Nifty attempted recovery from recent support

Our markets witnessed a sharp correction in last one week and have retraced more than 50 percent of the recent upmove from 19220 to 20200. The index attempted some recovery from the immediate support of 19600 on Monday, and ended on a flat note. 

Our markets have been in a corrective phase since last one week mainly because of weak global cues and long unwinding by FIIs. They have sold equities in the cash segment worth over Rs. 18000 crores in this month so far and have also reduced their long positions in the index futures segment. Their net long positions have reduced from 67 percent to 53 percent in last few days.  The Nifty index has immediate support around 19600 which is the 61.8 percent of the recent upmove. The index precisely recovered from this support in Monday’s session and formed a ‘Doji’ candlestick pattern on the daily chart. In options segment, 19500 and 19600 has decent open interest outstanding while 19800 call option has the highest open interest. Thus, 19600 will continue to be seen as the important support and if this remains intact then a pullback move could be seen ahead of the September series monthly expiry. In such a scenario, a pullback towards 19800-19870 can be seen. On the flipside, in case 19600 is broken then we could see a continuation of the corrective phase towards 19500/19435.

The Nifty Midcap index has once again managed to defend its 20 DEMA support which has not been breached since the month of April. The important support for this index is placed at 40000-39900 and only a breach below this should be seen as negative.