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The Indian benchmark indices – the Nifty 50 (18,150) and the Sensex (61,015) – after opening flat, have seen a sharp decline in the first hour of trade. Both indices are now down by about 0.4 per cent each.
The fall is despite the major Asian indices sending out positive signals. Among them, ASX 200 (7,050), Hang Seng (20,640) and KOSPI (2,250) are up in the range of 1.5 – 2.5 per cent. Though Nikkei 225 (25,765) is down by 1.3 per cent.
The market breadth of the Nifty 50 is showing bearish bias as the advance/decline ratio stands at 13/36. Like the benchmark indices, the mid- and small-cap indices too are facing selling pressure as they are down in the range of 0.4 – 0.7 per cent.
The downward pressure is seen across sectors. Barring the Nifty Pharma (up by 0.5 per cent) and the Nifty Health care (up by 0.4 per cent), all others are in the red. The Nifty Metal and PSU banks are the top losers today, down by 1.3 per cent each.
Nifty 50 futures
The January futures of the Nifty 50 index opened slightly lower at 18,299 versus yesterday’s close of 18,317. It then faced considerable selling pressure and has now slipped to 18,210.
Note that the contract has a support at 18,200. A breach of this level can drag it to 18,100 with the subsequent support at 18,000. On the other hand, if the contract rebounds from the support at 18,200, it will face hurdles at 18,280 and 18,340.
Note that there has been a significant amount of call writing, indicating that the participants are not expecting a rally, at least for intraday.
Trading strategy
The Nifty futures, which faced sell-off in the early hour of trade, appear to stay bearish for the day. So, traders can go short on the contract at the current level of 18,210. Add more shorts if the price moves up to 18,250. Place stop-loss at 18,300.
Modify the stop-loss to 18,200 when the contract touches 18,100. Tighten it further to 18,150 when price drops below 18,050. Book profits at 18,020.
Note that the above trade recommendations are for intraday. So, exit the positions by the end of the day if either target or stop-loss levels are not hit.
Supports: 18,100 and 18,000
Resistance: 18,280 and 18,340
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