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The Indian benchmark indices - Sensex and Nifty - which posted a loss in the last three weeks, began the week little changed from Friday’s closing price. However, soon after the session opened, both Sensex and Nifty fell. The Nifty 50 at 17,000 and the Sensex at 57,095 are down by 0.5 and 0.6 per cent respectively, for the day so far.
The market breadth of the Nifty 50 shows a bearish bias as the advances /declines ratio stands at 20/30. But interestingly, the mid-cap indices are largely flat, whereas the small-cap indices seem to have garnered some interest from investors, as they are in the green. For instance, the Midcap 50 flat and the Smallcap 50 are up by one-third of a per cent currently.
That said, most of the sectors are down. Among them, Nifty Auto is the biggest loser, down by 0.9 per cent. On the other hand, Nifty Pharma is the top gainer, up by 1.8 per cent.
Futures: Although the underlying Nifty 50 began the week flat, the October futures of the index opened with a considerable gap-down. It began at 17,021 today versus Friday’s close of 17,103. The contract then declined to mark an intraday low of 16,931, before regaining the 17,000 level, to trade at 17,050 in the mid-morning session.
Note that 17,070 and 17,150 are the key hurdles the contract should breach in order to turn intra-day sentiment positive. Until then, the bias will be bearish, especially considering the underlying index has been on a decline for the past three weeks. So, as it stands, it is a bears' game to lose.
Considering the above, we expectNifty futures to resume the fall, either from the current level of 17,050 or after seeing a corrective rally to 17,150. Therefore, traders can plan their entries accordingly. Our suggestion is given below.
Strategy: Go short at the current level of 17,050 and add shorts on a rally to 17,150. Place stop-loss at 17,215 at first and bring it down to 17,150 when Nifty futures slip below 16,940. Tighten the stop-loss further to 17,015 when the contract declines below 16,900. Book profits at 16,830.
Supports: 17,000 and 16,940
Resistance: 17,070 and 17,150
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