Weekly Outlook Indian Stock Market (31 May - 04 Jun)

WEEKLY TECHNICALS
High: 5077.25
Low: 4786.45
Close: 5066.55
Change: +135.40
RSI (14 Days): 50.95
Pivot: 4977
Support: 4876, 4686
Resistance: 5167, 5268

TECHNICAL CUES
Nifty ended the week on an upbeat note at 5066.55 marks gaining more than 2.50%. The Nifty May futures ended at 5037 with a discount of 29.55 points. If we look at the derivatives data we can see that Nifty future prices ended in the positive territory along with decline in the cost of carry and addition of open interest with higher PCR, this is an indication of accumulation of fresh short position at higher level. For the coming week, Nifty is likely to face immediate resistance at the levels of 5080 to 5100 level whereas on the downside support is seen at 4950.

• The Put-Call ratio of open interest increased during the week, closing at 1.12 levels. The options concentration has seen at 4700 – 5000 strikes put option.
• The Volatility Index (VIX) decreased significantly during the week and closed at 26.43%. If VIX increases from current level, then Nifty will see more downsides. Volatility has a strong inverse correlation with markets.
• FIIs were net buyer in index futures to the tune of Rs 1,186.06 crore along with decrease in the OI of 28.38% mainly due to squaring off of their short positions and in the options index FII witnessed a further decline in OI along with a net buy of Rs 2,017.79 crore with higher PCR, indicating a downtrend in markets.

The overall mood continues to be cautious with mixed trend. Q4 March 2010 GDP growth data and the infrastructure output data will be in focus early next week. The monsoon also holds key. The developments in the euro zone will also be closely watched as investors have remained cautious and stayed away from risky assets in the recent past amid persistent worries that the debt crisis in the euro zone could dent consumer spending in that region and slow a global economic recovery.

OPTION CUES
During the week, most of the open interest builds up in the range of 4800 to 5000 Put, while, on the flip side, maximum open interest accretion was seen in 5100 – 5200 Call as aggressive Call writing witnessed at these level. 4900 and 5000 strike Put added 8.24 lakh and 7.66 lakh shares respectively in OI on Friday. On the Call front 5100 and 5200 strike Calls witnessed addition of 10.50 lakh and 8.83 lakh shares.

OVERALL VIEW
Upward rally likely to continue until 5100-5150 levels
Nifty witnessed a high volatility this week. It initially moved higher, even above the 5000 level but could not sustain it and moved lower until 4800 levels after breaching 4900 levels. 4800 is a crucial mark and a move below it could have taken Nifty to 4700-4600 levels. But, it rebounded from this level and breached the resistance at 5000 levels on the back of short covering. It ended the week on a positive note by closing well above 5000 mark. In the coming week, Nifty is likely to continue its upward move to test 5100-5150 level as the technical indicators are giving bullish indications. However, it is also expected to correct once it reaches 5100-5150 levels after facing stiff resistance, later during the week. The stochastic and RSI are close to 48 levels and the MACD has also given a buy signal by crossing above the signal line. Moreover, it just gave a single closing below the 200 day exponential moving average positioned at around 4864 and rebounded afterwards indicating that this 200 EMA still remains a strong support for it. The Indian market will continue taking cues from the global markets for its movement. 5200 will be the next major resistance after 5100 and downside, 5000 is the immediate support and incase this level is breached, 4800 can be tested again.

Thanks and Regards

S&P Wealth Creators

Call 09831497250 or mail us @ S&P Wealth Creators with your Name and Mobile No. for subscription offer of intraday calls during Market hours.