Nifty call: Buy the contract with stop-loss at 16,200

Nifty 50 August futures (16,250)

The major equity indices in Asia are trading with a positive bias and the Indian benchmarks, the Nifty 50 and the Sensex, opened the session with a considerable gap-up, lifted by the firm trend in Asia. However, both the indices gradually gave up the gains and are currently at 16,240 and 54,300, respectively i.e., near Friday’s close.

The market breadth is slightly positive as the advances-declines ratio now stands at 27-23. But the mid- and small-cap indices are in the red – Midcap 50 is down 1 per cent and the Smallcap 50 is down by 1.2 per cent. Among the sectoral indices, Nifty Media is the top gainer, up by 0.7 per cent, whereas Nifty Metal is the top loser, down by 1.1 per cent.

Futures: Since the underlying Nifty 50 index opened with a gap-up, the futures (August expiry) opened positive i.e. at 16,274 as against Friday’s close of 16,251. While it initially rallied and made an intra-day high of 16,325, there was selling pressure as it rose. Eventually, the contract moved downwards and is currently hovering at 16,250. There is solid support at 16,225 and it is likely to help the contract bounce from here. The risk-reward ratio is favourable for the bulls, and they can be expected to give a push upwards.

Hence, traders can risk taking fresh longs at current levels, with stop-loss at 16,200. Maintain a strict stop-loss at 16,200, because a breach of this level can intensify the sell-off. On the upside, the contract might rally to 16,300 and then to 16,325. A break-out of this can lift it to 16,350. On the other hand, a breach of 16,200 can result in the contract testing support at 16,100.

Strategy: Buy the contract with stop-loss at 16,200

Supports: 16,225 and 16,200

Resistances: 16,300 and 16,325

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