Nifty 50 set for second straight weekly loss unless it closes above this level

Had it been for any other series, investors would take a 270-point gain on the Nifty 50 during a series. But to see a 270-point gain in the September F&O series would be a bittersweet feeling as after the first half of the series, the index was up as much as 1,000 points. Nonetheless, the index posted its fifth positive F&O series in the last six months.

The September series also added Rs 7 lakh crore to the overall market capitalisation of BSE-listed companies. That figure, after the first half of the series stood at well over Rs 14 lakh crore.

Thursday’s session could have been far worse for the Nifty 50, had it not been for the semi-annual index rejig which took place in the final minutes of the trading day. By then, the Nifty 50 had slipped below the 19,500 mark and was set for its lowest closing in a month. But the last minute inflows and subsequent rebalancing saw the index end the day near Wednesday’s lows of 19,554.

What Are The Experts Saying?

Ridham Desai of Morgan Stanley believes that after two strong quarters, the broader market can give up its outperformance to largecaps as global trading conditions appear more challenged. “Given the election calendar, the realised volatility of Indian stocks may have troughed in the short run,” he wrote. Desai expects the upcoming September quarter to be softer sequentially in terms of earnings but the December quarter may surprise on the upside due to the festive season and the upcoming cricket world cup.

“Asian equities’ outlook is mired in stickier-than-anticipated inflation, a strengthening dollar, and rising volatility,” said JPMorgan’s Mixo Das. “As markets grapple with an environment of higher-for-longer rates, we see global equities, and particularly long duration Growth stocks, coming under more pressure,” he added.

What do the Nifty 50’s Charts Indicate?

“Markets were range bound in last few sessions and one was anticipating a sharp fall, and the weak global factors have been already weighing on investors’ minds for quite some time,” said Shrikant Chouhan of Kotak Securities. “If US dollar and bond yields maintain their ascend, the downward trend may continue for some more time,” he added.

Nagaraj Shetti of HDFC Securities expects more pain ahead for the Nifty 50 as it has closed below its 10-weekly Exponential Moving Average, which was around 19,560. He now expects the index to fall towards its next support, which is the 20-Week Exponential Moving Average around 19,230. Immediate resistance on the upside is around 19,700.

“On the daily chart, the most recent candle has engulfed the bodies of the preceding few days candles, which indicates a negative sentiment,” said Rupak De of LKP Securities, adding that the prevailing sentiment continues to remain sell-on-rallies. He too expects the Nifty 50 to fall towards 19,250, with an immediate support at 19,450 and upside resistance at 19,600.

Nifty Bank’s Lowest Close Since September 1

The Nifty Bank, which had remained resilient through most of the session also could not escape the downward trend in the second half. With HDFC Bank and ICICI Bank already featuring among the laggards, Kotak Mahindra Bank joined that list on Thursday. Both Kotak and HDFC Bank together contributed to over half of the Nifty Bank’s fall.

Thursday’s close was also the lowest for the Nifty Bank since the start of the Month. It has now declined over 2,000 points in just eight trading sessions from the high of 46,310 it made on September 15.

Kunal Shah of LKP Securities said that the 20-DMA level of 45,000 is now a strong resistance for the Nifty Bank, with immediate upside support at 44,200. “A break below that level could trigger further selling pressure, potentially taking the index down to the 43,800 mark,” Shah said, adding that traders should maintain a sell-on-rallies approach as long as the index remains below 45,000.

The Nifty Bank still has a strong support at 44,000 – 43,800 levels and that can be a demand zone for the index, said Mehul Kothari of Anand Rathi. He expects more panic to set in if these levels also break on the downside. He expects fresh upside to resume only after the index crosses 45,000.

Worst over for MCX?

Shares of MCX ended at a record high on Thursday after the company confirmed a CNBC-TV18 newsbreak of moving to a long-awaited new tech platform in the first week of October.

“First a disclosure that we have investments in MCX. And I think amongst the entire exchange space, MCX perhaps has the best dynamics in terms of risk return. The more important story in MCX is the growth of options trading and earlier, I think options was eating into the value of the futures trading but now I think futures volume has stabilized,” Dipan Mehta of Elixir Equities said.

“I think the profits over the next two, three quarters can jump many fold because of these developments. So very positive and MCX and I think the price rise, which we have seen, seems to be fully justified,” he added.

What are the F&O cues indicating?

Nifty 50’s October futures added 42.6 percent or 28.96 lakh shares in Open Interest. They are now trading at a premium of 113.55 points. On the other hand, the Nifty Bank October futures added 68.2 percent in Open Interest or 8.93 lakh shares. Nifty 50’s Put-Call Ratio is now at 0.98 from 1.07.

Both Delta Corp and India Cements are out of the F&O ban list from today’s session.

Nifty 50 on the Call side for October 5 expiry:

For next Thursday’s expiry, the Nifty 50 call strikes between 19,700 and 20,300 have seen Open Interest addition. Interestingly, the 21,500 strike call for next Thursday has also seen addition in Open Interest.

Nifty 50 on the Put side for October 5 expiry:

On the put side, the Nifty 50 strikes of 19,200 and 19,500 have seen Open Interest addition for next Thursday’s expiry. The ones that have also seen addition in Open Interest are put strikes of 18,800 as well as 18,000.

Lets take a look at the stocks that added fresh long positions on Thursday, meaning an increase in both price and Open Interest:

Lets look at the stocks that added fresh short positions on Thursday, meaning a decrease in price but increase in Open Interest:

Here are the stocks to watch out for ahead of Friday’s trading session:

What Are Global Cues Indicating?

Markets in the Asia-Pacific have opened mostly higher on the final trading day of the week and the month, mirroring overnight moves on Wall Street.

The Nikkei is up 0.1 percent, while the Topix is down 0.2 percent. South Korea and Mainland China’s markets are closed due to a holiday.

Futures of the Hang Seng are also indicating a strong start to the trading session.

Benchmark indices on Wall Street ended mostly higher on Thursday ahead of the personal consumption price index release on Friday.

The Dow Jones ended 0.35 percent higher, while the S&P 500 added 0.6 percent. The Nasdaq ended 0.8 percent higher.

Foreign investors continued to remain net sellers in the market, while domestic investors continued to be buyers.