Wednesday, May 18, 2011

Nifty may continue to trade with bearish bias

Lower-than-expected results from SBI worsened market sentiment. SBI broke the major support of 2,600, where the stock had seen a hefty Put build-up in the past couple of weeks. This led to panic selling and the stock was reeling near the day's low of 2,415. Nifty heavyweights, like Infosys , Reliance and now SBI, have already declared below par results and may not witness immediate bounce.

Hence, the coming up L&T results will hold the key for further index movement. Nifty May 5500 Put at last started to witness closure of open interest resulting in weakness near 5500. The rising open interest at 5500 and 5400 Call options indicates Nifty may continue to trade with bearish bias.

The subdued movement in the Nifty may drag it till 5300-5340 levels. A close below 5300 may result in significant downsides. On the up-side, 5500 may remain a major resistance level. A move above 5500 may induce short-covering near expiry.

BankNifty has broken the major support of 10900 and may find immediate support near 10400. Private banking stocks have also added open interest along with SBI. If the support is not lent, then the situation may worsen for Bank Nifty.

Despite the market fall, India VIX, the measure of investors fear, has not moved up suggesting market participants are not expecting any major directional movement. However, if this index moves beyond 23 levels, it may result in sharp directional moves. On the institutional front, FIIs have remained net sellers in index futures so far which is seen in the sustained increase of open interest in the Nifty and Bank Nifty Futures along with price decline.

Defensive sectors, like FMCG and Pharma, may witness buying. Select pharma stocks, like Lupin, Sun Pharma , and FMCG heavyweights, like ITC and HUL , have already shown signs of increasing buying interest. Metal stocks are trading near major supports. However, the key would remain with the global commodity prices. For further cues, traders can also watch out the coming up events like India GDP figures.
Source : ET

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