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
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