The market has its logic and every trader have to follow its path. With expectations of lower reading of the US CPI, the Indian market was supposed to trade flat at least but trader lower during the later phase of trading as caution and selling in IT stocks.
As we discussed yesterday Banks found selling from morning gap and selling in BANK NIFTY was witnessed around 51400-51500 zone and dropped below 51000 near close. The breadth of BANK NIFTY was negative with 9 decline and only 3 advances. NIFTY also witnessed negative breadth with selling in IT Space, with 34 declines and only 16 advances. The NIFTY Index today formed another indecisive pattern and settled near its 20 days EMA level. Now one thing is very clear as long as NIFTY does not hold above 25120-130 levels, further upside is less likely.
Despite the US CPI data showing a positive trigger, one should be careful with the levels and any gap up may not be an indication of buy. The immediate support for NIFTY is near the 24880-900 zone and if the level is taken out, pls get ready to see a slide. The market works against conventional wisdom, hence careful trading is mandatory. The US data is positive however the option chain data and chart are negative. Today NIFTY index witnessed sharp Call writing and PCR (Put call ratio) dropped to 0.60.
From the data point, the annual inflation rate for US slowed to 2.5 per cent in August from 2.9 per cent in July, and below forecasts of 2.6 per cent. However only surprise is the core inflation figure, as Consumer Price Index ex-food & energy read at 3.2 per cent, unchanged from previous months. The global market showing mixed reaction as of now with the US dollar rising as short cover and equities and commodities are correcting.
Among these factors, one should stick to buy on dips on favorite sectors. Despite weakness in overall markets, Bajaj Auto gained over 4 per cent intraday while consumer durable finance also stayed moderately positive. IT witnessed some correction however we continue to maintain our bullish stance on IT Stocks for short to medium term.
We recommended this in yesterday's write-up and continue to stay with the view “For the coming weeks for cash, one should keep on looking at Auto stocks, Consumer durable stocks, Consumer durable finance, FMCG for Festive demand for short-term swing trading along with IT. Banks are still wait and watch mode.
In commodities, natural gas is trading near its resistance zone of 190-195 and sustained trading above the zone may open room for upside. However, failure at the resistance may push back lower towards 185 levels. In crude oil, the market is at oversold zone and witnessed recovery and trading slightly below the 5,700 level. Crude oil bull call spread is intact and one may see buying crude oil options at dips. In case of recovery we may see levels 5720,5750 and 5800 going forward. The crucial support is pegged at 5500-5550 zone as of now.
For NIFTY tomorrow, one can look forward for selling on a breakout below 880-900 zone. In bank Nifty one can expect sideways to negative with selling zone at 51300-51440. In Midcap select, the crucial support is placed at 13000 mark with immediate resistance at 13170-190 zone. Shall recommend few stocks with targets and stop loss from next week onwards.
The report is being prepared by Bitupan Majumdar, an independent SEBI registered research analyst with registration code INH30006962. Please consult your financial advisor before making investment decision.
