Trade Setup for March 23: Over to Nifty 50 options expiry after Fed moves as per script

The FOMC moved according to script last night, hiking interest rates by 25 basis points. While that should not have come as any surprise to the market, treasury secretary Janet Yellen played party pooper by saying regulators are not considering any blanket deposit insurance to stabilise the US banking system.

Yellen's comments roiled US markets which had seen a couple of good sessions this week and were on the mend. It will be these negative cues that will greet the Nifty 50 ahead of today's weekly options expiry session.

The Nifty 50 traded in a narrow, 100-point range in a lacklustre session on Wednesday ahead of the FOMC decision. While there. Heavyweights like Reliance, ICICI Bank and TCS helped the index close with minor gains.

Having said that, the Nifty 50 index closed above Friday's high of 17,146, which we highlighted in our setup on Wednesday morning.

BSE-listed companies added more than Rs 1 lakh crore in market capitalisation in Wednesday's rangebound session.

Gautam Sinha Roy of ICICI Prudential Life Insurance said that the current market situation is a bit of a quandary, as there is no clear direction where the market would swing.

"But having said that as a deployer of long term capital do I like these markets? Probably yes. Because I am getting good stocks at reasonable valuations, where growth outlook for the next five years is good. So, from that perspective, I do like the market and the ability to deploy money at the current juncture," he said.

Ruchit Jain of 5paisa.com says that the upside hurdle for the Nifty 50 is now at its 20-day exponential moving average of 17,320, while 16,850 on the downside continues to remain a key support. He advised traders to watch out for global cues, which unexpectedly turned out to be negative, and trade in that direction.

The Nifty 50 remains in a buy-on-dips mode as long as it manages to hold the 17,000 level, according to Kunal Shah of LKP Securities. He sees an immediate resistance of 17,200 on the upside where the highest call Open Interest for the index is. A move above that may take the index past the 17,500, he said.

HDFC Securities' Nagaraj Shetti is also waiting for the index to decisively breakout above the 17,200 resistance barrier, which it currently is showing no attempt at doing so. Unless that happens, the changes of the market moving higher are less, according to Shetti. Immediate downside support for the index is at 17,020.

On Thursday, Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty 50 index — fell 71 points or 0.41 percent to 17,087, thereby pointing to a negative opening for the market.

Asian markets have opened lower, in line with the US market reaction to Janet Yellen's comments overnight. The Nikkei 225 is down 0.9 percent, while the Topix is down 1.1 percent. South Korea's Kospi is also trading with losses of 0.7 percent.

All three major benchmark indices in the US shed a percent each on Wednesday with the Dow Jones declining over 500 points, giving up most of Tuesday's gains.

The S&P 500 fell 1.6 percent, as did the Nasdaq.

Rohan Patil of SAMCO Securities said that the Nifty 50 is in recovery mode after the hammer pattern formed on March 20. That, however, may be put to test in today's session post weak overnight cues. Patil sees support for the Nifty 50 at 16,900 - 16,800, while resistance is at 17,400. In case the index slips below 16,800, the next support is seen at 16,600 on the downside, he said.

The Nifty Bank index found resistance at the 14-day moving average mark on Wednesday, while momentum indicators remain in a bullish crossover, according to LKP's Shah. A decisive breakout above the mark of 40,000 will lead to the index moving higher towards 41,000 in the near-term, while lower-end support lies at 39,500.

For today's weekly options expiry, the 17,250 call of the Nifty 50 index saw addition of 17.8 lakh shares in Open Interest, while the 17,300 call added 12.9 lakh shares.

Open Interest shedding was seen in the 17,000 call (19.3 lakh shares) and 17,100 call (17.1 lakh shares).

On the downside, the 17,100 put added 12.5 lakh shares in Open Interest, while the 17,200 put added 9.5 lakh shares.

Nifty 50's put-call ratio is at 0.93 from 0.88 on Tuesday. Biocon and Indiabulls Housing Finance continue to remain in the F&O ban.