Market Snapshot
The sell-off on Wall Street and the Asian markets saw the Sensex open with a negative gap of 289 points at 12,694. The index soon dropped to a low of 12,504 - down 479 points from the previous close. Lack of buying interest saw the Sensex finally close with a loss of 453 points (3.5%) at 12,530.Nifty lost 3.4% to close at 3641.
The NSE and BSE cash volumes were slightly higher compared to the previous day at INR 86 bn and INR 43 bn respectively. The F&O volumes were also higher at INR 316 bn.
Sentiment Indicators
The Implied Volatility (IV) across Nifty strikes has slightly decreased to 34% levels. The WPCR of Nifty Options increased to 1.07 compared to the previous day while the 5 day average is 0.93.
Outlook
The markets are expected to open with a positive gap on the back of recovering global cues and expected short covering in the domestic markets. However, the pullback can be short lived as more shorts can come in with investors shorting the Nifty above the level of 3730.
FII’s have been net sellers to the tune of INR 15,000 Mn in Index futures and only INR 2,800 Mn in stock futures in the last two trading sessions. The cautious outlook observed in taking new positions in single stocks will continue as the markets wait for a clear direction. Nifty OI is at all time high with 39.9 Mn shares underlining of which nearly 8% of the fresh position got built yesterday. Nifty futures discount got expanded from 12pt to 42points yesterday indicating aggressive shorts getting built up. We expected short covering to be witnessed if market sustains above the opening gap.
Though we are bearish on the cement segment we recommend buying in some specific counters like India Cement, Grasim, and ACC on the back of short covering at current levels.
Yesterday, the Nifty managed to sustain above the 3627 despite falling a few ticks below that level intraday. As mentioned earlier the markets will continue to be sandwiched between the levels of 200 DMA and 13 DMA and a clear cut direction would emerge only after one of the averages is breached decisively. Until then the Nifty will remain to be range bound.
The range between 3623 continues to be important and immediate support for the Nifty followed by 3591. The current resistance levels for Nifty are at 3701 and 3758.
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Thanks Yash