Nifty to show strength above 16500, avoid aggressive bets in Bank Nifty; add blue chips in staggered manner

By Sameet Chavan

The Indian equity market tumbled on weekly F&O expiry day, tracking the global bourses, wherein the benchmark index NSE Nifty 50 plunged below the psychological mark of 16000 from the start of the session. The weakened macro factors have dampened the overall sentiments as we witness the relentless selling pressure in the equities. The index concluded Thursday’s session in red with another cut of over 2.22 per cent to settle at the 15808 level on the weekly expiry.

The previous swing low of 15670 is not far away, and it would be a matter of time to retest the same. Though the market subsidized in the oversold region for quite some time, a further correction could be disruptive in the coming period. For the time being, any breach below the 15670 odd zone would bring the possibility for the index to shed another 200-300 odd points in the near period. On the higher end, the 16000-16050 zone is expected to act as immediate resistance, while the strength only could be seen above the 16500-16650 zone.

In the F&O space, we saw the addition of a few shorts in Nifty and long unwinding in the banking index. Stronger hands continue to curb liquidity in the Indian equity market and added bearish bets in index and stock futures segment. In the index options front, we saw build-up in 15800-16000 put strikes. On the other hand, 15800-16200 call strikes added fresh build-up in the coming weekly series.

Overall global weakness has poured in complete water on yesterday’s promise the banking stocks had left us with. But not to surprise, this is the perfect characteristic of a downtrend. Both Nifty and Nifty Bank have now approached their critical levels, so it would be interesting to see whether the oversold market decides to rebound first or continue to be with the recent trend. As far as levels are concerned, 34000 – 34500 has now become a sturdy wall; whereas a sustainable move below 33200 – 33000 would lead to some panic kind of situation in this space. One should avoid trading aggressively on both sides; because we tend to see a lot of whipsaws in such situations.

The ongoing rampage is due to the global macro factors, hence any improvement from the overseas market should act as a catalyst for the bulls. Technically, the bearish formation would only get discarded above the mentioned resistance zone. Until that time, one should remain cautious and keep close track of global and domestic developments. Also, traders are advised to avoid aggressive bets and look for stock-specific action, while investors could now seize this opportunity by initiating accumulation in good blue-chip companies but in a staggered manner.

(Sameet Chavan is a Chief Analyst-Technical and Derivatives at Angel One. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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