Market went four sessions sideways and slid down for one session. Nothing, again, to comment on such behaviour — especially, when the daily range has been quite limited.
I spoke about this last week as well and hence no change after another week. You know it has been a poor week for the main indices when they clock losses while the mid- and small-cap indices put in some gains (albeit small). The fact that the market would become stock specific was also mentioned last week and the moves in the small and midcap indices are a testament to that.
Last week's letter mentioned that the main trends are not troubled as yet. The very short term may be troubled but nothing beyond that. At least not yet. Chart 1 shows the situation, using the Kalman filters for trend.
Everyone was, kind of, hoping that the 25K level would not be broken. But it was. Now a slight apprehension about the continuation has crept into minds. The above chart should allay those fears.
For the very short-term chaps, the picture is different of course. See chart 2, this is more relevant to them. Here, not only is the trend down but the next week CPR is also under attack (maybe) and if prices remain below 25100, then there could be more declines. The very least that we need to see for bulls to regain their footing, is a move past 25200 and better yet, 25300.
Can we get that? Maybe we can. We had three heavyweight results over the weekend. Reliance, HDFC Bank and ICICI Bank. Market should be happy with the Reliance numbers and prices should be up, lending a helping hand for the Nifty. The GDR was up soon after the result, so that gives you a bit of a clue. Now, the two bank’s results should be seen as good but a critical reading may see them falter.
HDFC Bank did some creative provisioning and saved tax while ICICI Bank hobbled through with some gains. Both the banks — as did Axis Bank earlier — seem to be relying more on Treasury operations to bring in the gains! Whatever happened to core banking? Be that as it may, markets may see them positively and that too would be good enough to create some positive traction for the big indices.
Note that the level to overcome is not very high either and with some effort, the indices can conquer the peaks for turning bull. Besides, the big short Put option position on monthly contracts of Nifty continues to dominate at the 25,000 level with some back up from the 24,900 levels for the weekly series as well. This tells us that the bulls are still going to make a game of it at these levels. There is some short call activity just above the current strikes but nothing major. What is actually more interesting is that in the long-dated options (December 2025), we find calls losing value but puts not rising. This implies an expectation of limited downsides yet. Also, the Vix refuses to move up either.
So, like I stated last week, fear of panic declines is in the minds of a few only. Not in those who matter. Just look at this fact — the market has been down for 3 weeks now, and the prices are yet to compromise the June 20 (the big breakout candle upward) low yet! Such limited price damage can never be part of a bearish structure! Hence, we have to treat what’s going on as a pullback only.
If we get more churning here, then the CPR for the next month will turn into a very thin one and that would foretell a trend move to come in August. So, bear that in mind as we unwind into the rest of the month.
Declines during the week, if seen, may meet with support around 24800 levels. So, that would be a good point to go against the prevailing sentiment and create longs.
Even the Bank Nifty too doesn’t need to do too much, just get past 56800 and sustain and the job would be done. For that, however, the prices of the two private bank majors need to run. SBI is in play already, what with its big QIP having gone down rather well. Kotak results are only next week so may not really be a contributor for now. Keep a watch to gather the idea of what the BNF would do.
The big test for the trends may come up on Wednesday-Thursday as IT majors (Infosys, Persistent, Coforge) kick in with results. Now, if they can chip in, Nifty would get enabled some. Monday-Tuesday is relatively light in terms of big names for results, so it is last week’s big guns' impact or nothing.
So, next week is going to be relatively simple. Either the three stocks will drive trends back up (a bit, or a lot) or they will fail to do so. That will decide trends for 2 sessions. Then Wednesday, the market will look at IT names to chip in. If they do, great. If not, some pressure may be seen from IT dragging. In between all these, other stock results would keep popping up during the week and drive individual trends.
And that, dear readers, may get to be the real deal for this week as well. Stock specific moves. We have all spent enough time waiting for a breakout to occur and flower but that has been yet elusive. In the meanwhile, lots of stocks with good results are making big moves and there are good opportunities in there. They make for some decent short-term opportunities.
Last week, I wrote that you should know what you are looking for in the market and the charts will help you address that. This week’s additional point is that it is better to look at where the market is looking rather than chase down what you are looking at – if you want to be an active participant. Now, if you can combine the two- know what to look for and know what the market wants to look at- then you would, probably, get on top of things here!
Trending markets are easy to play. But right now, they are on a holiday. Ranging days are here and that calls for a different play. Fortunately, once every quarter we get these fertile fields of Results and that can produce enough new green shoots or bamboo growths to make our time and effort worthwhile.
Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.
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