Nifty closed at 9,788 on Friday. It was slightly weaker and is likely to remain in this range for some more time, with support at 9,636 and 9,425 and resistance at 9,844 and 9,950. Major domestic macro data is weak and along with a weak technical set-up of the indices, it also suggests bears may continued to rule the market.
Trucks returning over the Friendship Bridge, from the North Korean town of Sinuiju to the Chinese border city of Dandong. North Korea's antics are making the markets jittery. Pic/AFP
International investors are continually offloading their positions in both equities and bond markets. Domestic investors do lend their support, but their purchases are also limited. Sustained IPO in the primary market has also dampened them. Put together; at the current geo-political scenario investors may stay on the sidelines. The only positive news is that global markets including US markets, are still positive and can give rise to some hope of recovery.
It is advisable to create short positions at every rise, rather than taking open long positions. Investors with a long time view can selectively pick large cap stocks at the current scenario in small quantities.
Both PSU banking Nifty and Private Banking Nifty are weak. Last week, we saw heavy sell-off in PSU banks. At the end of the week, selling was also seen in private sector banking stocks. The ongoing selling can continue in private banking stocks and minor recovery can be expected in PSU banking stocks due to the slightly over sold situation.
Nifty PSU Banking stock Index has support at 3,000 and if this level has been taken off, then it could test 2,867. Metal Index witnessed huge profit booking as expected and Nifty Metal Index could test 3,354. A decisive move below this level can cause further selling in this sector. Nifty Energy Index could fall further, but the intensity could be low this week, due to the oversold situation.
Pharma and IT are the two lone counters where we can see minor buying activities. These two sectors are directly connected with global market players, so, if there is a profit booking in the NASDAQ index, due to North Korea and US tensions, then they will have multiple impacts on the same stocks, which are available in the domestic market.
US Job data is key. This could give a clear direction for the US markets, which will be due. Job creation in September could be too far from earlier estimates. If this is so, then the US Fed may not increase the interest rate soon. Yet, if the actual number meets street expectations, then a sharp rate hike can be expected.
Last week data is interesting to analyse. Selling volumes has increased compared with buying volumes. The highest open interest of Nifty put was seen at 9,700 strike price, October series Nifty put open interest activity was seen at the strike price 9,600 and 9,500. In the case of Nifty Call options 9,700, 9,800 and 10,000 attracted a hike open interest in October.
Alex K Mathews is the founder of www.thedailybrunch.com
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