Weak US Markets Can Play A Spoil Sport In Indian Markets

 

Market Setup

Gift Nifty indicated a gap- down by 150 points at 6.30 IST today. The Dow closed lower by 641 points, NASDAQ dropped by 497 points, and the S&P 500 ended down 105 points in Monday’s trade.

This morning Asian Markets were trading lower with the Nikkei 225 down by 597 points, while Kospi was flat. Earlier today, Dow futures were up by 67 points. Nasdaq futures gained 70 points and  Hang Seng Futures added 64 points. Based on the cues from Gift Nifty, Nifty will likely open around or below the 22200 level.

Foreign funds sold ₹47.88 billion of stock in the cash market on Monday. FII selling continued, and was matched by the Domestic Institutional Investors. FII activity remained neutral in the derivative segment during Monday’s session. Taking into account the data, FII may carry a bearish sentiment towards Indian Markets.

As noted in our Monday report , were expected to remain range-bound, and they played out exactly that way.. With weak US closing on Monday spilling into the Asian Markets, which traded in the red this morning , outlook for Indian markets looked weak. 

Today marked the expiry of the Sensex weekly contracts. although the data for today was neutral, the negative impact from last night’s US market decline was likely to be felt. Taking Cues from Gift Nifty, the opening trade of Nifty50 would be around 22000. In Monday’s trade 22000 was well defended by the bulls, but today’s action will have to be seen. 

One can expect an immediate bounce after the gap down opening. Subsequently, a wait-and-watch policy for the first 15 to 30 minutes should be employed to gauge where Nifty50 settles. If Nifty50 settles below 22000, then the level of 21800 would open up, which marked the swing low of May 2024. One should also keep a watch on the calls build up on 22000 and 22100 level. All the immediate moving averages of 10 and 20 period of Daily, Weekly and Monthly are far away. The immediate support is 100 Weekly Exponentially Moving Average placed at 21852. Now the 20 Monthly Exponential Moving average placed at 22348 will now act a resistance. India Vix has decreased to 13.76 and is well within the comfortable zone. Overall, the day would be determined by the morning action due to the gap down action of Gift Nifty50. It still remains a sell-on-rise set up.

Nifty Bank is also in a state of confusion. HDFC Bank has given away all the gains of Friday’s trade. Though the data suggested a range-bound day, the indications of Gift Nifty can play a spoilsport. A wait-and-watch policy is the best play today. HDFC Bank’s behavior today can determine the course of Bank Nifty.,y. The 20 Monthly Exponential Moving Average placed at 48200 will be a strong support. With 0.914 million puts, 48000 is the immediate support, and with 1.730 million calls, 49000 is the immediate resistance. On the downside, 47,881 remained open, marking the swing low of 27 January 2025. The market remained a sell-on-rise setup.

Previous session
Spot

Nifty50 had opened-gap up by 69 points at 22184 and Bank Nifty opened gap-up by 134 points at 48478.

After opening gap, Nifty hit its intraday high of 22261 in the opening ticks . As noted in the Monday report, the put writers tried to hold Nifty50 above the 22200 levels, but the call writers overwhelmed them and Nifty50 lost 150 points within the next 30 minutes to test the 22000 levels. The bulls made a couple of attempts to pull Nifty50 upwards, but it was decisively brought down to 22000 levels. Barring the initial movement in the opening ticks, it was a range-bound movement.,.. The bulls did not have the strength to take Nifty50 above 22200, nor did the bears have the strength to take Nifty50 below 22000; Nifty50 finally closed the trading session at 22119. It was an even closing for bulls and bears, with nobody having the upper hand at the closing. This 200-point range appears to be the range for Nifty50 for the next couple of days. Thirty three out of the Nifty 50 stocks closed the day in the green.

Nifty Bank mirrored the movement of Nifty50 in Monday’s trade. After opening gap up, Nifty Bank initially reached its intraday high of 48566 . Weakness in HDFC Bank, the star performer from Friday, emerged immediately and dragged Nifty Bank lower, hitting an intraday low of 47,844 As highlighted Monday, the level of 47881 remained open, Nifty Bank briefly broke the low of 47844 and rebounded. This 47880 level was tested again during the day but was defended, and Nifty Bank closed the day at 48114. It was a weak closing for Nifty Bank, as Friday’s momentum failed to carry over into Monday Five out of 12 Nifty Bank stocks closed the day in green.

It was a relatively good day for the other Sectoral Indices. The gainers included Nifty Next 50 (+1.02%), Nifty Mid Select (+0.89%), Nifty IT (+0.79%), Nifty Metal (+1.18%), Nifty Auto (+0.19%), Nifty FMCG (+0.19%), Nifty Pharma (+0.33%), Nifty Consumer Durables (+0.88%), Nifty Realty (+1.26%), Nifty CPSE (+0.58%), Nifty PSE (+1.30%). The notable losers included Nifty Oil & Gas (-0.80%), Nifty Small Cap 100 (-0.27%), Nifty Midcap100 (-0.14%), and Fin Nifty (-0.33%).

Options Chain
Nifty50 (expiry March 6)

The option chain appears balanced between the call and put writers. Put writers regained conviction, with fresh put writing seen on Monday from strikes 23,100 down to 22,900Puts were rolled up from 22800 to 22900. This shows strong conviction of the put writers to defend this level. Some put unwinding happened from strike 22200. Similarly, fresh call writing took place from strike 22100 till 23500. Implied volatility stood at 14.26 on the put side and 14.36 on the call side.

Nifty Bank (expiry March 27)
Not much changed on Monday. The option chain for March 27 was evenly placed between the call and put writers. Call and put writing was visible at the at-the-money strikes and also appeared at several strike on either side. The implied volatility stood at  16.26 on the put side and at 14.98 on the call side.

Sensex (expiry March 4)
Ahead of the weekly expiry of Sensex, the option chain was very balanced between the call and put writers. Fresh call writing took place on Monday from strike 73100 till 74000. Similarly, fresh put writing took place at every strike from 73100 till 72000. Monday was a range-bound expiry with premiums melting on both sides. 73000. The implied volatility at the put side was 13.59 and 14.62 on the call side.   

Support and Resistance

• Nifty50: Major support at 21900; major resistance at 22500.
• Nifty Bank: Major support at 48000; major resistance at 49000.
• Sensex: Major support at 73000; major resistance at 74000.  

 

 

Put-call ratio: at-the-money

• Nifty50: Overall 0.70; ATM 0.89 (bearish)
• Bank Nifty: Overall 0.9; ATM 1.29 (neutral to Bullish)
• Sensex: Overall 0.8; ATM 0.98 (neutral)