- In the absence of institutional flows, F&O expiry may predominate, believes Santosh Meena of Swastika Investmart
It was a week of brutal selling in the Indian equity markets amid widespread COVID fear among retail and HNI traders that led to a sharp sell-off in the broader market. FIIs flows have been slowing in the run-up to Christmas, and they are expected to dry up even more in the run-up to the New Year. Therefore, the behaviour of local participants will drive the market, and the last F&O expiry of 2022 will lead to volatility in the market. Covid worry has become an excuse for a sell-off, and its related news will continue to impact the direction of the market. Apart from that, crude oil prices and rupee movement will be other important factors.
Technically, Nifty has surrendered its 50-DMA and 100-DMA effortlessly. However, the relative strength index (RSI) is approaching oversold territory, and if Nifty manages to regain its 100-DMA of 18840, which coincides with a 50% retracement of the previous rally, then we can expect a short-covering move in the market. On the upside, the 18000–18100 area will act as a supply zone, and Nifty has to cross its 50-DMA of 18200 for any meaningful strength. On the downside, 17640, 17565, and 17425 will be the next important support levels.
Additionally, Bank Nifty has fallen below its 50-DMA and major support level of 41800, which is bad news for the bulls. 41600, on the other hand, is a short-term gap support established on November 11th. Below this, 40800 will be the next major support level. On the upside, the 50-DMA around 42200 will act as an immediate hurdle; above this, we can expect a short-covering move towards 42500/43000 levels.
If we look at the derivative data, then a put/call ratio of 0.72 is showing an oversold reading, while FIIs are biased on the short side with 56% short positions in the index futures. The OI distribution chart suggests 18000 as a stiff resistance level, while 17800 and 17500 are immediate support levels.
(Author is Head of Research at Swastika Investmart. The views and recommendations made above are completely personal and not of Mint. We advise investors to check with certified experts before taking any investment decisions)
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