F&O outlook- Nifty may continue to march towards 17900-18000; focus on thematic moves, support at 17600

F&O outlook: Nifty may continue to march towards 17900-18000; focus on thematic moves, support at 17600

By Sameet Chavan

US markets have been in a declining mode since the last couple of weeks and Wednesday night, they rebounded sharply due to their overbought condition. We being the outperforming market of late, was in search of a small push sentimentally and sharp bounce back globally provided the much needed impetus to start the session with a decent bump up. In fact, a small bout of profit booking around the mid-session was absorbed with an ease. Eventually, Nifty concluded the weekly expiry around the 17800 mark by adding a percent to the bulls’ kitty.

This is exactly what we had alluded to in our previous commentary that the struggle around 17700 for Nifty will end if we get support from the global peers. We finally managed to close at 3-week high, which was the recent congestion phase. Importantly, this move is backed by the banking space which has clocked the highest level for the current calendar year. This participation is certainly considered as a healthy sign for our market. Going forward, we expect Nifty to continue this northward move towards 17900 – 18000 and then beyond the 18000 mark. On the flipside, if there is no aberration globally, 17700 – 17600 should now act as immediate support. Traders are advised to continue with an optimistic approach and use declines to add fresh longs.

FIIs were net buyers in the cash market segment to the tune of Rs. 2913 crores. Simultaneously, in Index futures, they bought worth Rs. 853 crores with an increase in open interest, indicating long formation. Looking at the overall F&O data, we have witnessed long formation in both indices. On the options front, piling up of position is seen at 17700-17800 put strikes, indicating a gradual shift in the base. On the contrary, a considerable OI concentration is seen at 17800-18000 call strikes, implying nearby resistance. Once we surpass this, we would see some short covering moves in these strikes.

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Apart from banking, the other heavyweight space, IT also contributed to yesterday’s rally which has been a laggard for quite some time now. The cement too continued with its dream run as we saw a few smaller names giving a catch up move to the larger names. One can continue to focus on such thematic movers and also, the broader market remains the real flavor.

(Sameet Chavan is the Chief Analyst-Technical and Derivatives at Angel Broking. Views expressed are the author’s own. Please consult your financial advisor before investing.)