Weekly Outlook Indian Stock Market (28 Jun - 02 Jul)

WEEKLY TECHNICALS
High: 5366.75
Low: 5259.90
Close: 5269.05
Change: +6.45
RSI (14 Days): 57.35
Pivot: 5299
Support: 5230, 5192
Resistance: 5337, 5405

TECHNICAL CUES
Indian markets ended the week on a flat note. Indices belled the week on a firm as investor’s confidence strengthened after China signaled an end to the Yuan’s fixed rate to the dollar. In addition to this, markets also reacted positively to the end of turf war between IRDA and SEBI, finally the government has ruled that Unit Linked Insurance Products (ULIPs) will be regulated by IRDA. Thereafter, markets continued to pare initial gains as investors were cautious after the US Federal Reserve downgraded its view on economic recovery. Later in the week, Oil and gas stocks advanced after the government decided to hike petrol prices while banking stocks declined the most anticipating an imminent hike in interest rates.
Nifty ended the week on a flat note at 5,269.05 marks gaining marginally 0.12% The Nifty Futures (June) closed at a premium of 13.75 points. On the derivatives front we can see that the Nifty ended in positive territory along with an overall addition of open interest and with positive cost of carry, this is an indication of long poison is being built up at lower levels. For the coming week an immediate support for Nifty is seen in the zone of 5,180-5,200 whereas on the upside resistance is seen in at 5,330-5,350 mark

• The Put-Call ratio of open interest decreased during the week from 1.20 to 1.03 levels but last day of the week it again surged to 1.20 level. The options concentration has seen at 5,200 – 5,300 strikes put option.
• The Volatility Index (VIX) increased marginally during the week and closed at 20%. Market participants should be watchful at current levels as any up move in volatility may trigger more downsides in the markets.
• FIIs were net buyer in index futures to the tune of Rs 441.62 crore indicating slightly up trend in market and in the options index FII witnessed a further decline in OI along with a net sell of Rs 2,570.67 crore with higher PCR is indicating market will trade range bound in near term.

Nifty is expected to remain in the range of 5,150-5,380 and only a breach on the downside will push the index to lower levels. The move may remain mixed, with selling pressure near 5,350 levels. Any instability on the global front will bring about selling pressure from current levels. The progress of the monsoon will also be keenly watched. However, global risk appetite holds key for Indian equities in near term.

OPTION CUES
During the week, most of the open interest builds up in the range of 5200 -5,300 Put while, on the flip side, maximum open interest accretion was seen in 5,400 – 5,500 Call. 5,200 and 5,300 strike put added 8.85 lakh and 4.34 lakh shares respectively in OI on Friday. On the Call front 5,400 and 5500 strike Calls witnessed addition of 2.70 lakh and 1.90 lakh shares respectively in OI due to call writing at this level.

GOLD
Gold prices started the week on a substantially lower note. China’s move to free it’s currency against the US dollar was viewed negative for gold by the investors. Immediately after, prices managed to edge marginally higher due to steady dollar and ahead of Fed’s interest rate decision. Thereafter, the dollar started to get stronger and thus pushing the gold prices lower. Dollar ultimately went shaky and the set of economic data released during the week was also weaker than expected. Therefore, yellow metal shone towards the end of the week. In the domestic market gold dropped initially on the back of profit booking as the international markets sent negative signals. Prices rebounded towards the end of the week amidst the firming trend in international gold prices. Gold prices saw a marginal drop on w-o-w basis thus registering a fall of 0.70% in the international markets and 0.33% in the domestic market. Gold prices are expected to rise modestly in the next week. Investors are likely to divert their funds towards secure investment options like gold amidst the uncertainty regarding global economy recovery.

OVERALL VIEW
Technical indicators suggesting correction in Nifty
After marking decent move on the very first day of the week Nifty remained highly volatile and choppy for rest of week and traded in narrow range of 100 points in between 5,360-5,260, due to F&O expiry on Thursday of this week. Nifty breached the psychological mark of 5,300 decisively on the very first day of week and managed to sustain above that. Technical momentum indicators are currently suggesting correction in Nifty as most of the indicators has just reversed their directions from bull to bear. RSI (14 Days) has changed its direction from 63.65 and is currently hovering in neutral territory at 56 indicates correction. MACD is also on the verge of giving negative breakout and currently showing maximum divergence. Stochastic Oscillator has also just entered into positive territory from deep positive and crossed mark of 80 from above confirming weakness in Nifty. Nifty is trading above 14 day EWMA, but has closed below 7 day EWMA indicating correction in Nifty in near term. If Nifty manages to breach the 14 day EWMA (5,220) then we could see downside upto 5,100 mark in forthcoming trading sessions. Nifty is currently facing stiff resistance at 5,350-5,360 if this level breached decisively then we could see rally upto 5,450 mark and on the flip side strong support at 5,220 if this level breached then we could see fall upto 5,100 mark. Expecting Nifty to remain range bound in between 5,200 and 5,360 in short term. Nifty is likely to move in tandem with its global counterparts and would remain depended on them for any major breakthrough on either side. However domestic markets factors like today increase in oil prices could hamper the equity market in short term as increase in oil prices could result in higher inflation number. This could force the RBI to raise the key interest rates to curb the inflation implies slowing down of economy growth rate

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