Weekly outlook (19 to 23 Feb): FOMC minutes, HDFC Bank meet, Nvidia results and F&O cues to watch

Building on the recent consolidation, Indian markets erased previous week’s losses and closed the week 1% higher. The NIFTY50 added over 200 points, closing above the 22,000 mark for the first time in a month, on the back of a positive domestic inflation report and rebound in banking stocks.

While the headline indices posted gains, the broader markets performance was mixed. The NIFTY Midcap 100 rebounded from Monday’s decline and ended the week 0.5% higher. However, the NIFTY Smallcap 100 recovered from its weekly low but ended the week with a loss of 0.4%.

Sector-wise, the NIFTY Auto index touched a fresh 52-week high and gained over 4% during the week. PSU Banks and Oil & Gas sectors also performed well, gaining over 2% and were among the top gainers. Conversely, Metal and Media lagged, losing over 1%.

Index breadth- NIFTY50

In our last blog, we advised our readers to keep an eye on the price action around the 20- and 50-day moving averages (DMAs). The index rebounded from 50 DMA (around 21,500 ) and recaptured the 20-DMA. It’s currently making a third attempt towards the all-time high (22,126).

This coincides with the positive movement in our breadth indicator. On February 9, only 52% of the NIFTY50 stocks traded above their 20-DMA. This formed a base, and by week’s end 68% of the stocks were back above 20-DMA, suggesting a positive turnaround. However, it is important to note that during consolidation and high volatility, the breadth indicator usually oscillates between 50 and 70. A sustained climb above 72 could signal further upward momentum upto or beyond 80.

FIIs positioning in the index

As highlighted in last week's blog, monitoring the Foreign Institutional Investors (FIIs) futures open interest (OI) proved to be insightful. Despite the dip towards 21,600, the overall (net OI) futures open interest (OI) of FIIs gradually recovered by over 17% (as shown in the chart below) and now stands at over -68,000 contracts. As of today, FII short OI in the index futures is at 62%.

For the coming week, traders are advised to closely monitor the change in FIIs OI numbers to gauge the momentum of the NIFTY50 and BANK NIFTY.

Click here to track open positions of FIIs in the index futures: Login https://pro.upstox.com/ ➡️F&O➡️FII-DII activity➡️FII Derivatives

Domestic Institutional Investors (DIIs) once again stepped in last week to absorb the selling pressure of the FIIs in the cash market. The FIIs sold ₹6,237 crore worth of equities, while DIIs purchased ₹8,731 crore, resulting in a net positive institutional activity of ₹2,494 crore for the week.

(Updated as of 15 Feb)

F&O - NIFTY50 outlook

For the February 22 expiry, the initial OI build-up of call writers is concentrated at the 22,600 and 22,100 strikes. The bulls, on the other hand, have established their put base at the 22,000 and 21,700 strikes. Based on options data, the NIFTY50 is expected to trade between 21,450-22,550 in the upcoming week.

Experts believe that the NIFTY50 is approaching its immediate resistance zone around 22,050-22,150. The index has previously encountered strong resistance at this level. On the downside, the index has immediate support at its 50 DMA (around 21,500).

F&O - BANK NIFTY outlook

For the February 21 expiry, significant call OI was observed at 47,000 and 46,500 strikes, while the maximum put writing occurred at 46,000 and 44,000 strikes. Based on the options data, BANK NIFTY is expected to trade between 43,800 and 47,800 for the upcoming expiry.

As highlighted in last week's blog, the BANK NIFTY formed a hammer candlestick pattern on the weekly chart. This week, the index closed above the previous week's high, confirming the reversal pattern. However, experts warn that the BANK NIFTY is not out of the woods yet. The index faces strong resistance between 46,500 and 46,900. Traders are advised to wait and watch the price action in this area. Immediate support for the BANK NIFTY is at the 45,600 level.

📅Events in focus: FOMC minutes, speeches from the Fed, US jobless claims and Nvidia earnings.

💻Spotlight: HDFC Bank will hold its analyst and institutional investor meetings on February 19 and 21. Traders should keep a close eye on developments as dates coincide with the weekly expiry of BANK NIFTY.

📊Stocks in focus: As per the open interest and futures price, the stocks showing long build-up are National Aluminium, TVS Motor, Glenmark Pharmaceuticals, Mphasis, Wipro and Metropolis. Similarly, to track the OI losers login https://pro.upstox.com/ ➡️F&O➡️Futures smartlist➡️OI Gainers/OI Losers/Most active.

📓✏️Takeaway: In last week's takeaway, we pointed out that although the NIFTY50 formed a bearish engulfing candle on the weekly timeframe (19 Jan), it never closed below it. This indicates support based buying.

Looking ahead to next week, the NIFTY50 is once again approaching its all-time high (22,126), which previously acted as a resistance and profit-booking zone. Experts believe that a sustained daily close above this level could open the doors for further gains. Immediate support for the index is at 21,500, which coincides with its 50 DMA.

💡Traders are advised to keep a close eye on HDFC BANK this week. As mentioned earlier, HDFC Group's analyst and investor meet on the 19th and 21st of February can provide directional cues for the BANK NIFTY, which can significantly impact the momentum of the NIFTY50.

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.