WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : The bulls had witnessed a sharp pullback rally on Monday; however, the benchmark indices failed to get a follow-through move on the upside and they continued to move southwards on Wednesday and Thursday, breaking their important psychological mark as the ghost of the strong dollar, Brent crude oil price rise and the weak monthly auto sales numbers spooked the Indian markets. The benchmark indices have plummeted more than 3 per cent during the week, and in line with the frontline indices, selling was seen in the broader markets as well with Nifty Mid-cap losing about 2.75 per cent, while the Nifty Small-cap dipping about 1.93 per cent. The selling pressure was seen across the sectors, barring Nifty Metal. The correction was led by Nifty Auto, Nifty Pharma and Nifty FMCG. Technically, after testing the support level of 10,775-10,850 multiple number of times in a span of last 7 to 8 trading sessions, the index finally breached its crucial support zone on Thursday and moved below its 200-DMA for the first time after May, 2018. Going ahead, the levels of 10,530-10,550 is likely to act as a support level for the index and a follow-through move below this level may take the index towards levels of 10,400-10,310 in the short term. On the higher side, we believe that the levels of 10,775-10,850 is likely to act as a stiff resistance for the index. If we speak of the short-medium term, the trend is certainly in favour of the bears. However, we feel that the current weakness is now overdone and we might see a pullback rally, which could be resisted at the levels of 10,775-10,850.
NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, jumped about a 4.36 per cent to 18.91. Nifty October 2018 future last price stood at 10,599.90 at a premium of 0.65 points over the spot closing of 10,599.25. Nifty November 2018 future last price stood at 10,650.95 at a premium of 51.7 point over the spot closing of 10,599.25. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.01 for the October month contract. Among Nifty Calls, 11,000 strike price from the October month expiry was the most active Call. Among Nifty Puts, 10,500 strike price from the October month expiry was the most active Put. For the October series, the maximum OI outstanding for Puts was at 10,500 strike price, and that for Calls, it was at 11,000 strike price.