Nifty 50 (19,515) and Sensex (65,740) opened the day considerably lower compared with yesterday’s close following bearish cues from the Asian equity market. Peers like Nikkei 225 (32,300), ASX 200 (7,315), Hang Seng (19,490) and KOSPI (2,600) are down between 0.2 and 1.2 per cent.
The advance/decline ratio of Nifty 50, at 19/31, is giving the index a bearish bias. However, the mid- and small-cap indices have advanced.
Among the sectors, Nifty Pharma, up by 1.2 per cent, is the top gainer whereas Nifty Realty, down by 0.8 per cent, is the worst performer in the first hour of trade.
Nifty 50 futures
The August futures contract of Nifty 50 opened today’s session with a gap-down at 19,540 versus yesterday’s close of 19,597. It has recovered a bit and is now hovering around 19,575.
The recovery may not be easy because the contract has a resistance at 19,630. Similarly, there is a good support at 19,500. Therefore, the next swing in price depends on which direction Nifty futures move out of the 19,500-19,630 range.
Since the equity market across Asia appears bearish, the chances of Nifty futures falling below 19,500 looks likely. In such a case, the price could decline to 19,380.
Nevertheless, initiating short positions now may be risky. Below is our recommendation.
Trading strategy
Stay on the fence for now and short Nifty futures if it falls below the support at 19,500. Target and stop-loss can be at 19,380 and 19,550 respectively.
Supports: 19,500 and 19,380
Resistance: 19,630 and 19,680