On Friday, the index opened with a gap down. Although there was an attempt to deliver an intraday recovery within a few minutes of opening, as soon as the index closed the gap, a fresh wave of selling started which threw the index to the day’s low of 17,239.85, by 11:30 AM IST. Clearly, the pressure is there from the higher levels. Now, what could be the trajectory from here?
After the index bottomed around 16,747.7 on the day the RBI increased the repo rate by 50 basis points, we have seen a good recovery to the high of 17,428.8 which was marked yesterday. That’s a good move of around 4%. During this recovery, the Nifty 50 index was never been able to breach its previous day’s low which is a healthy sign of a recovery. But today is the first time that this trend of higher lows has been negated and the index fell below yesterday’s low of 17,315.65. In fact, the opening of today’s session was lower than the previous low. That’s the first sign of fizzling out of the current recovery.
Other strong factors are coming from the currency markets. The rupee tumbled to a record low of 82.32 in today’s session which is definitely not a good sign for our markets on fundamental grounds. Also, while we were rejoicing when prices fell to US$82.5 per barrel a couple of weeks back, now these prices are up at US$94.5 per barrel. Rising oil prices also jitter the sentiments of market participants in India as they directly affect the import bill of the country.
Now coming to the charts, yesterday’s peak was made around the resistance level of 17,400. After the market broke above the resistance of 17,200, the level of 17,400 held its ground and turned the Nifty 50 from there. Technically, the 17,200 now becomes a support zone, however, a fall below this level seems possible looking at the deteriorating macro environment.
Looking at the options chain data, put writers are still cautious as compared to call sellers. The 17,500 CE for the 13 October 2022 expiry has a strong OI of 1.56 lakh contracts which would now be resistance for next week. Also, yesterday’s high of 17,428.8 lies below 17,500 making it a relatively less risky level for CE sellers. On the downside, 17,200 to 17,100 would be the support zone. The overall view on the Nifty 50 remains slightly negative as long as the rupee keeps on hitting record lows and the range for the current weekly expiry seems to be 17,500 – 17,100. As the range is only 400 points wide, violent moves are not expected by the expiry.