Market Snapshot
The Sensex opened with a positive gap of 55 points at 12,485. Lackluster movement in early trades saw the index slip a wee bit to 12,427, before bouncing back to higher levels. Fresh buying in select stocks like BHEL, ONGC and Reliance Communications saw the index surge to a high of 12,655. The index finally settled with a gain of 215 points at 12,645.Nifty ended with a gain of 70 points to close at 3679.
The NSE and BSE cash volumes were significantly lower compared to the previous day at INR 49 bn and INR 26 bn respectively. The F&O volumes were also lower at INR 244 bn.
Sentiment Indicators
The Implied Volatility (IV) across Nifty strikes has slightly decreased to 30-33% levels. The WPCR of Nifty Options decreased to 1.13 compared to the previous day while the 5 day average is 1.02.
Outlook
The markets are expected to stabilize after yesterday’s rise, and we expect that short covering will continue to accentuate the rally further. NIFTY made a higher bottom by not testing the earlier low of 3554, and if is able to cross the intermediate top of 3750, it will gain further strength. We recommend holding on to long positions, as we believe that NIFTY will make an attempt to test the high of 3750.
Cement sector should see some respite after the news that government would allow tax breaks to new capacities announced on or after April 1st 2007. Though the news would not have a significant impact on the earnings potential of the companies, but we expect that it would turn the sentiments slightly positive, which can fuel up short covering in the oversold counters. IT sector is expected to remain an out performer and position in the sector against Nifty could be taken.
On Nifty, 200 DMA (3585) once again acted as a very strong support and markets staged a recovery from those levels. In shorter term, the Nifty has a support at 3660 followed by 3646, while the resistance is at 3721 (13 DMA) followed by 3750 (intermediate top). For a sustainable rally, it is imperative for the NIFTY to breach the above resistance levels of 13DMA.
Download here