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Nifty 50 September Futures (11,410)
The effects of a crash in the US market yesterday spilled over to the Asian markets, too, as all the major indices opened with a deep discount. However, post the huge gap-down open, the indices did not move down further, and they are largely trading flat.
The Nikkei 225 has ended today’s session with a loss of a little over 1 per cent whereas the Hang Seng and the Shanghai composite indices are trading lower by 1.5 per cent and 1 per cent, respectively.
Coming to the domestic market, the benchmark equity indices opened with a considerable gap-down, taking cues from their Asian peers. The Nifty 50 and the Sensex are now trading lower by 1.1 per cent each.
The market breadth of the Nifty 50 shows that 40 out of the 50 stocks are down today. Like the benchmark indices, all the mid-cap and the small-cap indices are in a sea of red. Among the sectoral indices, except the Nifty media (up by 1.3 per cent) and the Nifty auto (up by 0.8 per cent), all other indices are trading with a loss.
The top loser is the Nifty PSU bank index, down by 1.9 per cent, and this has dragged the Nifty bank index lower (down by 1.7 per cent). Since the market is bearish at broader level, the fear gauge i.e. the volatility index – India VIX – has shot up by nearly 6 per cent to 21.63.
The September futures of the Nifty 50 index began the session significantly lower at 11,383 versus Thursday’s close of 11,542. But the contract reversed quickly after registering an intraday low of 11,355. What followed is a sideways movement where the price has been oscillating between 11,390 and 11,425.
A positive sign is that after a sharp gap-down open, rather than moving southwards, the contract has recovered. The recovery can continue if the resistance at 11,425 is breached. On the other hand, if it declines below 11,390, the contract can be expected to fall sharply. Given the scenario, traders can stay on the sidelines until either of 11,390 or 11,425 is broken.
Above 11,425, it can appreciate to 11,460 and 11,520 whereas below 11,390 it can fall to 11,350 and 11,300.
Strategy: Tread with caution as the contract is moving sideways
Supports: 11,425 and 11,460
Resistances: 11,390 and 11,350
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