Last week was the second week of fall in the Indian equity markets on the back of weak global cues, earnings disappointment from IT names, and pain in HDFC twins. It is expected that this week will also kick-off on a sombre note on the back of a sharp fall in the US market on Friday after hawkish commentary by the US Fed and weak earnings.
In terms of Q4 earnings, the market will react to the results of ICICI Bank on Monday, while Bajaj Finance, HDFC Life, Bajaj Auto, HUL, Ambuja Cement, Axis Bank, Bajaj Finserv, Vedanta, Indusind Bank, Maruti Suzuki, Ultratech Cement and Wipro will be other key results which are scheduled this week.
FIIs are continuously selling in the Indian equity markets and their behavior will be important amid concerns of aggressive rate hikes in the USA.
There are still uncertainties about the Russia-Ukraine war whereas the market will also have an eye on crude oil prices.
If we look at the derivative data then the put-call ratio is sitting at 0.91 level whereas FIIs' long exposure in index future stands at 47 percent, both are heading towards the oversold zone.
In terms of OI distribution, the highest OI on the put side stands at the 17,000-mark. Below this, we can expect more selling pressure. On the upside, open interest for call options is evenly distributed between 17,200-and 17,500.
Technically, the Nifty has a sacrosanct support level of 16,800. Below this, Nifty is vulnerable to a major fall. However, 16,600 is also another support level as a 61.8 percent retracement of the previous rally.
On the upside, 100-DMA of 17,300 is an immediate and strong hurdle while 20-DMA of 17,450 is the next critical hurdle.
Bank Nifty is likely to surrender a psychological support level of 36,000 where 35,000 is the next critical support level. On the upside, 36,500-37,000 is a critical supply zone.
(Santosh Meena is Head of Research, Swastika Investmart Ltd.)
