market. The intermediate trend was down till April 12, which is a month from the March 11 peak of 5,971. Intermediate trends can last much longer. There is strong resistance at 5,750. If that is beaten, there is continuous resistance at every 50 points or so, till the 6,000 level. On the other hand, if the index does fall below 5,475, a target of 5,375 is possible. If the support at 5,375 breaks, a drop till 5,200 is likely.
The latest inflation numbers have raised hopes of further rate cuts. As a result, the Bank Nifty has staged a strong recovery. If the market does stage a full recovery, the BankNifty will be key. The other speculative gainer has been the oil and gas sector where most PSUs and Reliance and Essar Oil have seen buying. On the flipside, Infosys’ results caused a big selloff and dragged down the IT sector. If TCS and HCL Tech don’t pull off a rescue act, the CNXIT could slide much further. In the options segment, there are expiry effects visible with holidays like Ram Navami and Mahavir Jayanti to come. In the immediate future, traders seem bearishly biased. The April put-call ratio (PCR) and the three-month PCR are both around 0.93. This is on the negative side of the benchmark of one.
In the context of two remaining weeks of April settlement, a big trending move still looks possible. Option traders are getting reasonable risk:return ratios near money. The Nifty is at 5,568 with the futures premium or discount nominal.Despite the apparent recovery in Monday's session, the breadth signals remain negative and, given a trend of FII selling, there is a very good chance that prices will trend lower in the long-term. Asian markets ex-Japan are weak although the US and Japan seem bullish.
Domestic political instability is likely to build up when the next parliamentary session starts. The results season will exert its own stock-specific pressures. Selloffs in the gold market have impacted jewellery and NBFC stocks but some of that money could come into the equity market.
The Nifty has held above 5,475 so that’s the mark to watch on the downside. On the upside, it has massive resistance between 5,590-5,635. This zone has been heavily traded and the 200-DMA is also in this area. A positive crossover, above say 5,650, could lead to a pullback till 5,750.
If there is a pullback till 5,750, it could mean a period of range trading or a reversion to a full-fledged bull market. The intermediate trend was down till April 12, which is a month from the March 11 peak of 5,971. Intermediate trends can last much longer. There is strong resistance at 5,750. If that is beaten, there is continuous resistance at every 50 points or so, till the 6,000 level. On the other hand, if the index does fall below 5,475, a target of 5,375 is possible. If the support at 5,375 breaks, a drop till 5,200 is likely.
The latest inflation numbers have raised hopes of further rate cuts. As a result, the Bank Nifty has staged a strong recovery. If the market does stage a full recovery, the BankNifty will be key. The other speculative gainer has been the oil and gas sector where most PSUs and Reliance and Essar Oil have seen buying. On the flipside, Infosys’ results caused a big selloff and dragged down the IT sector. If TCS and HCL Tech don’t pull off a rescue act, the CNXIT could slide much further. In the options segment, there are expiry effects visible with holidays like Ram Navami and Mahavir Jayanti to come. In the immediate future, traders seem bearishly biased. The April put-call ratio (PCR) and the three-month PCR are both around 0.93. This is on the negative side of the benchmark of one.
A strangle of long 5,600c (45) and long 5,500p (36) suggests that the settlement expectations are for trading between 5,420, 5,680. A long 5,600c (45) and short 5,700c (16) costs 29 and pays a maximum 71. A long 5,500p (36) and a short 5,400p (15) costs 21 and pays a maximum 79 while an in-the-money spread of long 5,600p (78) and short 5,500p(36) costs 42 and pays 58.
These are all decent ratios. They can be combined into a long-short strangle position, with a long 5,500p, long 5,700c and a short 5,400p (15) and a short 5,800c (5). This costs a net 32 and pays a one-way maximum of 68. This has breakevens at 5,468 and 5,732.
