Any Break Be­low 50 DEMA could See Nifty Slide to 9,500

A fall could drive 9,800 put sell­ers to cover the shorts 9,500 strike has the sec­ond high­est out­stand­ing po­si­tions af­ter 9,800

The Economic Times - - Companies: Pursuit Of Profit -

Mumbai: The Nifty could im­me­di­ately fall by a per­cent f rom Thurs­day’s close be­fore hurtling down to 9,500 if it breaks be­low its 50-day ex­po­nen­tial mov­ing av­er­age (DEMA) at 9,780. The in­dex briefly fell be­low that mark, mak­ing a low of 9,776.2 in the last hour of trade Thurs­day,be­for­ere­coup­ing­someof its losses to close down at 9,820.25.

A break be­low this cru­cial level, could drive put sell­ers at 9,800 — which has the max­i­mum open po­si­tions at 46.2 lakh shares — to cover their shorts, and ex­ac­er­bate a fall all the way to 9,500-odd lev­els, which has the sec­ond-high­est out­stand­ing po­si­tions be­low 9,800. The av­er­age price of the 9,800 puts was around ₹ 47 a share since the com­mence­ment of the Au­gust se­ries of F&O con­tracts.

This makes the breakeven be­low which the put sell­ers be­gin to face losses at around 9,750. They will be forced to buy back the puts sold, adding to the sell­ing pres­sure. A seller of puts is bullish on mar­kets, while a buyer is bear­ish.

“Since the be­gin­ning of the cur­rent rally from 7,893 on De­cem­ber 26, the mar­ket has re­spected the 50 DEMA, bounc­ing back smartly from there on June 30,” said Chan­dan Ta­paria, de­riv­a­tives an­a­lyst at Moti­lal Oswal Se­cu­ri­ties.

“For it to re­main above this level, it must break above the cru­cial level of 9,928.” Above that level (9,928) an­a­lysts ex­pect the mar­ket to con­sol­i­datearound10,000level.Op­tions data peg the im­me­di­ate re­sis­tance for the mar­ket at 10,020/25 level. Au­gust op­tions peg the range of the mar­ket at 9,750- 10,025. The mar­ket will keenly eye the re­sults of pub­lic sec­tor bank­ing ma­jors such as State Bank of In­dia and Bank of Bar­oda, and pharma com­pany Ci­pla on Friday. “If the bank re­sults come bet­ter than ex­pected, it could be a sen­ti­ment booster,” said He­mant Na­hata, de­riv­a­tives an­a­lyst, IIFL Wealth & As­set Man­age­ment.

NSE data Thurs­day in­di­cate that FIIs might have hedged their net put buy­ing on the Nifty and the Bank Nifty op­tions by net pur­chas­ing fu­tures on the two in­dexes worth ₹ 471 crore. They were also net buy­ers of stock fu­tures of ₹ 359 crore, while hav­ing sold cash mar­ket shares worth a pro­vi­sional ₹ 841 crore on Thurs­day.

Above 9,928, an­a­lysts ex­pect, the mar­ket to con­sol­i­date around 10,000. Im­me­di­ate re­sis­tance seen at 10,020/25

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