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BL Research Bureau
Despite the major Asian indices trading in the red, the Indian benchmark indices are largely unchanged compared to Friday’s closing level. The Nifty 50 is at 16,530 and the Sensex is around 55,500. Notably, both the indices gained marginally before giving away the gains. Among the Asian indices, the Nikkei 225 has lost 1.6 per cent whereas the Hang Seng is down by 1.1 per cent.
Although the Nifty 50 is flat, the market breadth is showing a negative bias i.e., the advance-decline ratio stands at 20-30. The mid- and small-cap indices too have lost between 0.25 and 0.8 per cent and the volatility has gone up as indicated by India VIX – the volatility index. It has gone up by nearly 4 per cent to 13.50. Among the sectoral indices, the Nifty Oil and Gas is the top gainer, up by 1.1 per cent followed by the Nifty Metal, up by 0.5 per cent. On the other hand, the Nifty Pharma and Media are the top losers, down by 1 and 0.7 per cent, respectively.
Futures: The August futures contract of the Nifty 50 opened the session with a minor gap-down i.e., at 16,499 versus Friday’s close of 16,517. However, after marking an intraday low of 16,461, the contract started to move upwards and is now hovering around 16,540, around 0.15 per cent higher compared to previous close. The price action since morning shows that the contract exhibits bullish bias but 16,560 is acting as a roadblock. Also, other metrics like the market breadth and the volatility shows that the path is not easy for the bulls. Thus, traders should wait for a bullish confirmation before initiating fresh longs.
Considering the above factors, traders can buy the contract if it decisively breaches the resistance at 16,560. Stop-loss can be placed at 16,500. A breakout of 16,560 can lift the contract to 16,600 and then possibly to 16,700. But if the contract falls below 16,500, the intraday trend could turn bearish. This can lead to the futures falling to 16,460, the nearest support. Subsequent support is at 16,400.
Strategy: Go long above 16,560; stop-loss at 16,500
Supports: 16,500 and 16,460
Resistances: 16,560 and 16,600
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