WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : Indian stock markets seemed to be in a ‘Santa Rally’ mode as domestic markets completely shrugged off extremely weak session in the US markets on Friday and started the first trading session of the week on a cheerful note. Thereafter, Nifty continued its jubilant run and surpassed its early December high of 10,941, despite high volatility seen in the US markets. However, on Thursday, Nifty opened the session lower after the US indices registered their lowest closing level in over a year as the US Fed raised interest rate for the fourth time this year, which was in line with what most market participants had anticipated. However, the Fed has left the door open for more hikes in 2019 as against the market expectation of no hike or only one rate hike.
Nifty after registering low of 10,334 on December 11 rallied about 650 points in about last seven trading sessions. In the process, the index cleared its 100-day moving average and also registered new swing high of 10,985. However, due to jitters in the global markets, Nifty opened with a gap-down on Thursday, but the index showed tremendous resilience and managed to recoup almost the entire losses to close flat. Going ahead, we expect the markets to consolidate or take a breather in the form of minor correction as the present structure on the charts is slightly overstretched along with the stochastic oscillator, which is currently in the overbought territory. During this phase of temporary breather, we expect the area of 10,845-10,816 to act as an important support level as holding above this region would keep the pullback options open or else we could test the 200-day moving average which stands at 10,765. On the upside, a follow-through move above 10,985 is likely to open up for further upside towards the levels of 11,085-11,090. NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market’s short term expectation of volatility, dipped by 2.25 per cent to end at 14.33. Nifty December 2018 future last price stood at 10,986 at a premium of 34.30 points over the spot closing of 10,951.70. Nifty January 2019 future last price stood at 11027.10 at a premium of 75.40 point over the spot closing of 10,951.70. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.45 for the December month contract. Among Nifty calls, 11,000 strike price from the December month expiry was the most active Call. Among Nifty Puts, 10,900 strike price for the December month expiry was the most active Put. For the December series, the maximum OI outstanding for Puts was at 10,000 strike price, and that for Calls, it was at 11,000 strike price.