Trade setup for 5 April: NIFTY50 closes at record high, eyes RBI policy for direction

Asian markets update 7 am

After a negative handover from Wall Street, the GIFY NIFTY shows a subdued start (-0.4%) for Indian equities. As Brent Crude rises above $90 a barrel, Asian markets are trading lower. Japan's Nikkei 225 is down 2.3%, while Hong Kong's Hang Seng is down 0.5%.

U.S. market update

U.S. stocks tumbled on Thursday ahead of the release of the March jobs report. A sharp rise in crude oil prices, coupled with comments from Minneapolis Federal Reserve official that the Fed may hold off on rate cuts if inflation remains sticky, dented investor sentiment.

The Dow Jones lost 1.3% and closed at 38,596, while the S&P 500 slipped 1.2% to 5,147. The technology-heavy Nasdaq 100 dipped 1.4% and ended the day at 16,049.

NIFTY50

April Futures: 22,612 (▲0.4%)

Open Interest: 1,96,187 (▼3.1%)

After a positive start, the NIFTY50 index surrendered all its gains and dipped below Wednesday’s low. However, the index made a sharp recovery and closed above the 22,500, marking the highest close.

Following yesterday’s blog, the NIFTY50 held on to its 1 April low on closing basis despite ongoing sharp intraday swings and consolidation near all-time high. However, the hanging man candlestick pattern was formed on the daily chart on 4 April, as the index closed near its peak. This bearish reversal pattern is formed after an uptrend, but the confirmation requires next candle’s close to be lower than hanging man’s close.

Experts believe that the NIFTY50 remains in an uptrend, highlighting immediate support at 20,200- 20,300 zone. Today’s RBI policy announcement on rates will provide further directional clues to the traders.

The initial open interest (OI) build-up for the 10 April expiry shows a scattered and range-bound picture. The maximum call OI is at 23,000 and the 22,500 strike, while the maximum put OI is at 22,500 and the 22,300 strike.

BANK NIFTY

April Futures: 48,199 (▲0.4%)

Open Interest: 1,21,109 (▼11.3%)

The BANK NIFTY extended its upward momentum and opened above the 48,000 mark, led by gains in HDFC Bank. However, the index witnessed selling pressure at higher levels and traded in a narrow range throught the session.

On the daily chart, the index has formed the doji candlestick pattern, highlighting indecision of traders ahead of the RBI policy announcement today. As yoy can see in the chart below, the index has just entered the immediate resistance zone and a decisive close above or below this could offer more directional clues.

Since the doji is a neutral candlestick pattern, traders can also keep eye on today’s close for further continuation or rejection of the trend. The immediate support for the BANK NIFTY is at 47,500 mark and the resistance remains at 48,200.

The Open Interest (OI) build-up for the 10 April expiry shows a significant call base at 48,000 and 48,500 strikes. On the other hand, the maximum put base is also at 48,000 strike along with 47,500 strike. Based on options data, traders expect the NIFTY50 to trade between 47,500 and 49,000.

FII-DII activity

In the cash market, both the Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) were net sellers on 4 April. The FIIs sold shares worth ₹1,136 crore, while the DIIs offloaded shares worth ₹893 crore. To track the ratio of long and short open positions of FIIs in the index, log in to https://pro.upstox.com/ ➡️F&O➡️FII-DII Activity➡️FII Derivatives

Stock scanner

Long build-up: Bandhan Bank, Indus Towers and UPL

Short build-up: Dabur, Idea, Bharat Petroleum and DLF

Under F&O ban: Hindustan Copper, Steel Authority of India and Zee Entertainment

To access a specially curated smartlist of most traded and active stocks, as well as the OI gainers and losers, simply log in: https://pro.upstox.com/ ➡️F&O➡️Options smartlist/Futures smartlist

In Futures and Options or F&O, long build-up means an increase in Open Interest (OI) along with an increase in price, and short build-up means an increase in Open Interest(OI) along with a decrease in price.

Source: Upstox and NSE.

Disclaimer: Derivatives trading must be done only by traders who fully understand the risks associated with them and strictly apply risk mechanisms like stop-losses. The information is only for consumption by the client and such material should not be redistributed. We do not recommend any particular stock, securities and strategies for trading. The securities quoted are exemplary and are not recommendatory. The stock names mentioned in this article are purely for showing how to do analysis. Take your own decision before investing.