The Nifty continued the pullback of last week and ended above 10,300. We believe that the index is in a consolidation zone above 10000 and should eventually move towards 10600.
Volatility, which increased to almost 17 percent before the exit poll announcement cooled off to 14.9 percent in Friday’s session. The move below the crucial level of 14 percent would further comfort equity markets.
The options concentration has remained quite high at 10,000 Put strike, which finally acted as a major support. PCR-OI of the Nifty is still comforting near 1.23 and is not showing any sign of overbought marke
Previously, this ratio had gone towards 1.60 also when Put writers were quite aggressive in the market. Hence, there is still room for some more price appreciation in this series.
Short traders are still holding short positions in anticipation of any reversal on Monday. If the election outcome on Monday is on expected lines as per exit polls, we can witness another leg of short covering.
The rupee appreciation trend is really supporting the market. The surge in crude also did not bring in any weakness in the currency. Rather, it has remained in appreciation mode since Moody’s upgraded India’s rating.
Underperforming Nifty heavyweights from the IT, pharma and FMCG space have been quite supportive to the market in case of any profit booking.
Twice in the current series, the Nifty Bank index witnessed a decent support near 25000 and witnessed a sharp reversal upside. It closed below 25000 in the first week of December.
However, on the back of aggressive short covering, it ended near the highest point for the week ended December 15.
The same replica was seen in the second week as well where the index witnessed short covering and ended near the highest point of the week.
HDFC Bank along with midcap stocks dominated the week whereas absence of selling in PSU banks also provided more steam to the index, helping it to surpass the crucial resistance of 25500 that was last seen on December 1.
FII selling abates in India:
For emerging markets (EMs), the week saw a price recovery of over 2 percent, which was still less than 50 percent decline seen in the week ended December 8.
A recovery in Taiwan’s market (heavyweight) was a key catalyst for this up move but China’s market and other key EMs continued to linger.
Fund flow wise, selling in EMs continued for most EMs (albeit at a tapered pace) with South Korea and Taiwan seeing outflow of over USD 300 million each. In the Indian market, there was inflow over USD 40 million
In the F&O segment, FIIs tapered their bearish bets. There was a short closure of close to USD 50 million along with option selling (volatility selling) of over USD 430 million.
Global risk sentiment seemed to point towards a continued risk-off mode. The sell-off in the EM space has not abated completely.
Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
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