Weekly Outlook Indian Stock Market (24 - 28 May)

WEEKLY TECHNICALS
High: 5105.20
Low: 4842.30
Close: 4931.15
Change: -162.35
RSI (14 Days): 45.4
Pivot: 4960
Support: 4814, 4697
Resistance: 5077, 5222

TECHNICAL CUES

• The Put-Call ratio of open interest decreased during the week, closing at 0.93 levels. The options concentration has seen at 4,800 - 4,700 strikes Put option.
• The Volatility Index (VIX) increased significantly during the week and closed at 32.26%. Market participants should be watchful as the current level is considered to be quite high which may trigger further downtrend in the markets. Volatility has a strong inverse correlation with markets.
• FIIs were net seller in index futures to the tune of Rs 4,576.01 crore along with decrease in the OI of 2.54% mainly due to squaring off of long positions and in the options index FII witnessed a further incline in OI along with a net buy of Rs 2,581.29 crore.

The overall mood continues to be cautious with downward bias as global markets cues are critical. Euro zone debt worries remain in focus. However, investors will eyed on next week’s meeting in Euro zone with the US Treasury Secretary to resolve the European economic crisis. So overall trend indicate negative bias, but any positive decision may trigger short covering.

OPTION CUES
During the week, most of the open interest builds up in the range of 4,900 to 4,700 Put, while, on the flip side, maximum open interest accretion was seen in 5,100 - 5,300 Call as aggressive Call writing witnessed at these level. 4,900 and 4,800 strike Put added 69.58 lakh and 84.47 lakh shares respectively in OI on Friday. On the Call front 5,300 and 5,200 strike Calls witnessed addition of 71.71 lakh and 77.35 lakh shares.

OVERALL VIEW
Short covering might push Nifty above 5,000 mark
Nifty continued its downward move this week on the back of growing fears that the euro zone's handling of its sovereign debt crisis might put the global economic recovery at risk. It breached the crucial 5,000 support level and moved further lower to test 4,850 levels later in the week. However, it rebounded from here and managed to hold the important 4,900 support level by the end of the week. As Nifty has breached its 200 day simple moving average which is positioned at 4,990 level, its medium term outlook remains bearish. Nifty is expected to continue taking cues from global markets for its movement. Incase the global markets do not show any signs of recovery Nifty is expected to breach its immediate major support at 4,900 to test 4,850-4,800 level. A strong rebound can be expected anytime during the next week due to short covering from these levels. Upside, 5,000 is the immediate major resistance and 5,100 can be tested only after breaching this level. Downside, if 4,800 level is breached Nifty can further move down until 4,700 level. Also, a high volatility can be expected due to the F&O expiry which is due in the coming week.

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