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Nifty 50 April futures (14,280)
Even though the Asian markets have been flat to positive, the Indian benchmark indices opened the day with a significant gap down. After opening down, the indices extended the decline in the first hour and then recouped some of their losses, with the Nifty 50 and the Sensex now trading lower by about 2.3 per cent compared to Friday’s close. At their lowest point today, both were down by 2.9 per cent each. Among the major Asian indices, the Nikkei 225 and the ASX 200 closed flat, whereas the Hang Seng and the Shanghai composite are up by 0.4 and 1.7 per cent each.
The market breadth of the Nifty 50 index shows a clear bearish bias, as the advance-decline ratio stands at 6-44. Also, there is an increase in volatility as indicated by India VIX, the volatility index. It has gone up by a little over 10 per cent to 22.60. Like the benchmark indices, the mid- and small-cap indices are in the red as well, each losing between 2 and 3.2 per cent. Among the sectoral indices, barring the Nifty pharma (up by nearly 0.2 per cent), all other indices are down. The Nifty PSU bank index is the top loser, down by 5.7 per cent, followed by the Nifty bank index, down by 4.2 per cent.
Futures: Following the gap-down open of the underlying Nifty 50 index, the futures contract began the session significantly lower at 14,399 versus the previous close of 14,645. It then fell to register an intra-day low of 14,213, before recovering some of its lost ground. But the contract looks bearish, and the negative intra-day outlook will not be reversed unless the resistance at 14,330 is decisively breached.
Hence, traders can be bearish, initiate fresh short positions with stop-loss at 14,350. Currently trading at 14,280 levels, the futures are likely to retest today’s low of 14,213, below which there is an important support at 14,200. A break below 14,200 can intensify the sell-off, wherein the contract could drop to 14,150.
From the current levels, the price range of 14,330 and 14,350 can act as a resistance band. Subsequent resistance is at 14,400.
Strategy: Short the contract with stop-loss at 14,350
Supports: 14,200 and 14,150
Resistances: 14,300 and 14,350
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