Domestic equity benchmarks Sensex and Nifty 50 snapped their five-day winning streak dragged by financials and and consumer durable stocks amid mixed trends in global markets. For the week, the Nifty 50 and Sensex gained about 1.25 per cent and one per cent, respectively powered by a post-results rally in key index constituents and easing Middle East concerns.
Rising global crude prices, a depreciating rupee and persistent foreign fund outflows further weighed on sentiment, according to traders. Profit-taking also came into play as the 30-share BSE Sensex tanked 609.28 points or 0.82 per cent to settle at 73,730.16. During the day, it lost 722.79 points or 0.97 per cent to 73,616.65. The NSE Nifty declined 150.40 points or 0.67 per cent to 22,419.95.
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Despite the benchmark indices experiencing notable losses, the mid and smallcap indices showcased their strength by hitting fresh record highs and closing with healthy gains. The BSE Midcap index closed 0.83 per cent higher at 41,587.77 after hitting its fresh record high of 41,628.75 during the session. The BSE Smallcap index settled with a mild gain of 0.27 per cent at 47,239.29 after scaling its fresh peak of 47435.39.
In its derivatives monthly rollover report, domestic brokerage firm Religare Broking revealed that Nifty 50 closed at around 22,600 after volume-weighted average price (VWAP)-based buying activity was witnessed in the second half of the day.
In its report, Religare highlighted that at 96 per cent, realty is the sector where the highest rollover was witnessed in the April series. Whereas at 87 per cent, telecom is the sector where the lowest rollover was witnessed.
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Nifty, Bank Nifty derivatives summary
Nifty futures have rolled at around 65 per cent compared to 70 per cent which is lesser with respect to the previous series. The Open Interest (OI) for the new contract is higher by around 2 lakhs with respect to the last month contract implying more long positions, according to Religare Broking.
Bank Nifty futures rolled at 74 per cent compared to 87 per cent, lower than the previous month. Banknifty futures have seen reduction of OI of around 32 lakh with respect to the last month. This might be because of the lesser positions in Bank Nifty during the April expiration.
Which stocks to invest in May series as per Religare Broking?
State Bank of India (SBI), UPL Ltd, GAIL and Infosys are the top picks for the May series, according to Religare Broking.
SBI (CMP: 805):
The stock gained over eight per cent with no major change in OI. Rollovers are less at 86 per cent indicating lesser carrying forward of previous Shorts. ”With fresh cash based accumulation, we believe stock would continue its northwards move. One should be positively biased with a stop at 740,” said Religare Broking.
UPL(CMP: 505):
After a prolonged downtrend, UPL gained over 11 per cent with reduction of some OI indicating short covering. Good delivery data and other technical parameters suggests the stock is in accumulation phase and may ultimately start moving higher. ”We believe its prudent creating Longs in the counter with a stop at 450,” said the brokerage.
GAIL (CMP: 208):
The stock gained 15 per cent in the previous series and added 10 per cent OI with higher rolls than 3-M average indicating long rolls. ”With decent activity in the last week of rollovers, we believe the stock might trade with Positive bias in the range of 192-230,” said Religare Broking.
Infosys (CMP: 1436):
The stock lost more than four per cent with 20 per cent OI addition implying as shorts. Rollovers are in line with the 3-M average. However going forward, one should hold on for fresh shorting in the stock. ”We believe stock might witness decent short covering in the days to come,” said the brokerage.
Outlook for April
Nifty Futures contract OI started with around 124 lakh compared to 122 lakh in April. Bank nifty futures have seen an OI of around 18 lakh compared to 50 lakh in April. The highest Nifty May monthly options OI is at 22,000 PE and 22,500 CE. Nifty 22,500 Call OI stands at around 50,000 contracts and 22,000 Put OI at around 70,000 contracts.
”At expiration, VIX was at around 11 per cent levels implying 670 odd points swing in the NIFTY in next 30 days,” said Religare Broking.
The brokerage believes that information technology (IT) and banking are the sectors that can outperform the index in May series. Foreign institutional investors’ (FIIs) long ratio is now at 40 per cent compared to 45 per cent previously in index futures implying more hedged positions into the May series. The IVs for options have declined marginally now at 12 per cent compared to 14 per cent implying lesser swing in May series.
Technical View: A combination of more long and some short rolls was seen in May series. For May futures with an average price of around 22,450 which becomes a pivot for the month. Until the time Nifty trades above 22,200-22,250 on spot, the index is in a buy on dips mode for the first weekly expiration.
”We expect the Nifty to find strong support at 22,200-22,250 levels for May series. On spot basis 22,200-22,800 might be the range for Nifty for first fortnight of May series,” said Religare Broking.
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”Bank Nifty had out-performed Nifty in the April, we believe it would trade in tandem with the benchmark for the upcoming series,” added the brokerage. For this series, ratio wise (Bank Nifty/Nifty) has a resistance at 2.20 and support at 2.05. The ratio between Bank Nifty and Nifty currently at around 2.15. The best support for Banknifty would be around 46,500 levels. ”We expect Bank Nifty to be in 46,500-50,000 levels for the first fortnight of May series,” said Religare Broking.
On the outlook for Nifty 50, Ajit Mishra, SVP – Technical Research, Religare Broking Ltd said, ”The intermediate volatility is normal during the earnings season and mixed global cues are further adding to the choppiness. We suggest continuing with stock-specific trading approach and utilizing dips to add quality names.”
Disclaimer: The views and recommendations above are those of individual analysts and brokering companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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