Nifty shorts still intact, avoid contra bets until any reversal signs emerge; support in 16500-16400 range

Nifty shorts still intact, avoid contra bets until any reversal signs emerge; support in 16500-16400 range

By Ruchit Jain

Nifty started the May series on a low open interest base and the stronger hands (FIIs) had rolled more short positions in the index futures segment. At the start of the new series, we did not witness any long formations as market participants were awaiting a decisive breakout beyond the recent consolidation range of 16800-17400. The U. S. Fed meet outcome was scheduled on Wednesday evening and it was anticipated that this event could lead to some conclusive breakout in the index. However, ahead of the expiry day, RBI came out with a surprise rate hike of 40 bps and this led to a sell-off in Nifty as well as Bank Nifty.

If we look at the sectoral indices, most of the sectors have seen a sell-off with the short formation in many individual heavyweights. Thus, the data is bearish and one should avoid contra bets until any reversal signs are seen. Since FIIs have much of their positions on the short side in index futures, any covering from them could be the leading signs of reversal and hence traders are advised to track the same. The immediate support for Nifty is placed in the range of 16500-16400 followed by 16100-16000 range while 16800 – 17000 is the immediate resistance range.

(Ruchit Jain is the Lead – Research, 5paisa.com. Views expressed are the author’s own. Please consult your financial advisor before investing.)