On November 22, ahead of the results of Maharashtra and Jharkhand elections, there was a rush among investors to cover short positions in NSE Nifty and Bank Nifty. This led to the highest unwinding in the November derivatives series. Unwinding of 12.23 lakh shares was witnessed in Nifty yesterday, while unwinding of 1.35 lakh shares was recorded in Bank Nifty. Due to this, sharp short covering was seen in the index.
FIIs increased their net long positions in indices
FIIs have increased their net long positions in the indices, taking their long-short ratio to 31 per cent from 25 per cent. This was the biggest change in a single day in November. Now the level of 24000 has become an important resistance for Nifty with heavy call writing. While the level of 23,500 has emerged as a strong support with heavy put writing.
There was a surge in the Indian stock market on 22 November. Oversold positions and short-covering during the recession were the main reasons for this rise. Due to this surge, the benchmark equity index rose by about 2.5 percent. Yesterday BSE Sensex jumped nearly 2000 points and Nifty reached 23900.
Bullish sentiment while maintaining caution in the market
Rajesh Palviya, Head Technical & Derivatives, Axis Securities Said that the decline in open positions and rise in prices in both the indexes are a sign of short covering. He said the positioning of FIIs reflects “bullish sentiment while maintaining caution in the market”. He said that Nifty has now reached 24300-24500. Whereas, 23500-23300 has emerged as a strong support zone.
Rajesh Palviya further said that the decisive level of Bank Nifty is at 51,000. Whereas for this, registration is visible at 52,000, 51,500 and 52,500. On the downside, support has shifted to 51,000, 50,500 and 50,000. However, he also warned that geopolitical developments or any unexpected election result could cause a reversal in sentiment.
Bullish signals from option market also
Dhupesh Dhameja, derivatives analyst at SAMCO Securities It is said that bullish signs are being seen in the options market also. The Put-Call Ratio (PCR) has increased from 0.85 to 1.15 indicating increasing bullish sentiment. He further said that for the first time in two months, there has been a huge increase in put option writing. This is a sign of bullish trend among traders. Increase in put writing at strikes 23,500 and 23,700 indicating strong buying interest at these levels.
On the other hand, maximum call writing was seen at 24,000 strike. There are 64.67 contracts at this strike. In such a situation, the level of 24,000 has now become an important resistance. Dhameja says that a decisive breakout above this level could trigger further short covering which could see Nifty move towards 24,500 which is the next resistance for it.
Now the maximum pain level for Nifty has shifted to 23,700.This is indicating limited decline in the short term. Let us tell you that this is the level at which traders can suffer the maximum loss on option expiry. Dhupesh Dhameja says that as long as Nifty remains above the important support level of 23,500, then the strategy of buying on dips will be the best strategy.
technical signals good
Technical indicators are also showing bullish signs. Nifty has regained its 200-day simple moving average (DSMA). Osho Krishna of Angel Broking That said, the 14-period RSI has broken out of the oversold zone, close to the key support located at the 200 DSMA. However, Osho advises to avoid very aggressive positions. He said, “Continuing lower highs is a matter of concern. Until Nifty shows strength by going above 24,000, the position will have to be kept light.” Osho believes that there is support for Nifty at 23,600-23,500 and immediate registration at 24,000-24,050.
BIG BROKERAGE REPORT: Goldman Sachs sees a target of 27000 in Nifty, CLSA prefers India over China.
Market ready for state election results and expiry
Analysts say that the upcoming Maharashtra and Jharkhand election results over the weekend as well as the upcoming F&O monthly expiry will be important for the market. Rajesh Palviya said the market is most likely to react to the election results of Maharashtra and Jharkhand on Monday. BJP’s victory in both the states may give a boost to market sentiment. However, its impact on the market is likely to be very short-lived. The real test for Nifty will be to survive above 24,000.
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