Indian equity markets witnessed profit-taking after the Nifty crossed the 18000 mark and the Bank Nifty hit a fresh all-time high as global cues were not supportive at all. We were showing resilience despite weak global cues but we can’t remain isolated for long. As a result, traders booked out some profit over the weekend. The global markets are looking nervous after US inflation numbers, which have caused the dollar index to hover around 110. US 10-year bond yields are at a multiyear high of 3.5%, and now everyone eyeing the outcome of the upcoming US FOMC meeting, which is scheduled for September 22nd. On the same day, the Bank of England will announce its interest rate decision.
Apart from this, the institutional flows will play a critical role because foreign investors have turned sellers after continuous buying for the last month. Domestic institutional investors are also showing some reluctance at higher levels.
Technically, Nifty is facing resistance around 18100 level and forming a kind of double top formation. It has slipped below its 20-DMA which is a sign of caution. On the downside, 17500/17300 are immediate and strong support levels while 17150-17000 is a sacrosanct demand zone at any meaningful correction. 17150 is a previous swing low while 17000 is a 200-DMA for the Nifty.
Bank Nifty witnessed a profit booking after hitting a fresh all-time high of 41840 but managed to end above 9-DMA of around 40500. If it manages to hold the 40500 level then its outperformance will be continued while if it slips below 40500 then 39700 will be the next important support level.
If we look at derivative data then the put-call ratio has slipped to an oversold level of 0.76. Therefore there is a probability of a bounce-back from the 17500-17300 zone. Short positions of FIIs in the index future are also at the low level of 28% therefore we have a scope of short covering.
Santosh Meena is Head of Research at Swastika Investmart Ltd.
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