BackWill Nifty be able to break out of 3-week range? Key levels to watch
Nifty is in a tight range where the cluster of 100-DMA (16,835) and 200-DMA (16,990) is acting as a support zone
PremiumIndian equity markets have been in a range for the last three weeks. The market will look for direction from Q2 earnings and global cues. Earnings season kicked off with IT earnings. Next week, many financial and cement companies will come out with their Q2 results. Global markets are quite volatile, which may lead to volatility in our market as well. In terms of global factors, macro numbers from the United States and China will be important. The movement of US bond yields, the dollar index, and crude oil will be other global factors to watch out for. FIIs are aggressively selling in the cash market, but DIIs are providing good support to the market. It will be important to see institutional flows from here on.
If we look at the derivative data, then the short positions of FIIs in the index future have come down to 77% from the record level of 87%, but it is still in oversold territory. The Nifty put-call ratio is sitting at 0.91, which is also an oversold level. The volatility index, the India VIX, has again slipped below its 200-DMA, which is providing comfort to the bulls.
Technically, Nifty is in a tight range where the cluster of 100-DMA (16835) and 200-DMA (16990) is acting as a support zone while the cluster of 20-DMA (17240) and 50-DMA (17490) is acting as a supply zone. On a weekly time frame, the 20-week SMA is proving to be strong support for the Nifty. Any decisive move from the 16800-17500 band, will dictate the further direction of the market.
Bank Nifty is also in a tight range of 38500-39500 where it needs to close above 39500 for a major short-covering rally towards 40300. If it slips below the 38500 level, then there will risk of selling pressure toward the 37500-37250 zone.
(Author is Head of Research at Swastika Investmart. Views expressed is completely personal and not of Mint)
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