Chandan Taparia
Greed and Fear Indicator: Volatility cooled further (VIX CMP – 24.16)
India VIX fell by 3.15 percent from 24.94 to 24.16 levels. A gradual decline in volatility which has been falling from the last couple of weeks and is also at its lowest levels in the last four months suggest an overall bullish stance. Lower VIX with overall rising Put Call Ratio suggests the emergence of multiple supports with buy on any decline on the market.
CBOE VIX
CBOE VIX slipped by 5.9 percent to 25.68 levels suggesting bullish tone in the US market. It continued its decline for the fourth week in a row.
Fund Flow: FIIs investment to lift market sentiment
In the cash segment, FIIs were sellers in most part of the week but finally broke their selling streak on Friday. They were net sellers to the tune of Rs 1,960 crore this week. Even though the FIIs had made a good comeback in June, follow up is required in the July series to keep up the strength in the market. DIIs were net sellers most part of the week and sold worth Rs 1,584 crore. On the derivatives front, there was marginal short built up in index futures and long unwinding in stock futures. The Long Short Ratio decreased and is hovering around to 53 percent.
Safe Haven: Investors seek shelter under the safe haven in choppy times (Gold, MCX CMP – Rs 49,000 per 10 grams)
Gold was marginally up by 0.24 percent on a week-on-week basis. It remained flat and consolidated in a range throughout the week. It is expected to remain choppy as the concerns of the increasing number of cases and re-imposing lockdowns prevail along with geopolitical tensions. It has been forming higher highs higher lows from the last 7 months and risk averseness of investors should keep the support intact.
Among other precious metals, silver rose by 3 percent on a week-on-week basis.
Option Data: Nifty immediate range 10,600 to 11,200 (Nifty CMP – 10,901, Bank Nifty CMP - 21,966)
Nifty index opened positive and witnessed sustained buying interest on Friday to extend its gains towards 10,900 levels which suggests strong buying interest from key support levels. It started to form higher lows from the last three trading sessions and managed to close above its trading band of 10,550 to 10,850 levels after consolidation of nine trading sessions. It has been respecting its rising support trend line by connecting all the recent swing low and holding above its 200 DEMA.
On option front, maximum Put open interest was at 10,000 followed by 10,500 strike, while maximum Call open interest was at 11,500 followed by 11,000 strike. We have seen Call writing in 11,100 and 10,800 strikes, while Put writing was seen at 10,800 and 9,800 strike. Option data suggests an immediate trading range in between 10,600 to 11,200 zone.
Bank Nifty managed to hold 20,800-21,000 levels in the last week and recovered towards 22,000. For Bank Nifty, maximum Put open interest was at 21,000, while maximum Call open interest was at 23,000 strike. We have seen Call writing in 22,500 then 23,000 strike while Put writing was seen at 21,500 then 21,000 strike.
Indian Rupee: Rupee brings upbeat mood (USD/INR CMP – 74.89)
The USD/INR chart lost strength and made lower highs from the last 3 trading sessions. The greenback was down by 0.4 percent on a week-on-week basis. Money flow into the Indian market led to an increase in the rupee as Nifty touches 11,000 levels. Optimism throughout the economy overweighs concerns of extended lockdown and may be an opportunity for the Indian markets to lay its base for investment by industries.
Crude Oil: Oil waiting to move out of range (Crude Oil WTI, MCX CMP – Rs 3,050 per barrel)
Oil traded flat during the week and was marginally up by 0.23 percent on a week-on-week basis. Oil prices remain unchanged as uncertainty sweeps pertaining to the demand of oil globally. OPEC and major oil producers agreed to ease supply curb from the coming month. The surge in the number of cases have dimmed the economic outlook.
DJIA: Look out for key levels (DJIA CMP – 26,672)
Dow Jones was up by 2.29 percent on weekly basis and closed around to 26,672 levels. It has crossed its hurdle of 26,300 and should move higher henceforth. It came out of its weekly narrow range pattern, waiting for a positive trigger. The index performance continues to drive other global markets with buy on decline strategy.
Moving forward, needs to hold above 10,800 zone to witness a fresh leg of rally towards 11,000 then 11,200 levels while on the downside supports are seen at 10,750 then 10,650 levels. Bank Nifty needs to hold above 21,500 to witness an upmove towards 22,500 zones while on the downside support is seen at 21,200 levels.
The author is Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited.
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