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'Volatility in Indian market could rise as Budget day arrives'

For Jan expiry, options data suggests a range of 12,200 to 12,500 on the upside while on the downside 12,000 to 11,800 levels.

December 31, 2019 / 12:33 PM IST
 
 
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India VIX indicator closed almost near its 2-Year low of 11 percent clearly pointing towards a rangebound market movement. However, amid upcoming Union Budget, increase in volatility with an upper cap of 15-16 percent can't be ruled out, Rajesh Palviya, Head -Technical & Derivative Research, Axis Securities, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpt:

After a muted week, do you think the market is on its way to hit fresh record highs?

The index has witnessed profit booking during the expiry week of December series.  The market mostly traded in a range starting from 12,100 to 12,250 throughout the week and has formed a ‘Doji’ candlestick pattern that indicates pause or consolidation in the coming days.

The index has been making higher highs, and higher lows on the weekly chart which suggests a continuation of the uptrend till any immediate supports are not broken decisively.

During the corrective action in the recent past, the Nifty has managed to hold above its previous consolidation breakout of the last 7-8 weeks which indicates the trend is likely to remain positive in the near/short term.

Close

The index has witnessed smart buying action at the beginning of January series and managed to surpass 12,200 level on a closing basis on Friday.

The derivative data suggests the highest Call Concentration and Call writing activity has been witnessed at 12,300 strikes followed by 12,500 strike price, which is likely to act as major resistance at the current juncture.

Similarly, the highest Put concentration and Put writing activity existed on 12100 followed by 12,000 strike price, which signifies 12,100 and 12,000 are likely to act as support for January 2020 series.

The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating positive bias. The chart pattern suggests that if Nifty crosses and sustains above 12,250 level it would witness buying which would lead the index towards 12,350-12,450 levels.

However, if the index breaks below 12,150 level then it would witness profit booking which would take it towards 12,100-12,000 levels.

Weekly strength indicators are in positive territory and quoting above their reference line which supports bullish sentiment ahead in the near term.

The Nifty50 is expected to trade in a range of 12,100-12,400 levels in the forthcoming week. We advise investors to buy stocks if Nifty corrects in the near-to-short term to 12,100-12,000 which is a strong support zone.

What does the rollover data suggest for the January series? Which stocks and sectors saw strong rollovers?

The Nifty December rollover stands at 70.44 percent on Thursday compared to 79.64 percent on the same day of the previous expiry with a decrease in the number of contracts by 7,327 from 1,13,058 of Nov expiry to 1,05,731 in Dec expiry indicating weak rollover as traders have unwounded their positions & booked profits amid recent rally.

The total OI after narrowing down by 2.43 mn shares now stands at 12.61 Million shares compared to 14.70 million shares of the previous expiry.

India VIX indicator of expected market volatility has closed almost near its 2-Year low of 11 percent clearly pointing towards a range-bound market movement, however, amid upcoming important event of Union Budget increase in volatility with an upper cap of 15 percent to 16 percent can't be ruled out.

For Jan expiry options data suggest a range of 12,200 to 12,500 on the upside while on the downside 12,000 to 11,800 levels.

The market-wide rollover has been slightly above its 3-months & 6-month average which indicates that market participants are betting more on stock specific movement rather than Nifty.

In December expiry Textile & Media sectors witnessed increased rollover, while autos, capital goods, FMCG, and pharma were almost inline or marginally higher as compared to the previous expiry.

Comparing with three-month average Telecom, Textile & IT has witnessed increased in rollover indicating positions mostly being intact with some amount of unwinding.

In terms of specific stocks, strong Rollover above three-month average was seen in Manapurm, MindTree, Muthoot Finance, and Asian Paint while one negative bias was witnessed in Indiabulls Housing Finance, LIC Housing Finance, RBL Bank, Sun Pharma, and YES Bank.

Any 3 stocks which you think are still good buy on dips stocks for 3-4 weeks?

Here is a list of top three stocks which we think are still good buy on dips stocks:

L&T Finance Holding: Buy| LTP: Rs 118| Buying Range: Rs 119-117| Target: Rs 132| Stop Loss: Rs 113| Upside 11%

The stock has witnessed a resumption of the uptrend on the daily chart. For the past four weeks, the stock is sustaining above its 200-Days SMA (112) which remains a positive sign. The daily and weekly indicators are in supportive mode.

MindTree: Buy| LTP: Rs 787| Buying Range: Rs 790-780| Target: Rs 830| Stop Loss: Rs 765| Upside 5%

Currently, the stock is sustaining above its weekly breakout zone of 760 indicating bullish sentiments. It is also sustaining above its 20, 50 100 and 200-Days SMA which supports positive bias ahead.

Manappuram Finance: Buy| LTP: Rs 176| Buying Range: Rs 176-174| Target: Rs 190| Stop Loss: Rs 169| Upside 8%

On the daily chart, the stock is sustaining above its daily breakout level of 170 indicating bullish sentiments.

The stock is sustaining above its 20, 50, 100-Days SMA which supports upside rally. Daily and weekly indicators are in positive mode indicating strength ahead.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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