“We may see further consolidation in the index on Thursday; however, volatility will remain high due to the scheduled weekly expiry,” says Ajit Mishra, VP – Research, Religare Broking.
After starting on a positive note, Indian market on August 11 failed to hold on to the momentum and closed flat. The broader market also recovered some losses to close in the red but below 1 percent.
Let’s look at the final tally on D-Street – the S&P BSE Sensex closed 28 points lower at 54,525 while the Nifty50 was up 2 points at 16,282.
Broader markets recovered after BSE clarified on the circular it issued to curb volatility in the small & midcap stocks that have a market capitalisation of less than Rs 1,000 crore.
“Benchmark indices closed on a flat note amid high volatility. Midcaps and Smallcaps have recovered sharply after BSE’s clarification in the new rule for “Add-on Price Band Framework”. This new rule had triggered a major sell-off in smallcap and midcap stocks today and yesterday,” Mohit Nigam, Head – PMS, Hem Securities, said.
“We believe that this new rule is limited to only a few illiquid stocks and it would not have any significant negative impact on the overall market,” Nigam added.
The expert further said that these small shakeouts are part of a bull market and it may give us a good opportunity to accumulate quality stocks in dips. On the technical front, immediate support and resistance for Nifty 50 is 16,100 and 16,400 levels, respectively.
On the sectoral front, buying was seen in metals, power, energy, and oil & gas stocks while selling pressure was visible in healthcare, banks, consumer durables, and finance stocks.
India VIX moved up marginally by 0.10% from 12.70 to 12.71 levels. Overall lower volatility indicates that bulls are holding the command and declines are being bought.
On the options front, the maximum Put OI is at 15,000 followed by 16,000 strikes while the maximum Call OI is at 16,500 followed by 16,300 strikes. “Option data suggests a broader trading range in between 16,000 to 16,500 zones while an immediate trading range in between 16,150 to 16,400 zones,” suggest experts.
Here’s what experts suggest investors should do on August 12:
Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services
Nifty formed a Bearish candle with a long lower shadow indicating declines were being bought smartly.
Now, the index has to hold above 16,250 zones to witness an up move towards 16,400 then 16,500 zones while on the downside, support is intact at 16,200 and then 16,150 levels.
Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas
After a positive start on August 11, the Nifty moved down to test its short-term support zone of 16,200-16,150. Over there the index witnessed strong buying support. Also, the index dipped into a recent gap area of 16,176-16,146 and filled it partially.
The bulls rushed in over there and pushed the index higher. As a result, a sharp decline in the first half of the session was followed by a significant recovery in the second half.
Structurally, the Nifty continues to stay in the brief consolidation thus keeping the larger bullish stance intact. The current sideways action is expected to be followed by the next leg up, which will take the Nifty to 16,400 in the short term.
Sachin Gupta, AVP, Research at Choice Broking
Technically, the Nifty index has been trading in a range with the support of 16,200 levels as in the last three trading sessions; we witnessed closing above the 16,200-mark, which acts as immediate support for the counter.
Furthermore, the Index has indicated a positive crossover between 9 & 21 days EMA, which supports upside movement in the counter.
A momentum indicator RSI & MACD is showing positive strength on the daily chart, which indicates a further bullish move. At present, the Nifty index has immediate resistance at 16,360 levels while downside support shifted higher to 16,200 levels.
Ajit Mishra, VP – Research, Religare Broking Ltd
We may see further consolidation in the index on Thursday; however, volatility will remain high due to the scheduled weekly expiry. The recent correction in the broader indices viz. midcap and smallcap have turned the participants cautious.
We reiterate our view to prefer index majors and quality midcap for short-term bets until the broader market stabilises and suggest maintaining few short positions also.
Investors, on the other hand, should not worry about the recent correction and use this phase to accumulate quality stocks on dips.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
