Domestic markets are expected to remain resilient on Thursday despite mixed global cues. Analysts said, today being the settlement day for September contracts on the derivative segment on the NSE, markets remain volatile. However, aggressive put writers on Nifty and long Nifty futures rollers signal that benchmark index is likely to sustain the momentum, they added.
Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities, said: the future open interest (OI) indicated buildup of long positions in Index futures for the first time since September 15. The Put-Call Ratio (PCR), a sentiment indicator, has risen back to 0.99 Wednesday from 0.82 the previous day, suggesting a resurgence of put writers.
- Buzzing stocks. Stocks that will see action today: September 28, 2023
Gift Nifty at 19840 signals a flat-to-positive opening for Nifty, as Nifty Sept futures on Wednesday closed at 19791 and Oct futures at 19828.90. US major indices closed mixed on Wednesday and equities across Asia-Pacific region are trading flat.
“Aggressive put writing was observed at 19,600 & 19,700 Strikes which led to a strong up move in Nifty today. Nifty has formed a hammer candle with a higher close, taking support from the 50-Day Exponential Moving Average (DEMA) of 19,560 on the daily chart. This is usually considered to be a bullish reversal signal.,” he said adding that “the level of 19,550 is likely to act as a strong support for Nifty while a follow up buying from the current level can result in a resumption of uptrend in the Index.”
Bank Nifty bounced back from the 78.6 per cent retracement level of 44,186, drawn from the low of 43,600 made on August 16 to the high of 46,310 made on September 15 and closed at 44,588, down 36 points. Strong put writer additions were observed at 44,200 & 44,300 strikes. “The underlying trend is weak in Bank Nifty and a decisive close above 44,800 level can ignite buying interest. The downside support for Bank Nifty is placed at 44,500 after today’s closing,” he added.
Nifty rejig effect
Meanwhile, rebalancing of Nifty will result. in a strong inflow into heavyweights such as HDFC Bank, said analysts.
Nifty Indices’ semi-annual rejig takes effect on September 29, with adjustments occurring on September 28 (Thursday).
According to Nuvama, cumulatively the Top inflows (net of all passive indices) are in HDFC Bank ($89 million |0.2x ADV), PowerGrid ($64mn |1.6x ADV), Shriram Housing Finance ($59mn |1.7x ADV), Trent ($54mn |3.5x ADV), TVSL ($40mn |2x ADV) and PNB ($21mn |0.2x ADV).
“Whereas top outflows are in NTPC ($46mn |1x ADV), PAG ($28mn |2.3x ADV), HDFC AMC ($25mn |0.7x ADV), IIB ($23mn |0.5x ADV), ACC ($19mn |0.9x ADV) and Indus Towers ($14mn |0.5x ADV),” it added.
In Nifty Bank key Inflows are in HDFC Bank ($70mn |0.1x ADV) and Kotak Mahindra Bank ($21mn |0.2x ADV) while key outflows (however volume impact is less) are in IndusInd Bank ($23mn |0.5x ADV), Axis Bank ($14mn |0.1x ADV), ICICI Bank ($11mn |0.1x ADV) and BOB ($10mn | 0.2x ADV).
In Nifty 50 Index major inflows are in Adani Enterprises ($21mn| 0.2x ADV), HDFC Bank ($19mn| 0.04x ADV) and Axis Bank ($11mn| 0.1x ADV) while significant weight reduction led outflows are in Adani Ports SEZ ($14mn| 0.2x ADV), Wipro ($12mn| 0.4x ADV) and JSTL ($8mn| 0.3x ADV).
With crude oil jumping strongly, focus shifted again to inflation.
Shrikant Chouhan, Head of Research (Retail), Kotak Securities Ltd, said domestic equity benchmarks on Wednesday on strong macroeconomic indicators and short covering. “The Reserve Bank of India will meet on October 4-6 to decide on interest rates and policy stance. Most analysts and economists expect the RBI will continue to maintain a pause on interest rates”