Markets are expected to remain choppy in the near term

The Nifty continued a gradual recovery from last weeks’ low and it added almost half a percent on Monday to end just below 19600. However, the banking stocks relatively underperformed and rather the banking index consolidated in a range to end on a flat note.

Last week, Nifty registered a low around the 40-day EMA around 19300, and the index has witnessed a pullback of about 300 points from there. However, the midcap stocks are still witnessing a buying interest and thus, the midcap index too is outperforming and is again close to new highs post some pullback move in the last week. The buying interest in the broader markets indicates that the uptrend still remains intact. However, we would like to see some bullish data and the index to surpass some important hurdles before concluding that the corrective phase is over. In last four months, our markets had rallied mainly because of buying from the FII’s in the cash segment and in the index futures segment too; they had traded with a positive bias during the last series. However, they rolled over only 58 percent of their long positions in the August series and post that they have further lightened up longs and formed fresh short positions as well. Their ‘Long Short Ratio’ has reduced to just 44 percent which means they have about 56 percent positions on the short side. This negative data has led to the correction but technically, this correction just seems to be a corrective phase within a broader uptrend as the broader markets have not witnessed any significant sell off and stock specific buying interest could still be seen. Hence, we expect the markets to remain choppy for some time and do not expect a momentum like we had seen in last couple of months.

In the options segment, traders have added positions in 19500 and 19400 put options of this weekly series which is the immediate support zone. On the higher side, high open interest is seen at 19600 and 19700 call options. Markets are expected to remain choppy in the near term and only a move above 19700 will confirm a continuation of the uptrend. Hence traders are advised to look for stock specific opportunities in the market as stocks are outperforming which provides a good trading opportunity there.