The ending of the week turned out to be extreme lacklustre for the domestic markets. Initially after yesterday’s fall the index NIFTY spot traded in a narrow range. During the process, the index attempted to clear the 7800 mark but in line with our view it failed to sustain at higher level. However, in the final hour of the session the markets lost ground and the index sneaked below yesterday’s low of 7767 to close near 7750 mark with a loss of 34 odd points. Although the chart structure was very bearish but the market was saved by sharp upticks in the heavyweight ITC during the final minutes. At last, the benchmark indices closed with week almost a percent lower from its previous weekly close.
On the global front, European indices like FTSE (+1.27%), CAC (+1.02%) and DAX (+0.79%) were trading with decent gain while the time the report was made.
The Asian Indices like NIKKIE (+0.54%), HANGSENG (+0.80%) and SHANGHAI (+0.67%) displayed a steady trend in today’s session.
On the sectoral front, once again we witnessed a dominating move from the bears as most of the indices except NIFTY FMCG (+0.47%) and NIFTY MEDIA (+0.08%) closed in negative terrain.
From the list of losers, NIFTY PHARMA (-1.56%) stocks corrected the most and were followed by NIFTY REALTY (-1.35%) and NIFTY PSU BANK (-0.94%) stocks.
The broader markets remained under stress as the MID100 (-0.53%) and SML100 (-1.33%) indices ended with significant loss.
In the currency market, after more than seven weeks we witnessed a breakout in the USDINR from the range of 66 – 67 indicating weakness in INR.
On the stock front, ITC rallied during the end of the session after the company's board recommended 1:2 bonus issues of shares. On the other hand, Aditya Birla Nuvo tumbled after the company reported weak Q4 earnings during trading hours today, 20 May 2016.
FII’s activity
F&O Segment: On the Derivative front FII’s have been net seller for the third consecutive day to the tune of 784 cr. The provisional data suggest that, they have sold 45 cr. in the Index Futures with a fall in open interest, (liquidation of long & short positions). Also they sold 566 cr. in the Index Option (fresh CE writing). At the same time they bought 140 cr. worth Stock Futures (liquidation of fresh long & majorly short positions).
Index Option Tracker
The Call PUT concentration is at 8000 strike CE with an open interest of 94.73 lakh shares. On the other hand, highest PUT base again shifted to 7700 strike with 52 Lakh shares.
In the May series, CE options saw addition of 3.24 Lakh shares in open interest with a rise in price; on the other hand PE option liquidated 9.96 Lakh shares in open interest with a fall in price.
The highest open interest activity was observed in the 8000 -- 7900 strikes CE with an aggregate open interest of 1.75 cr. shares, on the flipside highest PE activity was seen in 7700 – 7800 strikes to the tune of 1.00 cr. open interest.
The 7800 strikes CE added 7.73 Lakh shares; while on the put side addition was seen 7600 strike to the tune of 2.46 Lakh shares.
Whereas unwinding was seen in 8000-8200 strikes to the tune of 10.16 lakh shares, on the other hand 7800 & 7700 strike PE witnessed unwinding to the tune of 1.39 Lakh shares & 4.76 lakh shares respectively.
Technical Outlook
Finally Nifty registered breakdown from ‘contracting triangle’ pattern and filled the positive gap witnessed on 9th May 2016. The benchmark index closed below its 200 DMA as well as short term moving average, suggesting near term weakness. Even smoothened momentum indicators have registered swing low breakdown, showing early signs of short term weakness.
Going forward, a sustainable move below 7730 can go to further weakness in the market. Below 7730, Nifty could test 7680 – 7650. More and morw weakness will see only close below 7650 mark else it could test its resiresistance level of 7830 – 7880 and then to 7940 levels again
Traders can trade with levels only and wait for confirmation
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