Nifty 50 September Futures (11,535)

The benchmark indices of India, i.e. the Nifty 50 and the Sensex, are trading flat since morning. While the Nifty 50 is trading lower by 0.1 per cent, the Sensex is down by 0.2 per cent.

Among the major Asian equity indices, the Nikkei 225 ended the day with a gain of 0.9 per cent. But that was largely due to the gap-up open and the index was trading sideways throughout the session. The Hang Seng and the Shanghai composite indices are down by half a per cent each. Thus, the cues from Asia look unclear.

The advance-decline ratio, i.e. the market breadth of the Nifty 50 index, stands at 29-21. So, at a broader level, bulls seem to have an edge. Interestingly, even though the benchmark indices are flat, the mid-cap and the small-cap indices have advanced between 0.6 per cent and 1.2 per cent.

The Nifty media index, up by 1.6 per cent, is the best performer among the sectoral indices. This is followed by the Nifty IT index, up by 1.3 per cent. At the other end, the Nifty bank index is the top loser, down by 0.9 per cent. This is largely because the Nifty private bank index has lost about 1 per cent today. Since the market is flat, the volatility has dropped. India VIX – the volatility index – is down by 2.5 per cent to 20.6 level.

Even as the underlying Nifty 50 index is largely flat, the September futures contract of the index has come down slightly and is now trading lower by 0.25 per cent at 11,535. Thus, the futures premium has dropped, an indication that the bulls might be giving up. But the contract has a considerable support at 11,520 and until the price remains above that level, the chances of a fall are low.

Similarly, on the upside, the resistance at 11,575 is blocking the contract from rallying. Therefore it cannot be expected to trend in either ways until unless either 11,520 or 11,575 is breached. So, traders can wait for the price to move out of the range. Notably, the direction of the break can be taken as the confirmation of the next leg of trend and positions can be initiated accordingly.

A breakout of 11,575 can take the contract to 11,615 and possibly to 11,680. But if 11,520 is breached, it might decline to 11,460 and 11,430.

Strategy: Wait for the contract to move out of the range

Supports: 11,520 and 11,460

Resistances: 11,575 and 11,615

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