Weekly outlook (26 February to 1 March): India and US GDP numbers, auto sales data and F&O cues to watch
Upstox
5 min read • Updated: February 26, 2024, 8:45 AM
Summary
The NIFTY50 continued its upward trend, breaching its previous all-time high of 22,124. Experts remain optimistic, pointing to last week's strong gains and the emergence of strong support at the 21,300 level. While the upcoming monthly expiry of F&O contracts may cause some volatility, the overall outlook remains positive.
Markets extended their winning streak for the second consecutive week to close higher. The NIFTY50 gained 0.7% to 22,212 and the SENSEX gained 0.9% to 73,142. By the end of the week, the NIFTY50 broke out of its month-long consolidation to touch a fresh all-time high, buoyed by positive global cues and a rebound in private bank stocks.
While the key indices posted gains, the performance of the broader market was mixed. The NIFTY Midcap 100 ended the week 0.3% higher, while the NIFTY Smallcap 100 ended the week flat with a negative bias.
Sector-wise, the NIFTY Auto index continued its winning streak, gaining almost 1% for the week. Realty and Pharma also extended their rally to close 4% and 1% higher respectively.
Index breadth - NIFTY50
In our last blog, we told our readers that the NIFTY50 had regained its 20-day moving average (DMA) and was making a third attempt at its all-time high. The NIFTY50 index closed above its all-time high during the week and hit a new all-time high.
This was in line with the positive movement in our breadth indicator. We pointed out that the breadth indicator formed a base around 52% (NIFTY50 stocks trading above the 20 DMA) and a close suggests a positive turnaround. The Breadth indicator is currently at a crucial stage. If the index experiences further profit-taking, it could fall to 60%. On the other hand, a rise above 80% could lead to the formation of new highs.
FIIs positioning in the index
As mentioned in our blog last week, Foreign Institutional Investors (FIIs) continued to reduce their short bets in the futures contract throughout the week. Net FII open interest was halved, resulting in support based buying for the indices on the dips. As seen in the chart below, the current FII long-short ratio in the futures contract is now at 44% and 56% respectively. The net open interest of -63,790 contracts now stands at -37,058.
With monthly expiry and rollovers coming up next week, traders are advised to closely monitor the change in FIIs OI numbers to gauge the momentum of the NIFTY50 and BANK NIFTY.
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The trimming of bearish bets was also in line with the reduced selling by FIIs in the cash market. FIIs sold shares worth ₹1,939 crore, which was 69% lower than the previous week. On the other hand, Domestic Institutional Investors (DIIs) pumped in ₹3,532 crore, resulting in net positive institutional activity of ₹1,593 crore for the week.
(Updated as of 22 Feb)
F&O - NIFTY50 outlook
For the February 29 expiry, the initial OI build-up of call writers is concentrated at the 22,500 and 22,300 strikes. The bulls, on the other hand, have established their put base at the 22,000 and 21,500 strikes. Based on options data, the NIFTY50 is expected to trade between 21,500-22,700 in the upcoming week.
Experts believe that the NIFTY50 is witnessing support based buying around its 20-day moving average. The 20-DMA currently sits between 21,800 and 21,900 levels. Short-term resistance remains at 22,300 mark.
F&O - BANK NIFTY outlook
For the February 29 expiry, significant call OI was observed at 47,000 and 47,500 strikes, while the maximum put writing occurred at 47,000 and 45,000 strikes. Based on the options data, BANK NIFTY is expected to trade between 45,500 and 48,500 for the upcoming expiry.
Last week the BANK NIFTY zoomed out of its previous swing high (46,892) and consolidated near the breakout level. In last week's blog, we pointed out that the banking index is not out of the woods yet, as it may face resistance around the gap area between 47,200 and 48,000. Experts believe that the index could consolidate between 46,000 and 47,250 and a breakout on either side could give traders more directional clues.
📅Events in focus: GDP growth figures for India and the US and auto sales data will be released next week.
💻Spotlight: US-based Nvidia last week became the first semiconductor company to briefly hit $2 trillion in market capitalisation. The company reported its fourth quarter results last week, which beat estimates. The results overshadowed the FOMC minutes which suggested that interest rate cuts may be a long way off.
US investors weren't the only ones celebrating last week. Japan's Nikkei 225 index hit its highest level in 34 years. Ironically, this comes after Japan's economy entered recession in the second half of 2023.
📊Stocks in focus: As per the open interest and futures price, the stocks showing long build-up are Astral, Vodafone-Idea, Indian Hotels and Bharat Electronics. 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 told our readers to keep an eye on HDFC Bank. After a correction of over 15% from the December peak, the banking heavyweight closed flat last week, giving the BANK NIFTY a breather.
On the other hand, the NIFTY50 continues its upward climb, trading above its previous all-time high of 22,124. Experts remain optimistic, citing strong gains last week and emergence of strong support at the 21,300 mark. While the upcoming monthly expiry of FNO contracts might bring some volatility, the broader outlook remains positive.
... and as always, we'll keep you informed of any significant movements and potential opportunities via our morning trade setup blog, available every day before the market opens at 8 am.
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