Equity benchmark index Nifty closed the week with 1.21 % loss. Rally was mainly supported by Reliance Industry, IT , Banking and pharmaceutical stocks.Now everyone is having doubt regarding should i buy or sell in COVID-19 pandemic induced volatility?
Reliance Industry close the week with massive 15.76 % rally on back drop of Facebook deal from price of 1224 on 17 April. Social media giant Facebook’s investment for a 9.99 per cent stake in Jio Platforms is the single-largest FDI in the Indian telecoms and technology sector till date.
Nifty has climbed from low of 7610.25 on 23 March to yesterday’s closing of 9154 . Its massive rally of 20.28 per cent! in a bear market.Most of the rally was driven by positive global clues , announcement of fiscal stimuli measures by Narendra Modi led government and RBI’s measure to increase liquidity in the market.
But everyone in the market need to know whether this rally will sustained ? Shall I be a part of this rally or just be on sideline for a couple of days keeping cash in a hand?
Recent rally is too stock specific, and is mainly led by index heavyweight Reliance, pharmaceuticals and multinationals.
Nifty Pharma have given a 47.69 per cent return in the same time period.While Reliance Industry have given 60.28 per cent return.
Advance – decline ratio and Nifty price action is showing divergence in last few sessions, as prices are rising with decreasing advance – decline ratio. Nifty is likely to witnessed correction in coming sessions unless underlying improves drastically. India is facing twin issues of COVID crisis coupled with financial crisis in Banking and NBFC sector.Yesterday , Franklin Templeton MF announced winding up six debt schemes.Industry experts believe credit risk funds are going to face redemption pressure from investors worried about the safety of their money and likely to have negative impact on the market.
On closing basis Nifty is trading below 26 day EMA and stochastic shows its in overbought zone. Last couple of trading session, Index Nifty saw consolidation in price range of 8900 to 9300 with a wedge formation. On up move, level 9590 is expected to offer resistant and is likely to be hold.On Friday, index closed the day in red with Gravestone Doji candle formation indicating selling pressure on the rise.
One can considering selling 9100 CE @ 184.45 and buying 9200 CE @128. As long as Nifty is trading below 9150 this strategy is profitable. It have max profit potential of 4234 Rs while max loss of 3266 at expiry.
High risk investor can consider selling Nifty future between 9250-9300 along with buying in the money call.
If we sell Nifty future at current price of 9149.75 and buying 9150 CE @ 153.05, we risk max loss of 11498 at expiry. This strategy will be profitable if Nifty closes below 9K at expiry.
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