Saturday, May 15, 2010

Weekly Outlook Indian Stock Market (17 - 21 May)

High: 5212.70
Low: 5026.60
Close: 5093.50
Change: 75.45
RSI (14 Days): 51.51
Pivot: 5126
Support: 5039, 4984
Resistance: 5180, 5267

Nifty ended at 5,093.50 marks after making an impressive start in this week and managed to close with a gain of 1.5%. The Nifty May futures ended at 5069.30 with a discount of 24.20 points. If we look at the derivatives data we can see that Nifty future prices ended in the negative territory along with decline in the cost of carry and addition of open interest, this is an indication accumulation of fresh short position at this level. For the coming week, Nifty is likely to face resistance at higher levels of 5,150 to 5180 level whereas on the downside support is seen at 4,900 to 4,960.
  • The Put-Call ratio of open interest increased during the week, closing at 1.12 levels. The options concentration has seen at 5,200 – 4,900 strikes Put option.
  • The Volatility Index (VIX) came down initially during the week however moved higher and closed at 26.53%. Market participants should be watchful at current levels as any more up move in volatility index may trigger more downtrend in the markets.
  • FIIs were net buyer in index futures to the tune of Rs.3,608.06 crore along with marginal increase in the OI of 0.21% mainly due to squaring off of short positions and in the options index FII witnessed a further incline in OI along with a net buy of Rs 3,771.27 crore along with incline in PCR indicating a bearish outlook.
The overall mood continues to be cautious with downward bias as global markets cues are critical. Euro zone debt worries remain in focus as investors remained cautious that austerity measures taken by countries such as Spain and Greece to tackle their debt will hurt economic growth in the long term. So overall trend indicate negative bias, but any positive trigger may necessitate existing short covering thus enabling sharp upward move. It is expected that Nifty will take next support near 200 DMA at level of 4,960.

During the week, most of the open interest builds up in the range of 5,200 to 4,900 Put, while, on the flip side, maximum open interest accretion was seen in 5,200 – 5,400 Call as aggressive Call writing witnessed at these level. 5,100 and 5,000 strike Put added 1.15 lakh and 5.21 lakh shares respectively in OI on Friday. On the Call front 5,300 and 5,200 strike Calls witnessed addition of 6.87 lakh and 15.76 lakh shares.

Nifty is expected to remain within the range of 4,850-5,200
Nifty started the week with strong positive tone. On the very first day of trading week Nifty showed a significant rally of 160 points after USD 1 trillion European Union bailout package triggered rally in Asian and European markets. But on next trading day of week Nifty paired its some previous day gains in early hours of trade due to lower than expected IIP numbers outcomes, however Nifty and Sensex able to recover on the same day and closed in green tracking positive European counterparts in second half. For the rest of week, Nifty remained volatile and choppy. But on the very last day Nifty fell sharply due to lower than expected job data reported in US which triggered selling in global markets including in India. Technically Nifty last six day chart has formed an inverted W shape with support at 5,000. Momentum indicators MACD is showing negative divergence. RSI and Stochastic oscillator is also showing negative trend of Nifty and all the momentum indicators are currently hovering in deep oversold zone. We are expecting Nifty to touch 5,000 mark in next week. At 5,000 Nifty has very strong support, we advice investors to go long once Nifty touched this psychological mark.

Thanks and Regards

S&P Wealth Creators

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