A morning walk down Dalal Street | Nifty may consolidate, a close below 11,658 may lead to further selling


Bulls regained control on D-Street on Tuesday after registering a big fall of nearly 500 points on the Sensex and over 100 points on the Nifty50 on Monday.

The rally also helped Sensex to snap its 4-day losing streak and close above 39000 levels while Nifty50 closed a shade below 11700 levels.

The Nifty50 bounced back from its crucial 50-days exponential moving average (EMA), and now a close above 11727-11800 would keep bulls in control of D-Street, suggest experts.

Positive global cues amid stimulus by ECB helped sentiment, but traders remained cautious ahead of the outcome of US Federal Reserve meeting on Wednesday. Most experts feel that the US Central Bank is unlikely to cut rates which eye commentary of Fed Chairman on future trajectory of rates.

Weak Chinese economic data, escalating trade war concerns, and political concerns in the Middle East continue to fuel the fear of deepening global slowdown, suggest experts.

The trading activity remains fairly muted. The broader market underperformed benchmark indices and over 400 stocks on the BSE hit fresh 52-weeks low which includes names like Bosch, Jet Airways, HEG, Tata Sponge, TTK Healthcare, Escorts, Bharat Forge, etc. among others.

RSI on daily charts is looking weak and is now placed at 46.24 levels while MACD on the same chart, gave a sell signal. For the rest of this week, if Benchmark Nifty50 remains below the 50-day moving average, there could be further selling.

The Indian rupee strengthened against the US dollar on Tuesday, tracking gains in other Asian currencies, said a Reuters report. Rupee closed at 69.69 a dollar, up 0.3% from its previous close of 69.9.

On the institutional front, FPIs were net buyers in Indian equity markets for Rs 31 crore while DIIs were also net buyers to the tune of Rs 181 crore, provisional data showed.

Big News:

Capital markets regulator Sebi Tuesday permitted stock exchanges with commodity derivative segment to introduce futures on indices.

The stock exchanges, willing to start trading in futures on commodity indices, are required to take prior approval for launching such contracts, Sebi said in a circular.

“Permitting commodity derivative exchange to launch futures on commodity indices is very progressive move by the regulator,” Sanjit Prasad, MD & CEO of ICEX told Moneycontrol.

“It is a small step towards giant leap for the commodity derivative market reform and a development which is in line with the transformation witnessed in the equity market,” he said.

The turnover should be at least Rs 75 crore for agricultural and agri-processed commodities, and Rs 500 crore for all other commodities, Sebi said.

The size of the contract has to be at least Rs 5 lakh at the time of the introduction in the market with an initial maximum tenor of 12 months.

Technical View:

Nifty formed a Spinning Top kind of pattern ion daily charts

Spinning Top is often regarded as a neutral pattern which suggests indecisiveness on the part of both bulls and bears. It can be formed in an uptrend as well as in a downtrend.

The consolidation is expected to continue but if the index extended gains then it can lead to the test of 11,800 on the upside, experts said. However, a close below 11658 or 50-days EMA will lead to further selling.

Three levels to watch: 11658-11641, 11727, 11800

Max Call OI: 12000, 12500

Max Put OI: 11500, 11700

Technical Recommendations:

We spoke to SMC Global Securities and here’s what they have to recommend:

SRF: Buy| Target: Rs 3300| Stop Loss: Rs 2820| Upside 10%

Indraprastha Gas: Buy| Target: Rs 359| Stop Loss: Rs 320| Upside 7%

Godrej Properties: Buy| Target: Rs 997| Stop Loss: Rs 858| Upside 10%

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