The Indian stock markets are trading very volatile over the last many trading sessions. However, the Nifty has managed to break its five-week losing streak and ended with a decent weekly gain of 3 percent. The inflation and slowdown in the global economy means stagflation is a key concern for the global equity markets therefore we are seeing relentless selling by FIIs however Indian markets are in a better position due to support from domestic investors.
The market may remain volatile this week due to the May month expiry. On the global front, the minutes of the FOMC meeting will be released on May 25 which will be an important trigger while the movement of the dollar index and other commodity prices will be other important factors.
Technically, the Nifty is respecting the key support level of 15,700 and trading volatile in the range of 15,700-16,400. If Nifty manages to sustain above 16,400 level then we can expect a short-covering rally towards 16,700/16,900 levels while if Nifty slips below 15,700 then selling pressure may get extension towards 15,500/15,000 levels.
Banknifty is also respecting psychological support of 33,000 while 34,800 is acting as a key hurdle. If Banknifty manages to take out 34,800 level then we can expect a short-covering rally towards 35,500 level however if it slips below 33000 level then it may head towards 32,000 level.
If we look at the derivative data then FIIs' long exposure in the index future has improved to 39% and the put-call ratio also jumped to the 1.07 level but there is still scope for a short-covering move.
If we look at the open interest distribution chart then put writers at 16,000 strikes look confident while there is no major built up in call option side before 17,000 level.
(Santosh Meena is Head of Research, Swastika Investmart Ltd.)