By Ruchit Jain
In the last few days, Nifty has recovered after forming a support around the 17000 mark, and has rallied mainly because of short covering. The global markets too have witnessed some recovery from their support zone as the Dollar Index entered a consolidation phase. Now, in the last couple of sessions, the INR has depreciated and has hit a record above 83, but still, the Nifty index has not registered a fresh low and is infact trading much above the recent swing lows. This hints at a positive divergence which indicates buying interest in equities.
If we look at the derivatives data, the open interest data indicates short covering in the last few days which has led to the pullback move. Amongst market participants data reported on the exchange, FII’s have been on the short side throughout the October series. But they have started covering their short positions off late as their ‘Long Short Ratio’ has improved from 15 percent to around 27 percent now.
On the flipside, the client segment has been on the long side throughout this series and has been riding the trend with long positions around 67 percent. Until we see aggressive short formations again by FIIs, the market is unlikely to witness any significant correction. In options segment, decent open interest build up is seen at 17500 call and put options and if the index continues to show strength, then the call writers could look to cover their positions.
The derivatives data does not hint at any negativity and hence, traders are advised to continue to trade with a positive bias and look for buying opportunities on intraday declines. The immediate support for Nifty is placed in the range of 17400-17300 and any dips towards this support range should be used to buy. On the higher side, 17700 -17800 would be the resistance end to watch out for. Also, since we have a couple of trading holidays in the coming week on account of the festival, option buyers are advised to trade cautiously and look for opportunities only in momentum stocks.
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(Ruchit Jain is the Lead – Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)