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BL Research Bureau
Nifty 50 January Futures (14,500)
Equity market seems to be facing selling pressure as major indices in Asian are trading in the red. This is following a negative close in the US over last night. The S&P 500 index had closed with a loss of 0.4 per cent, and Dow Jones lost 0.2 per cent. In Asia, the Nikkei 225 index is down by 0.6 per cent, whereas the Hang Seng index has declined by 0.4 per cent so far.
Against this backdrop, the Indian benchmark indices i.e., the Nifty 50 and the Sensex too are currently down by about 1 per cent.
The Nifty 50 index’s market breadth is hinting at a sell-off at a broader level, i.e., the advance-decline ratio of the index stands at 5-45. Adding to the bearish bias, the volatility seems to have gone up. India VIX – the volatility index – has shot up by nearly 5 per cent to 24.15.
Like the benchmark indices, the mid-cap and small-cap indices have lost between 0.6 per cent and 1 per cent. Also, all the sectoral indices have depreciated today. The Nifty PSU bank index, down by 1.6 per cent, is the top loser followed by the Nifty pharma and media index, each down by about 1.4 per cent. The above factors indicate today market is witnessing a broad-based sell-off, and the likelihood of a recovery from here is very low.
The January futures of the Nifty 50 index, after opening with a gap-down at 14,605, initially gained to mark an intraday high of 14,623. However, it abruptly reversed the direction and started to head southwards sharply. It slipped below the support at 14,500 and made an intraday low of 14,460. It has now recovered from the day’s low and is currently testing the key level of 14,500. However, a rally beyond this level is less likely given the markets’ bearish tone across Asia.
Considering the above factors, traders can make use of rallies to create fresh intraday short positions. Stop-loss can be placed at 14,560. From the current level, the contract can fall to 14,440 and subsequently to 14,400. If the bearish momentum sustains, it can even touch 14,360.
Strategy: Sell on rallies with stop-loss at 14,560
Supports: 14,440 and 14,400
Resistances: 14,550 and 14,580
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