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§ Nifty opened on a weak note owing to negative cues from the Asian markets, and the selling persisted throughout the day, except in the last hour where some covering was witnessed that managed to keep the index afloat above the 6000 mark. The crucial support of 6040 was broken that led to some severe selling pressure during the day. Momentum oscillators on hourly charts have deteriorated and are in sync with daily oscillators with a sell signal. Market wide breadth continues to be in favor of declines. Nifty stocks’ breadth was pathetic at 1:4. Nifty is now trading at the lower end of the range of 5965-6165, and hence one needs to wait out before taking an action on the index trade as the volatility will be high due to the monthly derivatives expiry. Risks on the downside have increased on deteriorating price action, momentum, and breadth indicators. In case of a break and close below 5965, the downside opens till 5840. Immediate upside is likely to be capped by 6075-6125.
§ Realty, FMCG and Banking stocks contributed most to the fall; Metals and Auto shares were the only ones that bucked the otherwise bearish session. Financial heavyweights and Oil & Gas heavyweights barring RIL along with weakness in IT stocks hold the key to near-term market activity. We continue to favor RIL above the 1100 level and recommend a conviction buy setup on Tata Steel at current levels for an upside potential of 10%.
Bullish Setups: RIL, RCAPT, TATA, CIPLA, MM.
Bearish Setups: SESA, BPCL, HDFCB
§ Most Asian and European indices ended lower for the second day in a row indicating a near term downward pressure on equities. A test towards the daily averages is likely on these indices, where bargain buying is likely to occur. DXY has moved smartly higher form the crucial 76 mark. 78.50 is the expected target for the index where the recovery is likely to fade. Gold has begun the next leg lower which is expected to be sharp and swift and has the potential to take the precious metal down to $1270 in the short-term.
§ Interesting chart setups: RIL, TATA, CIPLA, SESA
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