Nifty call: Tread with caution while the index is volatile

Nifty 50 December Futures (12,070)

Despite positive cues from the Asian markets, the Indian benchmarks had a subdued opening. The US indices, too, closed yesterday on a positive note.

The December futures contract of the Nifty 50 index opened the session at 12,082 versus the previous close of 12,089. But after registering an intra-day high of 12,116, the contract fell sharply on the back of the interest rate announcement by the Reserve Bank of India. Also, there is a considerable resistance at 12,110.

The market breadth of the Nifty 50 index hints at a bearish bias, as the advances-declines ratio is at 16-34. The volatility index, India VIX, is up by a significant 10 per cent at 14.65 levels. High volatility is associated with this bearish trend. Thus, both the market breadth and volatility index indicate a negative bias.

Among the sectoral indices, the Nifty media index is the top performer, gaining 2.1 per cent. The Nifty PSU bank index is the top loser, down by 1 per cent in today’ session.

The December futures contract of Nifty, after a sluggish open, declined sharply from the resistance of 12,110. The contract might witness higher volatility on the back of the RBI announcement, resulting in more price swings. Currently trading at 12,070, the contract treads between two key levels at 12,055 and 12,110. The next leg of the trend could be established only if either of these levels are breached. Above 12,110, the resistance is at 12,160, and below 12,055, the support is at 12,000.

Strategy: Tread with caution as the index witnesses more volatility

Supports: 12,055 and 12,000

Resistances: 12,110 and 12,160

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