Divergence! How Long Can NIFTY Survive? - Pre Market Analysis

Here are some of the major updates that could move the markets today:

Stocks

Wipro and UK-based Finastra announced a partnership in India to power digital transformation for corporate banks in India.

Hero MotoCorp said it has joined hands with Hindustan Petroleum Corporation NSE 0.04 % to set up charging infrastructure for electric two-wheelers in the country.

Tata Steel  has raised Rs 2,000 crore through NCDs issue as the board of directors has approved the allotment of 20,000 non-convertible debentures with face value Rs 10 lakh each to identified investors on private placement basis.

Indian Hotels signed its second hotel in Dharamshala, Himachal Pradesh under the SeleQtions brand.

NBCC said it has secured the total business of Rs 274.77 crore during August, in an exchange filing over its monthly business update.

What to Expect? 

NIFTY opened with a gap-up at 17,770 and moved higher. The index made a top at 17,920 and declined. The fall took NIFTY below 17,900. The index closed at 17,816, up by 194 points or 1.1%.

BANK NIFTY opened at 41,207 and almost touched 41,700. There was a correction and BNF closed at 41,464, up by 564 points or 1.38%.

IT closed 0.8% in the green.

The US markets and the European markets closed deep in the red.

The Asian markets are trading lower. The U.S. Futures are in the green but the European futures are trading lower.

SGX NIFTY is trading at 17,720  indicating a gap-down opening.

NIFTY has supports at 17,720, 17,665, 17,600 and 17,500. We can expect resistances at 17,800, 17,870, 17,920 and 18,000.

BANK NIFTY has supports at 41,380, 41,130 and 40,800. Resistances are at 41,500, 41,650 and 42,000.

NIFTY has the highest call OI build-up at 18,000. The highest put OI build-up is at 17,600.

BANK NIFTY has the highest call OI build-up at 42,000 and the largest put OI build-up is at 41,000.

Foreign Institutional Investors net bought shares worth Rs 1,200 crores. Domestic Institutional Investors also net bought shares worth 130 crores.

INDIA VIX  is at 18.8.

We had discussed price action in the US markets yesterday. DOW had a tweezer bottom formation in the day-chart. And see what has happened yesterday. It is a red candle though with a longer lower wick. But the markets moved down by 1% after extreme volatility. This points out uncertainty and fear ahead of the Fed decision.

We have discussed this multiple times; Fed may go for a hike of 75 points most probably or 100 basis points. If Fed thinks that it is better to have smaller hikes for a longer duration, then they would go for a 75 bps hike and the markets would not react negatively. However, if there is a larger hike considering spiking inflation rates, the markets would take it badly.

Looking at the other markets, there is weakness. You can see that almost all the major global indices are bleeding right now. Let us see if NIFTY can survive this week. And this will largely depend on three factors: Fed interest rate decision, IT recovery and BNF trend continuation.

BANK NIFTY had an all-time high close yesterday and is on the verge of a breakout. But we do not know if today’s gap-down would spoil the trend. Yesterday’s sell-off in the second half also shed concerns over the strength. 

Looking at FIN NIFTY, there was a good rally when Banks moved higher along with the heavyweight HDFC. Bajaj Twins also made a significant contribution.

There is no doubt that there is uncertainty in the markets right now. We have Japan and UK also making interest rate decisions tomorrow on the expiry day after Fed decision tonight. Trade with fewer quantities if you are not sure of the trend.

I will be watching 17,665  on the downside and 17,800 on the upside.

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