FIIs turn net buyers in equities, buying interest seen in index heavyweights

Nifty started the week with a huge gap-up post the state election outcome over the weekend. The index extended its up move at all-time highs and ended the day just below 20700 with a couple of percent gains.

The markets gave a thumbs-up to the state election results over the weekend and the index heavyweight stocks witnessed significant buying interest which led to a gigantic up move in the benchmark. The Nifty rallied by a couple of percent while underperforming late, witnessed a sharp momentum to recover from the recent underperformance, and also registered new all-time highs as it rallied by more than three and a half percent. FII have turned net buyers in the cash segment recently and thus, the heavyweights are witnessing momentum. They had also rolled over lesser short positions during the monthly expiry. Also, the Midcap and the Small Cap indices are in the overbought zone, thus the risk-reward seemed more favorable in the large-cap names and this rotation could continue in favor of large names going ahead. Now the Nifty has achieved the levels of 20600 which was the 127 percent retracement level of the previous correction. The next retracement level at new highs is now seen around 21080. The momentum readings on the lower charts are overbought but since we are witnessing a strong trending up move, it is better not to pre-empt any reversal as of now. Rather one should look for opportunities in the direction of the trend with proper risk management. Open interest addition was seen in 20600-20500 put options while the highest open interest amongst call options is at 21000 strike. The immediate support for Nifty is now placed around 20380 followed by 20200.