2 Share Market - Weekly News Letter

Nifty lost 2.55pts or 0.05% to close at 5,320.4, BSE Sensex finally closed 3.13pts or 0.02% lower at 17,557.74, BSE Midcap index gained 0.02%, the BSE Small Cap index shed 0.29%.

It was yet another day of consolidation for the main indices on Friday. Substandard results from sectoral heavyweights like SBI, Bharti Airtel and Ranbaxy Labs have dented investor sentiments in the last few sessions. 

Markets extended recent gains in the initial part of the week but slipped into consolidation mode half-way through the week. Concerns about lack of progress on economic reforms and absence of intervention by leading central banks prompted investors to lock in some gains. Nifty closed up 2.1% week on week. The weighted average price for Nifty is at 5250 and that for the Bank nifty is at 10430. Over all market strenghth was lead by Auto, FMCG heavyweights along with stocks like Reliance and Infosys. On the other hand, PSU banks were the major draggers of the week. Positive global cues also favoured the movement of the Nifty. Once again, closure of positions was observed in most of the sectors despite positive market sentiments. Highest closure was seen in the cement and telecom space. However, stocks from auto, technology and power sectors witnessed marginal additions during the week

India VIX : the investor’s fear gauge, continued its declining pattern and closed negative for the fourth consecutive week. The index is likely to remain within the range of 15-19, suggesting the Nifty may continue its consolidated move. VIX is almost at one year low and on the breach of 18.2 on the upside.

Options : Major activities were seen at the ATM (At the Money) 5300 and 5200 Put strikes. The highest addition of 4.5 million shares was observed at 5300 Put during last week. Among Call strikes, closure was seen at the 5300 strike while marginal addition was seen at OTM (Out The Money) Call strikes. Short straddle i.e (selling in call and put) was seen at 5300 strike at an avg price of 150 premium might keep the nifty in the range 5200-5450 for the week. 

Key Break Out Levels for Nifty : 

Buy Nifty(Spot) above 5380 T1: 5414 T2: 5451 T3: 5488 T4: 5525 T5: 5562 T6: 5600 SL: 5260

Sell Nifty(Spot) below 5260 T1: 5225 T2: 5189 T3: 5153 T4: 5117 T5: 5081 T6: 5046 SL: 5380

profit booking or shorting pressure might be witnessed in Nifty. The short term trend has turned positive after convincing close above 5260 levels and the short term uptrend remains intact as the rising gap of 5240 is not negated. Coming week trend would be decided from cues from global markets and trend in crude prices. Next week will also be a truncated one due to the Independence Day holiday. While the IIP numbers turned out to be dismal, the focus will shift to WPI inflation data (due on Aug. 14) and Q1 GDP report (due on Aug. 31). Globally, the markets will continue to be underpinned by developments out of Europe and possible indications of central bank easing. With the quarterly earnings out of the way, market sentiment will be driven more by liquidity flows and prospective Government move(s) on the policy front. The main indices could turn range bound and choppy in the near term with no clear directional bias.

Nifty: The Nifty may trade with a positive bias till it holds above 5260. Immediate resistance for the Nifty lies at 5380 and move above this level may trigger fresh momentum towards 5451, 5488, 5525 while immediate support is at 5260 and move below this level may trigger panic till 5225, 5189, 5153 levels.

Bank Nifty: The Bank Nifty is likely to find stiff resistance at its highest Call base of 10500 strike. On downsides, it has immediate support at 10150. Upward momentum is expected only if it is able to sustain above 10500

While the Sensex/Nifty have been drifting lower in the last few sessions, the underlying trend remains up. We therefore believe that any further corrections should be used to enter into fresh long positions till 5260 and add more positions above 5380.