The Nifty 50 (19,315) and Sensex (65,000) have begun the week with a gap-down open and are now trading lower by 0.5 per cent each today. This follows bearish cues from the Asian market. The major equity indices such as the Nikkei 225 (32,040), ASX 200 (7,275), Hang Seng (18,560) and KOSPI (2,570) are down between 0.8 and 2.4 per cent.
Supporting the bearish bias in the domestic market, the market breadth is weak. For instance, the advances/declines ratio of the Nifty 50 stands at 9/41. Moreover, all the mid- and small-cap indices are in the red. Barring Nifty Media (up 0.3 per cent), all the other sectors are down so far today. Nifty Metal and Nifty Realty, down by 2.6 and 1.7 per cent, respectively, are the top losers. So, there is a broad-based sell-off happening.
Nifty 50 futures
The August futures contract of the Nifty 50 opened today’s session lower at 19,450 versus the previous week’s close of 19,504. The contract declined further and is now trading around 19,360.
Although the trend is bearish and the likelihood of a further fall is high, the underlying Nifty 50 has a support at 19,260. Equivalently, Nifty futures has a support at 19,320, against which the contract has now moved up to 19,360.
However, a bullish trend reversal is unlikely to occur. Nifty futures could resume the downtrend either from the current level of 19,360, or after moving a bit more up to 19,400. A decline after this corrective up-move can drag the contract to 19,250.
Considering the above factors, we recommend selling Nifty futures at the current level of 19,360, and adding more shorts in case the price inches up to 19,400. Place the initial stop-loss at 19,450.
If the contract falls below 19,300, tighten the stop-loss to 19,350. Book profits at 19,250.
Supports: 19,320 and 19,250
Resistance: 19,400 and 19,450