May27 , 2022

After Rbi Shock, Is There More Pain Ahead For Nifty50?

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The RBI’s out-of-cycle move to hike the key lending rate as well as the amount of money commercial banks keep parked with it sent shockwaves to Dalal Street on Wednesday. Analysts say the timing and magnitude of rate action along with the unexpected increase in the cash reserve ratio spooked the bulls.

All sectors bled on the Street as investors across the globe braced for the outcome of the Fed’s scheduled policy review, due late on Wednesday. 

What do the charts suggest for Dalal Street now?

The Nifty50 has formed a long bear candle on the daily chart as it decisively gave up important support at 16,900-16,800 levels, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

The chart pattern also suggests a downside breakout of the index’s broader high-low range of around 17,400-16,900, which is “not a good sign and could spell more in the short term”, he said.

The RBI has created a stir in the market ahead of the result of the Fed meeting in the US. The benchmark index’s slide below the crucial level of 16,800 can be extended all the way to the 16,400-16,200 zone in the near term, warned Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.

He sees the biggest hurdle at 16,800-16,900 and advises reducing weak long positions near 16,800 and taking contra positions only around 16,200 and below.

Here are key things to know about the market before the May 5 session:

At 7:40 am on Thursday, Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty index — were up 152 points or 0.9 percent at 16,841, suggesting a stronger start ahead on Dalal Street.

Asian shares tracked Wall Street higher amid thin trade after the US central bank raised interest rates by a widely-expected 50 basis points and sounded a less hawkish tone than some had feared. MSCI’s broadest index of Asia Pacific shares outside Japan was up 0.8 percent in early hours.

China’s Shanghai Composite was up 0.6 percent, Hong Kong’s Hang Seng up 1.2 percent and Singapore’s Straits Times flat. Many other markets were shut for Labour Day holidays.

S&P 500 futures edged 0.1 percent lower. On Wednesday, the three main Wall Street indices surged, with the S&P 500 recording its biggest one-day percentage gain in nearly two years. The S&P 500 rose three percent, the Dow Jones 2.8 percent and the technology stocks-heavy Nasdaq Composite 3.2 percent.

What to expect on Dalal Street

HDFC Securities’ Shetti pointed out that the level of 16,800 has been instrumental in a sustainable trend in the 50-scrip index over the past few months. There is a high chance of steep weakness in the near term.

“This anticipated market action could open the possibility of a larger degree of lower bottom below 15,670 in the next few weeks. A bounce from here could find strong resistance around 16,800-17,000 levels, with the immediate downside target to be watched around 16,200,” he said. 

Key levels to watch out for

The 50-scrip index sank further below all of its six main simple moving averages in a highly bearish sign. It is 560 points below the 200-day mark:

Period (No. of sessions)

Simple moving average
5 17,026.5
10 17,098.9
20 17,352.2
50 17,090.3
100 17,279.6
200 17,237.8

Mohit Nigam, Head-PMS at Hem Securities, brought down his resistance and support levels for the 50-strong benchmark by 200 points each:

Index Support Resistance
Nifty50 16,500 17,000
Nifty Bank 34,500 36,000

FII/DII activity

Foreign institutional investors (FII) net sold Indian shares worth Rs 3,288.2

crore on Wednesday, according to provisional exchange data. On the other hand, domestic institutional investors (DIIs) net bought shares worth Rs 1,338 crore.

The maximum call open interest is at the strike of 17,000, with 1.7 lakh contracts, and the next highest at 17,200, with 1.5 lakh contracts, according to exchange data. The maximum put open interest is at 16,500, with nearly 89,000 contracts, and the next at 16,000, with more than 88,000 contracts.

This suggests immediate resistance has shifted by 500-odd points to 17,500, and immediate support placed only at 16,500.

Long build-up

Here are five stocks that saw an increase in open interest as well as price:

Symbol Current OI CMP Price change OI change
TATACHEM 51,13,000 1,041.75 10.63% 19.11%
CANFINHOME 32,02,875 638.15 7.35% 11.81%
ALKEM 2,32,800 3,276.90 0.26% 8.42%
GNFC 32,12,300 836.5 0.49% 7.65%
HONAUT 5,010 39,912.50 0.09% 6.59%
Symbol Current OI CMP Price change OI change
ASTRAL 4,86,200 2,063 -4.32% -12.39%
ASHOKLEY 3,35,74,500 126.5 -0.71% -6.34%
PERSISTENT 4,89,900 4,156 -3.93% -4.23%
HEROMOTOCO 33,99,000 2,492.05 -0.77% -4.22%
HAVELLS 48,07,000 1,290 -1.98% -3.98%

(Decrease in open interest as well as price)

Short covering

Symbol Current OI CMP Price change OI change
HINDPETRO 1,36,26,900 273.95 1% -8.38%
PETRONET 1,67,16,000 208.4 2.13% -6.10%
LAURUSLABS 80,28,900 595 1.88% -5.15%
ITC 8,71,61,600 262.65 1.33% -3.69%
TATAPOWER 9,83,77,875 249.35 2.72% -3.40%

(Increase in price and decrease in open interest)

Symbol Current OI CMP Price change OI change
DIXON 5,43,250 3,965.50 -7.77% 39.42%
ESCORTS 27,80,800 1,590 -3.15% 37.82%
AARTIIND 22,84,800 849.05 -4.64% 16.63%
MCX 20,60,100 1,432 -0.03% 15.82%
METROPOLIS 2,92,000 2,269.20 -3.42% 11.64%

(Decrease in price and increase in open interest)

A total of seven stocks on the BSE 500 — the bourse’s broadest index — hit 52-week highs: Indian Hotels, Mahindra Lifespace, Mangalore Refinery, NLC India, Swan Energy, GHCL and Sumitomo Chemical.

52-week lows

A dozen scrips hit 52-week lows.

3MINDIA RALLIS SPICEJET
HDFCAMC RBLBANK SUDARSCHEM
INFIBEAM SANOFI TATACOMM
NAUKRI SOLARA ZOMATO

The India VIX — also known as the fear index — surged 7.9 percent to settle at 21.9 on Wednesday, its biggest jump since April 25.

First Published:  IST



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