It was another volatile week in a narrow range; However, we have seen losses in many individual stocks while some have outperformed. Nifty’s range is getting tighter and may try to break out of this range next week before the Union Budget.
Next week will be a short week as markets will be closed on Thursday on account of Republic Day; Thus, the expiry of F&O for the month of January is scheduled for Wednesday, which may lead to volatility in the market. Global cues are also volatile and lack direction, but any major change in the global market can affect our markets as well. FII selling has eased in the last few days after aggressive selling in the first half of this month, but institutional inflows will remain key to the market direction. Third quarter earnings season is underway, so stock and sector-specific moves will continue.
Technically, Nifty is trading in a well defined trading range of 17800-18250, but it is getting tighter, so we can expect a breakout or a breakdown. The move is similar to what happened in 2022, when the Nifty formed doji candles in the second and third week of January before exploding in the fourth week ahead of the budget.
On the upside, if Nifty manages to take out the 50-DMA of 18250, we can expect a rally towards 18500 and 18650 levels. On the downside, the group of 20 and 100-DMA of 18040-17940 is an immediate demand zone, while 17800 is a sacred support level. If Nifty slips below 17800 levels then next support levels will be 17625 and 17425.
Bank Nifty is also in the well defined trading band of 41725-42725; This band needs to be taken out for further direction. If it breaks above 42725, it is likely to move higher towards 43500 and 44000 levels. On the other hand, any major weakness will be seen only with a decisive move below 41725 level.
FII long exposure in index futures is close to 50%, indicating a neutral position; However, a put call below 1 indicates the possibility of a short covering move. As per OI distribution, there is a tough fight between the bulls and bears for Nifty around 18000 level, while 42500 put writers are betting on the bullish side in Bank Nifty.
Santosh Meena is Head of Research at Swastika Investmart Limited.
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