Technical View Of The Market By IIFL

After hovering around the 200-DMA for the past several sessions, the Nifty finally gave up the fight this week. The index broke below the crucial technical barrier after the rupee tumbled on mounting concerns impacted mainly by multitude of factors including deadlock in the land acquisition bill, poor corporate earning and higher oil prices. FII inflows have to some extent evaporated amid concerns over retrospective tax overhang.

Nifty lost ~3.4% in April and it may be a month many may like to forget. The old adage of Sell in May could well not be needed after all given the turbulence witnessed in the market in April. The government appears to be moving ahead on a host of issues. Sector rotations could take place as investors look to nibble into mostly large caps which have shed weight in recent times. Though many mid-caps have been pounded, it’s best to exercise caution on many of those counters for now.

Corporate earnings will continue to pour in with HUL, Hero Moto and PNB are among the major companies announcing quarterly results. HUL is expected to register 8% yoy growth in revenues at Rs7,487cr during the quarter led by healthy ~9% yoy growth in its HPC business. Operating margin is likely to expand by 120bps to 16.7% aided by sharp decline in key input prices.

Derivative Note

Rollover Analysis – April 2015

After ending in negative terrain for the February and March series, Nifty ends yet another contract in the red. The April expiry saw Nifty crossing above 8800 barrier in the initial days. However, it failed to sustain and tumbled almost 650points from the highs it registered in mid-April. The undertone in the market has been negative for the past few months, going by the rollovers; market is most likely to be choppy in the coming weeks with broader range being 8000-8500 levels.

The Nifty index rolled ~1.96cr shares (~68%) into the next contracts. The Nifty rolls were below 6months average of 73% and 2.25cr shares. Negative undertone in the market could possibly have led to lower rolls. BankNifty rolls were higher at 73% after ICICI Bank and Axis Bank result met street estimates. Market wide rolls were higher at ~86% on back of strong rolls in banking, auto and oil and gas stocks. Among stocks, Reliance Industries rolls stood at 90%+ with 3.79cr shares getting rolled as against 3.5cr shares in the previous two series indicating the trend may continue to remain positive.

Technical View

After breaking below the bearish H&S pattern in last week’s trade, Nifty continued its declining trend. However, daily momentum oscillators are near oversold levels, signaling that a trading low is to be put in place over next few sessions. Also, Index has formed a hammer pattern in Thursday’s trade. Moreover, on the weekly chart, Nifty is still holding on to its 50-WMA, suggesting a pullback in the near term.

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