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Domestic benchmark indices have begun the week on a flat note. Post opening, both indices rallied and are now up by 0.5 per cent. At the time of filing this report, Nifty 50 was at 17,620, while the Sensex was at 59,120. Notably, the indices are up despite their Asian peers showing a negative bias—ASX 200 is up 0.2 per cent, while the Nikkei 225, the Hang Seng and the KOSPI have lost between 0.1 and 1.5 per cent.
Supporting the bullish bias, the market breadth of the Nifty 50 i.e., the advance/decline ratio stands at 32/18. Similar to benchmark indices, the mid- and small-cap indices are in the green, up between 0.4 and 1.3 per cent. All the sectoral indices, too, have gained today, led by the Nifty Media, up by 1.9 per cent.
Futures
The September futures of the Nifty 50 opened the session slightly lower at 17,540 against last week’s close of 17,562. After a week start, the contract, rallied to the current level of 17,665.
The price action indicates that the contract has been stuck in the range of 17,500–17,800 and the direction of the break of this range will give us the hint about the next leg of trend.
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The indices remain vulnerable for a fall as long as they remain below their crucial resistancesA breakout of 17,800 can lift the contract to the psychological level of 18,000. A rally beyond this level is likely.
Whereas a break below 17,500 means the Nifty futures will most probably see a swift decline to 17,250—the nearest support level. Subsequent support is at 17,000.
Therefore, we suggest staying on the side lines given the prevailing conditions.
One can consider initiating fresh short positions when the contract rallies to 17,800 because it is likely to see a drop after touching this level. So, go short with stop-loss at 17,925. Liquidate the shorts at 17,500.
Strategy
Stay away for now and initiate fresh shorts when Nifty futures touches 17,800. Place stop-loss at 17,925. Exit the shorts at 17,500.
Supports: 17,500 and 17,250
Resistances: 17,800 and 18,000
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