Edelweiss - Daily Market Outlook 23rd Feb, 07

Market Snapshot

The Sensex opened marginally higher and rallied to a high of 14,287 in early deals. However, sustained selling pressure at higher levels saw the index pare gains. A heavy bout of selling in late noon deals saw the index plunge to a low of 13,978. The Sensex finally settled with a loss of 167 points at 14,021 while Nifty lost 56 points to 4,040.

The NSE & BSE cash volumes were significantly better compared to the previous day at INR 117 bn and INR 42 bn. The F&O volumes were significantly higher compared to the previous day at INR 552 bn.

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has remained unchanged at 26-29% levels. The WPCR of Nifty Options decreased to 1.00 compared to the previous day while the 5 day average is 1.09. The February futures are now trading at 27 points premium. The Nifty Futures OI has decreased by 22%.

Outlook

We expect the market to open with a positive gap for VWAP adjustment and to stay subdued for the rest of the session in the absence of any major triggers. The last half an hour of trading session witnessed Nifty plummeting by about 60 points on the back of unwinding of arbitrage position and VWAP basket selling. Base metals were up on the LME which might lead to some buying interest across metal stocks.

The market wide rollovers were at 83%, which is in-line with previous expiries. Nifty rollovers were very healthy with 77% positions getting rolled into the March contract. However the average market wide roll cost expanded to 85 bps from 62 bps on Wednesday. IT, Pharma and Textile stocks have seen strong rollover while FMCG and Auto were on the weaker side. Buying opportunities can be seen in TVS Motors, GMR, LITL, Siemens and Amtek Auto

After breaking the support level of 4080 the Nifty tumbled down steeply as predicted by the technical charts. The next support for Nifty is at 4009 which is also a 60 DMA and trend line support level followed by next support level of 3965. Resistance for Nifty is at 4091 and 4111.

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Thanks Yash