February 22, 2024

Bulls might come again in February

The Nifty fell 1.96 p.c in the course of the January collection expiry. Nifty futures rollover stood at 81.28 p.c, which is increased in comparison with final month’s expiry rollover of 79.54 p.c and its three/six/9 months common of 78.13 p.c, 78.60 p.c & 78.20 p.c respectively. Rollover is a means of carry forwarding an current place from one month to a different month. A excessive rollover signifies a robust sentiment whereas a decrease rollover is normally thought of as an indication of weak sentiment.

The Nifty will begin the February collection with an open curiosity (OI) of 1.28 crore shares in comparison with an OI of 1.38 crore shares at the start of the January collection. Nifty noticed a better rollover with a better price of carry (+0.74 p.c) and a fall in open curiosity, in comparison with its earlier month, indicating unwinding or liquidation of lengthy positions in January collection.

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India VIX, often called the concern indicator, began with 15.14 and made a low of 11.78 on January 15 because the volatility cooled off, giving main consolation to the bulls. Throughout the interval, Nifty rose and made an all-time excessive of twenty-two,124 on January 16. The volatility began to rise once more and Nifty got here beneath huge promoting strain since then, falling 3.48 p.c from the highs to shut at 21,353 on the final day of the January collection. The India VIX settled at 13.86 on January 25, 2024.

The overseas portfolio buyers (FPIs) Lengthy Brief ratio stood at 69.52 p.c on the primary day of January collection. The FPIs held comparatively increased lengthy positions in comparison with quick positions in Index futures. Regardless of the value making contemporary highs, the FPIs exercise in Index futures remained subdued till January 16, 2024. When FPIs began to liquidate lengthy positions, the tremors have been felt within the markets.

The Lengthy-Brief ratio went beneath the 50 p.c mark and stood at 22.00 p.c on the final day of January collection because the FPIs aggressively constructed quick positions and liquidated current lengthy positions since January 17. They now maintain extra quick positions relative to lengthy positions in Index futures.

The Put-Name ratio (PCR), a sentiment indicator, began with 1.54 on the primary day of January collection and fell till 0.66 on the final day of January collection. The studying of 1.54 steered that the market is overbought and a wholesome correction can’t be dominated out. The PCR fell beneath 1 on January 17 for the primary time since November 22, 2023 because the Name writers (bears) outplayed the Put writers all through the January collection.

On the Choices entrance within the February month-to-month expiry, the 21,000 strike Put possibility has highest open curiosity with 29,08,000 contracts adopted by the 20,000 strike Put possibility with 21,33,800 contracts. The strike costs with most Put open curiosity are the help ranges. Whereas on the Name facet, the 23,000 Name has highest open curiosity with 30,99,600 contracts adopted by the 22,000 Name strike with 18,28,150 contracts. The strike costs with most Name open curiosity are the resistance ranges.

Having stated that, the present market situation reveals a low Put-Name ratio (PCR) at 0.66 and a overseas portfolio buyers (FPIs) Lengthy-Brief Ratio of twenty-two p.c, suggesting a pronounced bearish sentiment within the January collection. Historic traits point out that every time the PCR hovers round 0.5-0.6 and the long-short ratio is within the vary of 10-15 p.c, the market usually experiences a short-term rebound. Consequently, there’s a appreciable probability that the February collection might witness a market restoration, dispelling the prevailing bearish sentiment and initiating an upward development.

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Technically, the Nifty consolidated in a good vary of 21,500-21,800 ranges for the primary ten buying and selling classes of January collection till January 11. The worth broke out of the vary on January 12 and made an all-time excessive of twenty-two,124 on January 16. The worth cracked 3.80 p.c since then and closed at 21,353 on the final day of January collection.

A decrease low, decrease excessive worth motion construction is seen on the day by day chart. The worth motion construction suggests we could also be at first of a short-term correction. The extent of 21,285, which can also be the rapid earlier swing low (made on January 18) is essential. A powerful shut beneath the 21,185 degree can take the Index additional down in the direction of 20,800 ranges.

A bearish Engulfing candle was fashioned on the weekly chart in earlier week with worth closing decrease once more final week (ended January 25), confirms the bearish sentiment.

The interim price range might be introduced by the Finance Minister, Nirmala Sitharaman on February 1 and therefore, the market is predicted to be extraordinarily risky within the upcoming week.

If the index can maintain on to the 21,285 ranges, quick overlaying (sellers reserving income) at 21,500 strike can push the Nifty increased. A powerful shut above 21,750 degree can lead to resumption of uptrend in Nifty.

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