Nifty call: Go short if contract breaches 13,450

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Nifty 50 December Futures (13,465)

The Indian benchmark indices recorded a fresh lifetime high last session i.e. the Nifty 50 marked a high of 13,548.9 whereas the Sensex marked a high of 46,162.3. But today, both the indices began the session with a gap-down and are down by about 0.6 per cent each so far.

Since key equity indices across Asia are down today, it weighed on the domestic indices. Moreover, the US market closed with a loss yesterday, setting a bearish tone. While the S&P 500 index lost 0.8 per cent, Dow posted a loss of nearly 0.4 per cent.

As the Nifty 50 is down for the day so far, the market breadth too shows bearish inclination i.e., the advance-decline ratio stands at 17-33. But interestingly, the volatility index, which generally shoots up when the market faces pressure, has come down a bit. India VIX – the volatility index – is down by one per cent to 18.72.

Similar to the benchmarks, the mid- and small-cap indices are down today, losing between 0.6 per cent and 0.9 per cent. Among the sectoral indices, only a couple of indices are in the green – The Nifty FMCG index up by 0.6 per cent and the Nifty metal index up by 0.2 per cent. All other indices are in the red, led by the Nifty PSU bank index, down by 2.3 per cent followed by the Nifty media index down by 1.8 per cent.

Following the Nifty 50 spot index, the December futures contract of the index opened with a gap-down at 13,504 compared to its previous close of 13,567. The contract then declined and made an intraday low of 13,440, thus slipping below the support of 13,500. Until the contract lies below this level, it can trade with bearish bias. However, 13,450 has been providing support in today’s session.

Considering the above factors, though the intraday trend looks down, one can stay on the fence until the support at 13,450 is breached before initiating fresh short positions. That is, sell the contract with stop-loss at 13,500 if it breaks below the support of 13,450.

A fall below 13,450 can drag the index towards the support at 13,375. Subsequently it can even moderate to 13,340 and then to 13,300. On the upside, resistance above 13,500 can be spotted at 13,530 and 13,550.

Strategy: Go short if the contract breaches 13,450

Supports: 13,450 and 13,375

Resistances: 13,500 and 13,530

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