Weekly Outlook Indian Stock Market (19 - 23 Jul)

WEEKLY TECHNICALS
High: 5453.45
Low: 5351.60
Close: 5393.90
Change: +41.45
RSI (14 Days): 61.79
Bollinger (20, 2): 4964-5451
Pivot: 5402
Support: 5350, 5306
Resistance: 5446, 5497

TECHNICAL CUES
Nifty ended on positive note at 5393.90, gaining 0.77% during the week. The Nifty July futures ended at 5398.25 with a premium of 4.35 points. If we look at the derivatives data we could see that Nifty future prices ended in the positive territory along with incline in the cost of carry with incline in open interest, this is an indication of long position build up. Nifty may continue to face resistance at higher levels of 5430 to 5460 whereas on the downside support is seen at 5300-5260.

• The Put-Call ratio of open interest increased during the week from 0.87 to 1.09 levels. The options open interest remained mixed as the week progressed.
• The Volatility Index (VIX) decreased during the week and closed at 19.70%. 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 731.98 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 2,508 crore with higher PCR 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. 5430 to 5460 levels for the Nifty continue to be an immediate resistance. The upcoming corporate results and RBI’s quarterly monetary policy review will be the main cue for the market. Overall, the index is expected to remain in a broad range and settle around 5250-5450 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 and put options .Most of the open interest builds up in the range of 5200-5300 put while, on the flip side, the OTM 5400and 5500 strike call options witnessed higher open interest build up. Significant short accumulation witnessed in 5200 put and 5500 call option. 5300 and 5200 strike put added 2.79 lakh and 3.07 lakh shares respectively in OI on Friday. On the Call front 5400 strike calls witnessed addition of 4.63 lakh shares.

GOLD
Gold prices started the week on a high note. The yellow metal prices saw big leap on the back of increased buying interest in the bullion metal following the recent drop in the prices. A downgrade in the Portugal’s debt rating and the weaker dollar helped to aid the gold prices. With the course of the time the volatility in the gold prices increased and the prices began to fall. The precious metal bounced back immediately after on the Federal Reserve's pessimistic view about the US economy which increased the appeal of precious metals as an alternate investment. Finally, the gold prices ended 1.21% higher on w-o-w basis in the international markets. The domestic gold prices also followed the international trend and started the week with an upbeat on the back of bargain hunting. The uptrend continued due to the forthcoming festival season. The investors’ remained cautious with an eye on the direction of the movement of the rupee. The gold prices were almost flat in domestic market and registered a gain of 0.33% on w-o-w basis. Gold prices may move upwards in the coming week due to the signs of slower growth in the global economy and on the back of a weakening dollar. Moreover, the forthcoming festive season domestically is also likely to spur the demand of the yellow metal.

OVERALL VIEW
The key benchmark index Nifty achieved much awaited milestone, surged to a new year high of 5453.34 on second trading day of week. Although Nifty breached 5400 mark decisively with gap up opening on second trading day of current week it wasn’t able to sustain above that and fell below 5400 on same day led by profit booking. For the rest of week Nifty remained highly volatile and choppy and traded in narrow range of around 100 points in between 5352 and 5454 and closed below crucial mark of 5400 on last trading day of week. We won’t expect Nifty to sustain above 5400 for longer period. We could see dramatic correction in Nifty from exiting high’s. Forthcoming monetary policy due on next week will remain decisive factor for deciding the short term movement of market. Any significant increase in key interest rate could trigger deeper correction. Nifty have stiff resistance at 5440-5460 while support for Nifty seems at 5300. Momentum technical indicators like RSI and Stochastic are currently hovering close to overbought territory from there they have changed their directions and signaling downward movement. MACD is currently moving in positive zone and on the verge of showing negative crossover and likely to breach neutral line from above indicating correction. Nifty is trading above Weekly 5 EMA. If Nifty manages to breach the Weekly 5 EMA (5302) decisively then we could see downside probably upto 5244 (Weekly 10 EMA) first and thereafter upto 5182 (Weekly 20 EMA). Nifty put call open interest data is currently suggesting that Nifty has very strong support at 5300 and resistance at 5500. Nifty is likely to trade in broader range of 200 points in next week, probably in between 5260 and 5460. Nifty is likely to remain in tandem with its global counterparts and would remain depended on them for any major breakthrough on either side.

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