Motilal Oswal Financial Services
The Nifty remained rangebound in the last two trading sessions, but witnessed a strong recovery last week from 10,333 to 10,838 levels. It formed an Inside Bar pattern on the daily scale and a strong bullish candle on the weekly scale, which indicates that declines are being bought into the market.
It has to continue to hold above the 10,700 zone to extend its move towards the crucial hurdle of 10,880-10,929. On the downside, support exists at 10,650, then 10,600 zones. It has been flirting near its 50-day exponential moving average (DEMA) and needs to surpass this crucial hurdle to commence the next upmove in the market.
The Nifty started last week on a negative note with the resignation of Reserve Bank of India Governor Urjit Patel and outcome of state election results, but managed to recover from the lows and bounced to 10,800 zones.
Volatility index corrected sharply by 18.45 percent last week to 15 levels, while put-call ratio moved up from 1.30 to 1.53 levels.
Decline in volatility, with a surge in PCR, suggests that supports are shifting higher and a small follow move could drive the next upmove.
On the option front, maximum put OI is seen at 10,000, followed by 10,200 strikes. Maximum call OI was seen at 11,000, followed by 10,900 strikes. Put writing was seen at 10,800 and 10,700 strikes, while call writing was seen at 11,000 strike. The option band signifies a trading range between 10,650 and 10,929 zones.
The Bank Nifty recovered well last week from 25,600 to 26,950 levels, but failed to surpass its immediate hurdle of 27,000. It formed two consecutive Doji candles in the last two sessions. It has to hold its immediate support of 26,666 zones to extend its gain towards 27,000 zones. Below 26,500, the immediate trend could turn for a short term decline towards 26,350, then 26,100 zones.
Sector-wise, the Nifty IT index managed to surpass its 50 DEMA but remains near to its hurdle zone. Infosys and NIIT Technologies are showing strength.
Nifty Auto index is near its multiple hurdle at 9,350 for the last 10 weeks. Only above that could it see a fresh move in this sector, while Bharat Forge and Ashok Leyland are witnessing pressure.
The Nifty FMCG index has been making a higher top -higher bottom. Stocks like Hindustan Unilever, Dabur India and Colgate Palmolive are likely to extend its momentum.
Positive price set-up in seen in NIIT Technologies, Infosys, Voltas, Bata India, Dabur India, BPCL and Godrej Consumer Products.Disclaimer: The author is Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.