Dear All,
Market Outlook
The prophets of doom have been proved wrong temporarily and profits seem to be coming at least on paper to the harried investors. The run up has been fast and furious and a lot of shorts are being forced to run for cover. From the budget low of 6825, Nifty has surged ~10% this week. Strengthening Indian rupee against the US Dollar also added to the positive sentiment on the bourses.
The big event is now behind us and what lies ahead is hope that GST will sooner than later get passed and that the RBI may get into action and lower rates. With none of the feared negatives making it into the Union Budget (no increase in time frame for long term capital gains or super-rich tax or hike in basic excise), it remained more of a neutral event. The silver lining, however, was that the fiscal deficit target of 3.9% was met and target of 3.5% has been maintained for FY17. This raises expectations of a rate cut from the RBI.
But the market has to content with the fact that some selling pressure could be witnessed given the precarious situation. It would be prudent to remain cautious at this juncture and use the gains to reshuffle your portfolio instead of blindly adding positions.
Technical View
Historically, Nifty tends to make panic lows around its 200-WMA and the same trend continued this week after Nifty reversed from low of 6825 on Budget day and rallied ~10%. Level of 6825 is also the 50% retracement of the entire rally which took place from the low Dec 2011 till high of March 2015. After struggling to replicate recent momentum on Friday, index faces strong supply pressure around higher end of the current orbit i.e. 7569; fresh longs should be initiated once it sustains above the same.
F&O View
After correcting 25% percent from its all time 9119 levels, Nifty recovers to end higher by 6.5% on weekly basis. India VIX settles lower by 18.2% on weekly close. On Nifty options chain, significant OI additions seen at 7700 call and out of money put options. Maximum open interest base seen at 7500 call and 7000 put. Technically due to sharp recoveries with gaping action Nifty entered into overbought zone on intra-day charts, consider 7450 spot to act as pivot point (bullish above/ profit taking below).
Happy Trading.
Please find attached herewith India Infoline Weekly Wrap
Warm Regards,
Amar Ambani
IIFL
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