The Nifty50 made a new lifetime high of 11,761 last week and observed a round of profit booking on the back of the forecast of a below-normal monsoon and monetary policy announcement.
However, positive news on the global front regarding US-China trade helped Nifty to close the week in the green.
The open interest (OI) in the Nifty during the April series has remained subdued amid significantly high premium. High premium in the Nifty can also be attributed to lack of short positions formed in the ongoing series.
At the same time, volatility has tested 19 levels on the back of monetary policy announcement. However, we believe it will decline gradually going into the results season. Stock specific moves are more likely to be seen.
In the options space, highest addition among Call strikes was seen at 11800 strikes while 11,700 Put strike saw major OI additions.
With almost eight lakh shares added in 11,600 Put, we believe 11,550 will be an important support for Nifty in the coming week. On the higher side, another round of up move towards 11,900 is likely.
With the rupee starting to depreciate again from its important support levels, stocks from technology and pharma space may come into the limelight.
At the same time, we expect stocks from the cement and infra space to outperform from here onwards.
Bank Nifty: Consolidation can be seen with support near 30,000:
Volatility remained high due to Reserve Bank of India (RBI)’s Monetary Policy while the decision of only 25 bps cut did not go well with market participants. This resulted in profit booking but 30,000 acted as strong support for the week.
Late buying in most private banks helped the index to end almost flat for the week. However, IVs rose nearly 12 percent for the week and did not cool off after the event, which may trigger some uncertainty in the coming days.
April series future premiums continued to remain high along with OI additions suggesting long accumulations.
We feel the closure of these long positions can only be seen if the future moves below 30000. Till then, a possible leg of consolidation can be seen.
The current price ratio of Bank Nifty/Nifty continued to remain above its two-year highs of 2.55. On the back of continuous buying by FIIs in equities.
We do not see any major correction in the near term. Once the Bank Nifty manages to end above its sizeable Call base of 30,500, more upside can be seen. This is likely to push the ratio towards 2.62
US March employment data in focus as US$ continues to consolidate:
US equities moved higher this week amid rising expectation of positive directions in US-China trade talks. This supported US benchmark 10-year yields, which are up 12 bps this week.
Today’s March employment data is expected to remain in focus. Strong jobs data could provide further strength in US equities as well as yields and dollar
Emerging Markets (EMs) witnessed mixed portfolio flows during the week. Equity outflows of over $50 million and $70 million were seen in India and Thailand, respectively.
South Korea and Taiwan witnessed strong inflows of $920 million and $835 million, respectively. The risk sentiments remained on the edge amid US-China trade talks as well as a short extension of the UK’s exit from EU.
Any signs of the possibility of an actual deal within actual Brexit date (currently April 12, 2019) or a long extension to Brexit negotiations would boost risk-on sentiment
Gradually rising crude oil price poses a threat to net oil importers like India. A sharp rise from current levels has historically tended to put pressure on currencies amid risks of widening current account deficit (CAD). As such, a halt in rising oil prices remains key for importers like India.
(The author is Head of Derivative from ICICIdirect)Disclaimer: 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.