Markets started on a negative note

Taking cues from the U.S. markets and the SGX Nifty, our markets started the day on a negative note on Monday. However, the market participants took this gap down as a buying opportunity, and recovered from the lows, and consolidated within a range. The index finally ended a tad below 18500 without much change from Friday’s close. 

Our markets have experienced some volatility in the last week, which appears to be the result of some profit-taking on long positions. FII’s have unwound some of their long positions due to which their ‘Long Short Ratio’ has recently declined from 75 percent to around 57 percent. However, the index has retraced the recent up move from 16800 to 18880 by 23.6 percent. The market breadth has not deteriorated much and thus, it would be crucial to see if the index recovers from this retracement support. The banking index has managed to hold well as it has shown relative outperformance and has supported the benchmark. In the options segment, 18500-18300 put options have decent open interest built up while the 18700 call option has the highest open interest. Hence, 18450-18350 would be seen as an immediate support range for the index and till this holds, traders can look for stock-specific buying opportunities. On the higher side, 18600-18700 would be seen as immediate resistance.

During the week, the U.S. Federal Reserve will be announcing its policy outcome, and how the global markets react to the same will be the crucial event to watch out for.