Chandan Taparia of Motilal Oswal Financial Services says the Nifty may see limited upside as well as downside as dollar-rupee and crude oil price movements will drive the Indian equity market in the short term
Motilal Oswal Financial Services
The Nifty opened gap up and witnessed sustained buying on Friday to extend its gains towards 11,520 zones. It formed a bullish candle on the daily scale and a Hammer candle on weekly scale, which suggests that the decline is being bought into.
The pull back in the last two weeks is being sold into, so follow up buying interest is more important to see short term stability. Now, the index has to continue to hold above 11,450 to extend it gains towards 11,600, then 11,666. On the downside, support is seen at 11,450, followed by 11,333.
The Nifty remained volatile last week due to volatility in the dollar-rupee and concerns over a trade war between the US and China. Last week, the index fell sharply towards 11,250, but recovered from the lows to end near 11,500. India VIX made a fresh 14-week high of 15.45. It cooled off in the last two sessions at 13.84 levels.
On the option front, maximum put open interest (OI) is seen at 11,400 and 11,000 strikes, while maximum call OI is seen at 11,800 and 11,600 strikes. We have seen put writing at 11,500, followed by 11,400 strikes, whereas call unwinding was seen at all immediate strikes. The option band signifies an immediate trading range between 11,400 and 11,600 zones.
The Bank Nifty started to form a lower top – lower bottom last week as it failed to surpass 27,500 and drifted lower to 27,165 levels. However, it recovered from the low of 26,555 to its crucial hurdle of 27,165. It negated its lower highs- lower lows formation and formed a bullish candle on the daily scale and a Hammer candle on the weekly chart. Now, it has to hold above 27,165 to extend its gains towards 27,440-27,500 levels. On the downside, support is seen at 26,750-26,650 zones.
We expect positive price action in metal stocks (Hindalco and Jindal Steel), TVS Motor, Bharat Forge, ITC, Divis Labs and Piramal Enterprises. The Nifty may see limited upside as well as downside as dollar-rupee and crude oil price movements will drive the Indian equity market in the short term.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.