Nifty 50 January Futures (13,832)

Following negative cues from the Asian market, the Indian benchmark indices opened with a significant gap-down today. But since the open, the indices have been moving in a largely rectangular pattern and, currently, the Nifty 50 and the Sensex are down by nearly 1 per cent each. Among the major indices in Asia, the Nikkei 225 is down by 1.6 per cent and the Hang Seng is by about 2.3 per cent.

The negative bias is affirmed by the market breadth of the Nifty 50 index, as the advance-decline ratio stands at 17-33. Yet, the volatility has dropped as indicated by the volatility index - India VIX - which is down by 1.3 per cent.

Similar to the benchmark indices, all the mid-cap and small-cap indices are in the red. Among the sectoral indices, barring the Nifty media (up by 0.9 per cent) and the Nifty auto (up by 0.5 per cent), all the other sectors have lost today. The Nifty PSU bank index is the top loser, down by 2.6 per cent, followed by the Nifty IT index, down by 1.7 per cent.

The futures contract (January expiry) of the Nifty 50 index opened with a significant gap-down at 13,849 versus yesterday’s close of 13,982. It then rallied to mark an intra-day high of 13,896, before moderating to the current level of 13,830. The intra-day price action since morning shows that the contract is now held between 13,800 and 13,900, and since today is the monthly expiry day, a close within these levels is highly likely. But movement between these levels can be volatile and so traders should tread with caution.

A breach of 13,800 can drag the contract to 13,765 and 13,700, whereas a breakout of 13,900 can lift it to 13,950 and 14,000. Nevertheless, the contract should breach either 13,800 or 13,900 to provide any clues.

Strategy: Tread with caution while contract trades sideways

Supports: 13,800 and 13,765

Resistances: 13,900 and 13,950

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