Market Snapshot
On Tuesday the Sensex opened with a positive gap of 102 points at 12,747. The index pared gains in early noon deals, and dropped to a low of 12,675. A fresh round of buying, thereafter, saw the index rally to a high of 12,799 - up 154 points from its previous close. The index, however, pared gains towards the close and finally settled with a gain of 61 points at 12,706. Nifty settled with a gain of 19 points to close at 3697.
The NSE and BSE cash volumes were significantly higher compared to the previous day at INR 60 bn and INR 29 bn respectively. The F&O volumes were also higher at INR 275 bn.
Sentiment Indicators
The Implied Volatility (IV) across Nifty strikes has slightly decreased to 28-29% levels. The WPCR of Nifty Options decreased to 0.96 compared to the previous day while the 5 day average is 1.04.
Outlook
The markets are expected to open slightly positive gaining strength from positive global cues and promising US housing starts data. We expect that still lot of short positions is in the system, which will accentuate the rally further, if NIFTY stabilizes at these levels. A clear bullish signal however requires a close above 3721.
The cement stocks rallied yesterday after positive news concerning tax breaks came in. We expect the cement counters to gain further as more short covering will come in at current levels. Metals stocks can see some buying lead by Hindalco and, Sterlite as metals prices were up at LME. The strengthening of rupee might raise concerns for IT stocks however we continue our long term view on Infosys, Satyam to be strong.
As we mentioned yesterday the 13 DMA at 3721 acted as a major resistance to the Nifty. We maintain that clear resistance would emerge only if the Nifty closes above that level. As long as the Nifty sustains above 3675 the bulls have a chance to stage a pullback. The immediate support for the Nifty is at 3675 and 3648. Nifty faces an resistance at levels of 3725 and 3750.
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