Last week, we had gone in expecting an upside rebound to 23,900. The supporting factors were VIX easing, support at 23,000 for Nifty 50, and FIIs‘ short positions at extreme. While the rebound played out to T, the approach of the 10-day SMA allowed bears to regroup, forcing a turn lower just short of testing the 23,900 mark. The hammering thereof not only forced a massive gap-down but also kept the subsequent reversal attempts brief and bereft of momentum.
Nifty prospects
The widening of the lower Bollinger band, following wild moves last week, forces us to bring 22,000 back into the picture. The first leg of this down move would aim for 22,560, before any consolidation emerges. Reversal attempts early in the day will require a direct rise above 23,179 to see momentum.
Nifty Auto: Early signal towards possible upside rebound
Despite undergoing a notable corrective phase from the 30,000 region, the Nifty Auto index is beginning to exhibit early signs of base formation near the 24,500-24,250 support band.
This zone has historically acted as a strong demand area, and the current price behaviour suggests that selling pressure is gradually easing. The index is presently trading around 24,700, and after the sharp decline seen in recent weeks, the intensity of downward momentum appears to be moderating.
Although momentum indicators remain cautious, with the RSI still below the 40 mark and the MACD positioned in negative territory, the rate of decline has slowed meaningfully. This deceleration in downside momentum hints at a potential stabilisation phase developing in the near term.
Importantly, derivative data is beginning to turn supportive. Derivative positioning is beginning to tilt positively, with close to 70% of near out-of-the-money put strikes seeing fresh short build-up, while in-the-money call strikes have attracted long positions. This shift suggests that participants in the F&O segment are increasingly aligning for a possible upward move rather than anticipating further downside.
From a price perspective, a sustained move above the 25,200 level could act as a trigger for short covering and open up upside targets towards 25,500, followed by 26,300. On the downside, holding above the 24,250 mark remains crucial to maintain the emerging positive bias.
Key heavyweight stocks, including Maruti Suzuki India, Mahindra & Mahindra, and Tata Motors Passenger Vehicles, have already started to rebound from their recent lows. This emerging strength in frontline names may provide the necessary support for the index as it attempts to stage a more broad-based recovery.
Overall, while the larger trend is still in a repair phase, improving derivative positioning and strong base support suggest the possibility of an upside rebound in the coming week. Dips may therefore be considered for selective accumulation, albeit with a cautious and disciplined approach.
Nifty Metal: Bullish structure intact – ‘Buy-on-dips’ strategy preferred
Nifty Metal continues to trade within a well-defined rising channel, underlining the strength of its medium-term bullish trend. The index is currently placed near the 11,400 level after witnessing a healthy pullback from recent highs. Importantly, this decline appears to be corrective in nature rather than indicative of any trend reversal.
Prices remain comfortably above key moving averages as well as the rising channel support near 11,100, pointing to sustained underlying strength. The recent consolidation in the 11,100-11,000 zone is allowing the index to digest prior gains and form a higher base. This region also coincides with earlier breakout levels, further reinforcing its significance as a strong support area.
As long as the index continues to hold above this zone, the broader bullish structure remains firmly intact. On the upside, a decisive breakout above the 11,700-11,800 resistance band could pave the way for the next leg of the rally, with potential upside towards the 12,300 region in the near term.
From a derivatives perspective, positioning remains constructive. Nearly 45% of near-OTM (out of the money) put strikes have seen fresh short positions, suggesting that traders are increasingly factoring in continued upside and limited downside risk.
Overall, the Nifty Metal maintains a positive bias, supported by a rising price structure and strong demand emerging at lower levels. Traders may continue to adopt a buy-on-dips strategy while closely monitoring channel support levels for confirmation of trend continuity.
First published in Financial Express.
