The Nifty has to hold above 11,750 to witness a bounce towards 11,850 while on the downside, support exists at 11,666 then 11,550 levels.
Greed and Fear Indicator: VIX needs to cool down (VIX CMP–21.64)
India VIX was up 6.2 percent from 20.38 to 21.64 levels on week-on-week basis. It formed higher highs for the last three sessions and needs to come down to provide comfort to the bulls.
CBOE VIX: CBOE VIX was up by 1.09 percent from 25 to 27.41 levels. It negated its higher highs–higher lows formation on the daily scale but volatility needs to cool off for stability in the market.
Fund Flow: FIIs start October on a positive note
In the cash segment, FIIs started the week on a positive note until the end of the week when they turned net sellers. The week summed up positive to the tune of Rs 1,186 crore. DIIs, on the other hand, were net sellers throughout the week to the tune of Rs 5,217 crore. The Long Short Ratio ranged from 64.91 percent to 68.71 percent in the week to close the week at 66.10 percent. On the FIIs derivatives front, there was long liquidation in index futures and in stock futures.
Safe haven: Gold trades flat (Gold MCX CMP–Rs 50,609 per 10 grams)
Gold was down by 0.52 percent week on week. It consolidated most part of the week and is hovering below its moving average. The yellow metal remained choppy but concerns over the spreading coronavirus will support it at support zones.
Among other precious metals, silver was down by 2 percent.
Option Data: Nifty's immediate range 11,400-12,000 (Nifty CMP–11,762, Bank Nifty CMP–23,533)
The Nifty futures closed the week with a loss of 1.38 percent with the reduction in futures Open Interest (OI) by 5.6 percent on a weekly basis, which indicates long liquidation. During the week, Put Call Ratio (PCR) based on Open Interest of the Nifty moved in between 1.31 and 1.60 levels and closed the week in the lower band, suggesting a limited upside.
On the options front, Maximum Put open interest is at 10,500 followed by 11,000 strike, while maximum Call open interest is at 12,500 followed by 12,000 strike. We have seen Call writing at 11,700 then 12,100 strike while Put writing is at 11,700 then 11,500 strike. Option data suggests a wider trading range in between 11,400 to 12,000 zone while an immediate trading range in between 11,500 to 12,000 zones.
Bank Nifty futures closed the week 1.33 percent lower with 5.3 percent reduction in Open interest on a weekly basis, which again suggests long liquidation. Put Call Ratio based on Open Interest of the Bank Nifty remained in between 0.78 and 1.27 and it closed the week at 0.93 levels. IV of the banking index is at 35 levels as the week concluded. Maximum Put OI is at 23,000 followed by 21,000, while maximum Call open interest is at 24,000 followed by 25,000. We have seen Call writing in 23,500 while Call unwinding at 23,000. Put writing is witnessed at 23,000.
India currency: Rupee surges (USD/INR CMP–73.44)
The USD/INR currency pair was up by 0.6 percent on a week-on-week basis. It continues to be in the range and is near its immediate support levels at 73. Flights to safety pushed the dollar lower. The rupee strengthened on account of positive domestic equities and skepticism around increasing rate of the deadly virus.
Crude Oil: Oil against gravity (Crude Oil WTI, MCX CMP– Rs 2,999 per barrel)
Oil was up by 1.32 percent on week-on-week basis and remained volatile during the week. Rising coronavirus cases are fuelling demand fears. It is facing resistance at its 50 DMA but is currently above its 200 DMA.
DJIA: Wild swings (DJIA CMP – 28,607)
The Dow Jones remained flat and was up by 0.07 percent on week-on-week basis. It formed a Doji candle on the weekly scale and negated its lower lows formation on daily basis. The US stimulus package did not show progress and a stalling recovery with rising concerns globally have shaken investor confidence.
Moving forward, the Nifty has to hold above 11,750 to witness a bounce towards 11,850 while on the downside, support exists at 11,666 then 11,550 levels. The Bank Nifty has to hold above 23,500 to witness an upmove towards 23,750 and 24,000 while on the downside support exists at 23,150 then 23,000.
(Chandan Taparia is the Vice President – Research Derivatives & Technical Analyst at Motilal Oswal Financial Services.)Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.