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Nifty likely to Retest December Lows of 4530

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Nifty likely to Retest December Lows of 4530

Once again there is a higher possibility for the Indian indices to test December lows, as small relief rally seems to be over with Nifty failed efforts to show the resilience above 4950 levels. The support zone of 4770-4830 is likely to be tested once again in the 1st half of the June series and closing below 4770 will confirm more bearishness and a possibility of retesting December lows.

On the expiry day, selling of INR 1251 crores in index futures and buying of more than INR 1700 crores in options in last few days adds warning signals before the showdown. The rollovers also shows lack of confidence as Nifty rollovers were below 60% in May expiry for the 1st time in over a year. The month of May exactly performed as per one of the famous saying of stock market i.e. SELL IN MAY AND GO AWAY” as Nifty lost more than 6% to close just marginally above 4900 levels against the previous month close of 5248.

The month of May was clearly the one to forget for not only the Indian markets but also for Indian economy, as Rupee ended the month at new life time low above 56 levels against USD. A small pull back to 54.50 cannot be ruled out, in which timeframe Nifty futures may see a small pull back rally up to 5085 levels, where Nifty will face very strong resistance, but rupee looks far away from the bottoming out and looks set to achieve another long term target of 58 levels in next few months against USD.

Nifty O.I. stands at 0.91. For the June series, highest open interest buildup is seen at 4500 Put and 5000 call, adding more importance to 4770 levels on closing basis for Nifty, below which selling pressure can increase to reach the eventual target of December lows.

Sectors likely to underperform in the next 2 months would be automobile and infrastructure sector. Stock specifically significant correction can be seen in stocks like TATA MOTORS, BAJAJ AUTO, MARUTI AND HEROMOTORS in the month of June.

Indian markets may open with a gap-up

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 Indian markets may open with a gap-up on Monday

The August expiry closed almost 12% lower which is an exceptional case in the last few years. If we look back, since 2008, it is for the first time the markets have closed with such a heavy loss in a single expiry. In the last week it was the Metal index & the BSE Banking index that lost the most by more than 4 per cent.

At the end of the week we saw narrow gains for most global indices. Investors were cautious before Bernanke’s speech to see if he will set out a plan that kick starts the stumbling US economy. Well, after the speech US markets recovered almost 4 % from their day’s low.

Based on charts, long-term trend is already spoiled as we have been indicating since first week of August. As we watch very closely on charts 4,750 turns out to be a long-term support for Nifty and it is utmost necessary that we get relief rally from the current levels, otherwise the sentiment could get more nervous.

Looking at the closing of US markets after the Bernanke’s speech there is good possibility that markets could open with some gap-up on Monday. In this bounce if Nifty manages to hold 4,875 next week we can expect a relief rally to further build-up, otherwise the down-trend will continue.

Next major support that appears as per the chart formations is 4,650 on Nifty and 15,650 on the Sensex. The volatility is likely to increase in next week as we have two holidays during the week and hence there could be a series of gap up or gap down openings.

Written by Rakesh Gandhi

August 30, 2011 at 2:34 pm

Nifty could head towards level of 4,800 or lower

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Nifty could head towards level of 4,800 or lower after US credit ratings downgrade

Indian market has been trading with a negative bias since past one week amid the uncertain environment in global markets. On Friday Indian market broke below the critical levels of 5,250 on Nifty & 17,500 on Sensex with high volumes and with negative advance decline ratio of 1:5 which is a big cause of concern. It added further pain to many of the stocks which have broken below their 2009 lows.
Like one gets excited about upside at higher levels it is time to get excited for the downside. Looking at the long term charts, markets have been trading in a broad range for past 12 months and in this period they have made a formation of descending triangle.
This bearish formation has completed on Nifty closing below 5250 on weekly basis. This formation has potential to take Nifty to the level of 4800 or even lower. Many of the global markets have also broken their important support levels that were not seen in last many months.
In coming weeks market could get very volatile before it finds a significant bottom and there will be bouts of up & down days but, a change of trend situation based in on technical study will take some time.
Any bounce will find difficult for market to stay above 5450/18050 levels as that has become pivot level looking at the formations and moving averages of last two years. Due to the gloom and doom situation around the globe, everything could become negative so it is better to not to hurry and wait for markets to get steady at lower level before commitment in long position.
Our markets have fallen on the global concerns and reasons for change of sentiment could also be something global.

Written by Rakesh Gandhi

August 8, 2011 at 12:35 pm

Selling to accelerate below the key level of 5400

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The Nifty Futures have fallen by almost 8% to 5550 from 5900 in last 16 sessions and currently hold 13 points premium over spot as per closing on 13th May, 2011.

In the current series, 5400 put has seen a maximum open interest of almost 8 million shares, indicating 5400 to act as immediate support, closing below 5400 can extend the current fall with more acceleration. Whereas, among call options, 5800 call holds maximum open interest of 7.5 million shares, indicating the 5750-5800 zone to act as very strong resistance , going forward.

The PCR for Nifty futures stands at 0.86 levels, hanging near around oversold zone. Traders with short positions need to be cautious, if the Nifty breaks the 5630 level on the upside, since short-covering is expected above this level. This will lead to an extension of the up move towards 5700-5750 levels.

Currently, implied volatility (IV) of Nifty put options appears higher in comparison with call options , which is the result of heavy buying in puts in the past few weeks. The NSE VIX stands at 20.63 giving no signal of stability in the market.

This concludes that, selling pressure will increase if Nifty is not able to hold 5400 on closing basis, and it will invite fresh short positions in the market for the retesting of 5250-5200 zone.

Written by Kunal Bothra

May 16, 2011 at 1:18 pm

Posted in NIFTY

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