Edelweiss - Daily Market Outlook 12th March, 07

Market Snapshot

The markets were again gripped in volatility with wild swings in and out of positive zone. The Sensex surged to an intra-day high of 13,145, however with selling pressure at higher levels especially in the cement sector the index finally lost 164 points to settle at 12,885. The Nifty was down 42 points to 3,718.


The NSE & BSE cash volumes were significantly higher compared to the previous day at INR 96 bn and INR 43 bn. The F&O volumes were a touch higher at INR 347 bn.


Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has slightly decreased to 29-30% levels. The WPCR of Nifty Options decreased to 0.85 compared to the previous day while the 5 day average is 0.93.


Outlook

We expect the market to open with a positive gap taking cues from encouraging US payroll data and Asian markets. The IIP numbers can set the tone of the market as we see some buildup in fresh positions by investors who where waiting on the fence for the volatility to settle down. The Nifty will be range bound in absence of any major news trigger.


After being net buyers for three consecutive days in Index futures, FII turned net sellers to the tune of INR 2.4 bn on Friday, as the bears overtook the bulls. The Nifty futures discount is expected to reduce from its current level of 18 points as the bearish tone is expected to fade away.


We continue to be bullish on Telecom, IT and Pharma sectors. Heavyweights Bharti, RCOM, Infosys are expected to drive the Nifty.


Currently the market is sandwiched between the 200 SMA (as a strong support) and 13 DMA as an intermediate resistance. We believe that the market would consolidate between 3750 and 3626 for sometime and eventually move northward. In the immediate term, the Nifty has a support at 3684 and 3644. The resistance for Nifty is at 3752 and 3778.

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