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Nifty 50 February futures (13,870)
Despite major equity indices across Asia trading in the red, the Indian benchmarks opened with a significant gap-up for the day. However, soon after the session open, both the Nifty 50 and the Sensex gave up their gains and are currently trading near yesterday’s closing level. Among the Asian majors, the Nikkei 225 has lost 1.7 per cent and the Hang Seng has lost 0.6 per cent.
Nothing much can be read from the market breadth of the Nifty 50 index as the advance-decline ratio, at 26-24, is almost equally split. However, volatility has gone up i.e., the volatility index – India VIX – has shot up by over 3 per cent to 25.00.
Even as the benchmark indices are struggling, the mid- and small-cap indices do not seem to be witnessing selling pressure wherein they have gained between 0.2 per cent and 1.2 per cent. Among the sectoral indices, barring the Nifty pharma (down by 0.75 per cent) and the Nifty FMCG index (down by 0.4 per cent), all other indices have posted gains so far. The top performer is the Nifty media index, up by 1.1 per cent, followed by the Nifty auto index, up by 0.9 per cent.
Now looking at the Nifty 50 futures (February expiry), similar to the underlying spot index, it opened higher at 13,925 versus Thursday’s close of 13,844. Initially it rallied to register an intra-day high of 13,984. But as it approached the critical level of 14,000, it lost momentum and began to decline. It is currently hovering around 13,870.
Though the futures have been trending down since the beginning of the week, it seems to have found good support at 13,750, from where it bounced yesterday. So, the possibility of a recovery increases if the contract prolongs its stay above that level. Moreover, despite the Asian cues being negative, the Nifty 50 can show some resilience, especially considering the broader market behaviour.
Taking the above factors into account, traders can start considering going long in February futures of the Nifty 50 for intraday. But rather than at current levels, buy the contract with stop-loss at 13,850 if it decisively moves back above 13,925. Beyond this level, it can possibly touch 14,000. Resistance above that level lies at 14,040.
Strategy: Go long above 13,925 with stop-loss at 13,850
Supports: 13,850 and 13,800
Resistances: 13,925 and 14,000
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