Weekly Outlook Indian Stock Market (12 - 16 Jul)

WEEKLY TECHNICALS
High: 5359.05
Low: 5225.85
Close: 5252.45
Change: +115.35
RSI (14 Days): 60.25
Bollinger (20, 2): 4926-5442
Pivot: 5312
Support: 5266, 5179
Resistance: 5399, 5446

TECHNICAL CUES
Nifty ended on positive note at 5352.45 marks gaining 2.20% during the week. The Nifty July futures ended at 5353 (LTP) with a premium of 0.55 points. If we look at the derivatives data we could see that Nifty future prices ended in the positive territory but with decline in the cost of carry along with decline in open interest, this is an indication of closure of some long position. Moreover, there was active call and put writing at most of the out-of-the money strikes option. Thus this indicates market will consolidate between 5200 to 5400 level. Nifty may continue to face resistance at higher levels of 5380- 5400 whereas on the downside support is seen at 5225 to 5260 levels.

• The Put-Call ratio of open interest decreased during the week from 0.94 to 0.87 levels. The options open interest remained mixed as the week progressed. The options concentration has shifted to the 5400-5500 strike call option due to short accumulation at these levels.
• The Volatility Index (VIX) decreased during the week and closed at 20.14%. 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 1,460 crore indicating slightly up trend in market and in the options index FII witnessed a further incline in OI along with a net buy of Rs 1,090 crore with accumulation in 5300 put is indicating market is likely to take a short correction in near term.

The overall mood continues to be cautious and showing a mixed trend. 5360 to 5400 levels for the Nifty continue to be an immediate resistance. The upcoming corporate results and progress of the monsoon will be the main cue for the market. Overall, the index is expected to remain in a broad range and settle around 5200-5400 levels. The global cues will play a crucial role as most indices across the globe are witnessing significant volatility.

OPTION CUES
During the week, there was significant accumulation of OI in OTM Call options .Most of the open interest builds up in the range of 5200 -5300 put while, on the flip side, the OTM 5400 strike and 5500 strike call options saw significant short accumulation. 5300 and 5200 strike put added 12.84 lakh and 1.32 lakh shares respectively in OI on Friday. On the Call front 5400 strike calls witnessed addition of 2.75 lakh shares.

GOLD
Gold prices started the week on a modestly subdued note. The precious metal ended lower after a heavy fluctuation. The yellow metal began to rise as the investors’ rushed into the bargain hunting for gold. A weaker dollar helped to support the firming trend in the gold prices. But, towards the end of the week gold lost its appeal as the upbeat economic forecast led the investors’ to venture into the riskier investment alternatives. International gold prices saw a decline of 3.28% on w-o-w basis. The domestic gold prices also began the week on a weaker note as the demand for the precious metal was low due to the nationwide strike by the opposition. Moreover, the monsoon season back home led the rural households (a major consumer of gold) to divert funds in buying seeds and fertilizers. The fall in the domestic gold prices continued as the global gold markets also failed to provide any firm cues. The domestic gold prices also registered a decline 2.57% on w-o-w basis. The coming week may see the prices of the precious metal remaining flat with a modest upward bias. A further fall in the gold prices is unlikely as there are speculations that the recent drop in the metal’s prices may spur buying at the lower levels and prompt investors’ to increase holdings of gold.

OVERALL VIEW

Nifty surged during the week and traded in range of 5230 to 5350. On daily chart Nifty has formed inverted head and shoulder pattern with resistance at 5360. On the upside, any sustained move above 5360 may take it to 5400-5450 levels and on downside if trades below 5360 we may see some correction in nifty. 5260 and 5225 will act as strong supports in short term. However, forthcoming IIP and inflation data will remain crucial factor for deciding the market movement. Expecting IIP number to remain in line with previous one or slightly higher which could take market to a new year high. Simultaneously increase in IIP numbers would result in rise in inflation which could create negative sentiment of RBI interference to raise the key interest rates further to rein in inflation sooner than later. Nifty is likely to move higher on day of IIP disclosure and lower on day of inflation outcome. Technical momentum indicators are currently suggesting continuation of uptrend as most of them are currently hovering in positive territory. Stochastic is currently moving towards overbought territory from neutral one and showing positive divergence. RSI (14 Days) is currently moving in neutral zone and on the brink of entering into overbought zone suggesting further upside in Nifty. MACD is about to show positive divergence and currently moving in positive zone suggesting upside in forthcoming trading sessions. Nifty is trading above 7 and 14 day EWMA. If Nifty manages to breach the 5 day EWMA (5296) decisively then we could see downside probably up to 5220 first and thereafter up to 5150 mark. Nifty put call open interest data is currently suggesting that Nifty has very strong support at 5200. Expecting Nifty to remain range bound in between 5240 and 5380 in short term. Nifty is likely to remain in tandem with its global counterparts and would remain depended on them for any major breakthrough on either side.

Thanks and Regards

S&P Wealth Creators