NIFTY forms strong pillar for the bull rally…
The weekly technical chart shows that, NIFTY registered double bottom (reversal)
formation after trending lower (between 2252.75 levels on 27th Oct 2008 and 2539.45
levels on 6th Mar 2009) from higher (6357.10 levels on 8th Jan 2008) for almost ten
months and broken the key resistance level of 4303.25 on 18th May 2009. So, NIFTY
forms a strong pillar for the bull rally in the long term. It is important to remember that
the double bottom is an intermediate to long-term reversal pattern.
Upbeat sentiments in the global markets and better than expected corporate earnings
facilitated the key benchmark index NIFTY to close above the psychological 4500 mark
after five weeks. Last week, foreign funds sold Rs. 965.63 crores more shares than they
bought Rs.610.34 crores in the futures and options market. For the upcoming week, we
expect NIFTY to remain positive with high degree of volatility considering the F&O
market expiry on 30th July 2009. If NIFTY sustains above 4693 levels, we may see the
rally upto 4910 levels. But trade cautiously as profit booking might be expected at higher
levels. The Nifty is very close to the crucial support level of 4315, which we don’t expect
to be broken soon.
The derivatives market looks attractive as NIFTY July futures open interest advanced by
6.55 percent coupled with improved cost of carry to 9.44 from 1.74 and also the open
interest PUT-CALL RATIO of NIFTY is at 1.46 (WoW) suggesting NIFTY remains in the
bull trend. NIFTY futures trading constantly at premium against spot market over the
last five days suggests upbeat signs. The daily historical volatility numbers (HV) of
NIFTY has declined by 0.46 percent. The Implied Volatility (IV) of INDEX both call and
put options declined by 0.99 percent and 2.45 percent respectively. This indicates
traders are becoming more bullish and expect option prices to fall, hence being a call
buyer may be a better alternative than being a put seller.
POST MARKET ANALYSIS
Domestic markets ended with phenomenal gains for the week on firm global cues.
Further announcement of positive Q1FY10 results by the companies also supported the
market rally.
