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Trade setup for Sept 29: As Nifty retreats 1% from peak, more pain ahead? Key market cues before Wednesday's session

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Buying may emerge at lows as the near-term trend still looks positive, opines HDFC Securities' Nagaraj Shetti. Here's how the coming session is poised to start on Dalal Street.

Trade setup for Sept 29: As Nifty retreats 1% from peak, more pain ahead? Key market cues before Wednesday's session
Indian equity benchmarks made a sharp U-turn on Tuesday, stopping more than one percent away from all-time highs clocked last week. Losses in IT and select financial shares pulled the market lower, though gains in oil & gas and state-run banking counters arrested the fall. The Nifty50 index recovered more than half of intraday losses by the end of the volatile session.
The Bank Nifty gauge slid 0.6 percent, having begun the day with a bang at an all-time high.
So, what do the charts suggest for Dalal Street?
The 50-scrip benchmark formed a long negative candle on the daily chart with a tall lower shadow, indicating broad-based profit booking from recent highs, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities. But the sharp recovery in the second half of the day signals the absence of any significant trend reversal at highs, he said.
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Be cautious till F&O expiry
Before the monthly derivatives expiry, due on Thursday, the 10-day simple moving average of around 17,500 should be in focus, said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities.
"We should be a contrarian buyer for a short period if the index falls to that level. On the higher side, till the market does not cross 17,950, traders should reduce their weak long positions at resistance levels," he said.
Here are key things to know about the market before Wednesday's session:
SGX Nifty
At 8:27 am on Wednesday, Nifty futures trading on Singapore Exchange -- an early indicator of NSE's Nifty benchmark in India -- were down 96 points or 0.5 percent at 17,671.5, suggesting a negative start ahead on Dalal Street.
Global markets
Equities in other Asian markets lost ground on Wednesday tracking overnight losses on Wall Street. MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.4 percent in early hours, while Japan's Nikkei 225 benchmark was down 2.4 percent. Investors worried over rising US bond yields and inflation Doubts re-emerged over the global recovery at a time when the US central bank is set to taper stimulus.
S&P 500 E-Mini futures traded half a percent higher in early Asian trade, hinting at a positive opening in the US on Wednesday.
What to expect on Dalal Street
"The near-term trend of Nifty still looks positive and buying may emerge from lows in the coming 1-2 sessions," said HDFC Securities' Shetti. Tuesday's weakness could be the formation of a new higher bottom at the lows. Any sustainable upmove on Wednesday could confirm a higher bottom reversal, which may to open another round of upside for the market, he said.
Rahul Sharma, Co-Founder of Equity99, warned that the market might fall more due to weak global cues.
Key levels to watch out for
Nifty50: Immediate support for the index is expected at 17,700, followed by 17,625 -17,550 levels, and hurdles seen in the 17,825-17,850-17,950 zone, according to Sharma.
Bank Nifty: For the banking index, he expects support at 37,650, and then 37,500-37,350, and resistance at 38,200, followed by 38,350.
FII/DII activity
Foreign institutional investors (FIIs) withdrew a net Rs 1,957.7 crore from Indian equities on Tuesday. Domestic institutional investors (DIIs), however, made net purchases of Rs 161.5 crore, exchange data showed.
Call/put open interest
A high degree of call open interest is accumulated at the strike prices of 17,900 and 18,000. On the other hand, the maximum put open interest is at 17,500, NSE data shows. This suggests immediate resistance at 17,900 and support only at 17,500 next.
Long build-up
The futures of only one stock saw an increase in open interest as well as price, suggesting a build-up of long positions:
SymbolCurrent OICMPPrice change (%)OI change (%)
ONGC4,96,41,900141.63.77%2.06%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
LT1,14,34,4501,734.50-1.87%-43.27%
OFSS5,13,1254,585-2.53%-40.05%
GMRINFRA7,44,07,50035.8-0.83%-39.16%
PFIZER2,46,1255,679.65-0.65%-39.06%
MANAPPURAM1,66,32,000169.65-1.62%-38.74%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
JSWSTEEL3,01,57,650661.450.46%-48.79%
TATACHEM85,40,000906.62.48%-41.11%
PETRONET2,23,29,000238.851.57%-38.44%
NMDC6,53,25,000140.950.61%-36.56%
DRREDDY24,04,5004,859.951.25%-35.57%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
SIEMENS19,11,5252,105-0.76%6.07%
SHREECEM1,54,00029,230.05-0.76%3.21%
LTTS5,02,4004,626.85-4.52%0.08%
(Increase in open interest and decrease in price)
Stocks hitting 52-week highs
Reliance Industries, Kotak Mahindra Bank, ICICI Bank, Indian Oil, ONGC, NTPC, Power Grid, Grasim, NHPC, JSW Energy and Indus Towers were among the 34 stocks in the BSE 500 index — the broadest gauge on the stock exchange — that clocked 52-week highs.
52-week lows
No stock in the BSE 500 universe hit a 52-week low. Apart from that, new debutants CarTrade Tech, Rolex Rings and Krsnaa Diagnostics were among the 22 stocks that hit the trough.
Volatility gauge
NSE's India VIX index -- which gauges the expectation of volatility in the near term --  rose 2.7 percent to 18.5 on Tuesday, having gyrated within a wide range of 15.4-18.6 during the session.
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