The market extended correction for the second consecutive session and remained volatile on February 7, ahead of the interest rate decision by the Reserve Bank of India's (RBI) Monetary Policy Committee scheduled for February 8. Among sectors, auto, FMCG, select IT and metal stocks were under pressure.
The BSE Sensex was down 221 points to 60,286, while the Nifty50 fell 43 points to 17,722 and formed a bearish candle on the daily charts, making lower high lower low formation, indicating temporary weakness in the market.
"While the bias remains positive, we expect the Nifty to consolidate in the range of 17,400-18,000 levels for the next few sessions," Subash Gangadharan, Senior Technical and Derivative Analyst at HDFC Securities said.
Traders need to focus on stock-specific action to make money, he advised.
Rupak De, Senior Technical Analyst at LKP Securities feels the Nifty index faced stiff resistance around the 17,800-17,850 zone where aggressive Call writing is visible. The index needs to surpass this level on a closing basis to witness a short covering move toward the 18,200 level, he said.
The support on the lower end is at the 17,600 level and if breached will lead to a further correction towards 17,450-17,400 levels, Rupak added.
The broader markets were also weak with the Nifty Midcap 100 and Smallcap 100 indices falling 0.02 percent and 0.71 percent respectively on negative breadth, but the volatility is providing support to the market as India VIX fell by 3.82 percent to 14.13 level from 14.69 level.
We have collated 15 data points to help you spot profitable trades:
Note: The open interest (OI) and volume data of stocks in this article are the aggregates of three-month data, and not just of the current month.
Key support and resistance levels on the Nifty
As per the pivot charts, we have the key support level for the Nifty at 17,668, followed by 17,630, and 17,570. If the index moves up, the key resistance levels to watch out for are 17,789, followed by 17,826 and 17,887.
The Nifty Bank has outperformed broader markets, rising 116 points to 41,491 and formed a Doji kind of pattern on the daily charts, indicating indecisiveness among bulls and bears about future market trends ahead of the MPC meet outcome.
"The Bank Nifty continued to trade in a broad range ahead of the RBI policy wherein 41,000 is a support and 42,000 is a resistance. The index needs to break this range on either side decisively for trending moves. The undertone remains bearish within the range and one should keep a buy-on-dip approach," Kunal Shah, Senior Technical Analyst at LKP Securities said.
The important pivot level, which will act as crucial support for the index, is placed at 41,201, followed by 41,075 and 40,870. On the upside, key resistance levels are placed at 41,610, followed by 41,737, and 41,941.
On a weekly basis, we have seen the maximum Call open interest (OI) at 18,000 strike, with 1.15 crore contracts, which may be a crucial resistance level in coming sessions.
This is followed by an 18,500 strike, comprising 1.01 crore contracts, and a 17,800 strike, where we have more than 92.69 lakh contracts.
Call writing was seen at 17,800 strike, which added 38.95 lakh contracts, followed by 18,600 strike, which added 35.09 lakh contracts, and 18,000 & 18,500 strikes, which added 25.4 lakh contracts each.
We have seen Call unwinding in 17,600 strike, which shed 1.77 lakh contracts, followed by 18,700 strike, which shed 74,700 contracts, and 17,300 strike, which shed 29,500 contracts.
On a weekly basis, the maximum Put OI was seen at 17,000 strike, with 62.42 lakh contracts, which can be a crucial support level for coming sessions.
This is followed by the 17,500 strike, comprising 60.29 lakh contracts, and the 17,700 strike, where we have 57.56 lakh contracts.
Put writing was seen at 17,400 strike, which added 14.55 lakh contracts, followed by 17,500 strike, which added 9.98 lakh contracts, and 17,700 strike which added 9.53 lakh contracts.
Put unwinding was seen at 16,500 strike, which shed 8.98 lakh contracts, followed by 17,100 strike, which shed 6.39 lakh contracts, and 17,600 strike, which shed 5.87 lakh contracts.
Stocks with a high delivery percentage
A high delivery percentage suggests that investors are showing interest in these stocks. We have seen the highest delivery in Page Industries, Kotak Mahindra Bank, SBI Life Insurance, Hindustan Unilever and Power Grid Corporation of India, among others.
An increase in open interest (OI), along with an increase in price, mostly indicates a build-up of long positions. Based on the OI percentage, we have seen a long build-up in 31 stocks including Navin Fluorine International, Samvardhana Motherson International, Ambuja Cements, Cummins India, and ABB India.
A decline in OI, along with a decrease in price, mostly indicates long unwinding. Based on the OI percentage, 40 stocks saw long unwinding, including ITC, Dr Lal PathLabs, REC, Persistent Systems, and NMDC.
An increase in OI, along with a decrease in price, mostly indicates a build-up of short positions. Based on the OI percentage, we have seen a short build-up in 71 stocks including Syngene International, LIC Housing Finance, Deepak Nitrite, Escorts, and InterGlobe Aviation.
48 stocks witnessed short-covering
A decrease in OI, along with an increase in price, mostly indicates a short-covering. Based on the OI percentage, as many as 48 stocks were on the short-covering list, including Adani Ports and Special Economic Zone, Petronet LNG, Hindustan Copper, Bajaj Finance, and LTIMindtree.
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Shree Cement, Adani Power, Adani Wilmar, Cummins India, Escorts Kubota, Dreamfolks Services, Endurance Technologies, Equitas Small Finance Bank, GATI, Gujarat Pipavav Port, Graphite India, HG Infra Engineering, Honeywell Automation India, IRCON International, ITD Cementation India, Minda Corporation, Samvardhana Motherson International, Narayana Hrudayalaya, Oberoi Realty, Piramal Enterprises, Speciality Restaurants, Symphony, Tracxn Technologies, Trent, and Windlas Biotech will be in focus ahead of its quarterly earnings on February 8.
Stocks in the news
Rate-sensitive stocks including banks, auto and real estate will be in focus on February 8 ahead of the outcome of the MPC meeting.
Hero MotoCorp: The two-wheeler major has recorded a 3.6 percent year-on-year increase in standalone profit at Rs 711 crore for the quarter ended December FY23, led by other income but impacted by weak operating performance. Revenue for the quarter at Rs 8,031 crore grew by 1.9 percent over the year-ago period, with 4 percent decline in sales volumes. At the operating level, EBITDA (earnings before interest, tax, depreciation and amortisation) fell by 3.7 percent YoY to Rs 924 crore with the margin declining 70 bps for the quarter. The company announced an interim dividend of Rs 65 per share.
Bharti Airtel: The telecom operator has reported a 26 percent sequential decline in consolidated profit at Rs 1,588 crore for the three-month period ended December FY23, impacted by licence fee provision. Revenue from operations for the quarter grew by 3.7 percent QoQ to Rs 35,804 crore, with average revenue per user climbing by Rs 3 to Rs 193 for the quarter. On the operating front, EBITDA increased by nearly 5 percent QoQ to Rs 18,453 crore with a margin expansion of 101 bps for the same period.
Adani Green Energy: The renewable energy arm of the Adani Group has registered a 110 percent year-on-year increase in consolidated profit at Rs 103 crore for the December FY23 quarter despite weak operating performance and exceptional loss, supported by other income and strong topline. Revenue for the quarter at Rs 1,973 crore increased by 41 percent YoY, while EBITDA fell 18.2 percent YoY to Rs 853 crore with the margin declining 3,127 bps to 43.23 percent for the same period.
Sobha: The south-based real estate firm has reported a 48 percent year-on-year decline in consolidated profit at Rs 31.8 crore for the quarter ended December FY23, impacted by weak operating performance. Revenue surged 40 percent YoY to Rs 868.2 crore for the quarter, with a highest-ever quarterly sales volume of 1.48 million square feet, up 12 percent YoY and best average price realisation of Rs 9,653 per square feet, up 22 percent YoY. However, EBITDA fell 41 percent YoY to Rs 88.8 crore for the quarter with a margin of 1,393 bps YoY to 10.22 percent in the same period.
PC Jeweller: Consortium of four banks - IDBI Bank, Indian Bank, Bank of India and Karur Vysya Bank - has issued their loan recall notices to the company. The legal proceedings between State Bank of lndia (lead bank) and the company are continuing, and the next date of hearing will be February 28, 2023. The company's showrooms (barring three - Preet Vihar, Pitampura and Kingsway Camp - in Delhi) are operational.
Aurobindo Pharma: Step-down subsidiary Aurolife Pharma has received approval from US Food and Drug Administration to manufacture and market the Diclofenac sodium topical solution. Diclofenac sodium topical solution is used in the treatment of osteoarthritis of the knees. The product is expected to be launched in Q1FY24, and has an estimated market size of around $487 million for 12 months ending December 2022, according to IQVIA.
Thermax: The energy and environment solutions provider has registered 59 percent year-on-year growth in profit at Rs 126.2 crore for the quarter ended December FY23, driven by good performance in all three segments (energy, environment and chemical) and last year's margins were affected by higher commodity and freight costs, which have now stabilised. Revenue climbed 27 percent YoY to Rs 2,049 crore for the quarter, while EBITDA at Rs 161 crore for the quarter grew by 42.4 percent with a margin expansion of 86 bps compared to the year-ago period. As on December 2022, Thermax Group had an order balance of Rs 9,859 crore, up 33 percent YoY, but order booking for the quarter was 10 percent lower at Rs 2,204 crore.
Fund Flow
Foreign institutional investors (FII) sold shares worth Rs 2,559.96 crore, while domestic institutional investors (DII) purchased shares worth Rs 639.82 crore on February 7, as per provisional data available on the NSE.
Stocks under F&O ban on NSE
The National Stock Exchange has added Ambuja Cements to its F&O ban list for February 8 but removed Adani Ports from the same list. Securities thus banned under the F&O segment include companies where derivative contracts have crossed 95 percent of the market-wide position limit.
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