F&O Manual | Nifty trades flat; pharma set to breakout with long build up in Auropharma, Sunpharma and Dr Reddy’s

The benchmark indices traded flat amid volatility with the Bank Nifty seeing a sharp fall as bank stocks dragged following RBI’s new risk weight measures.

On the sectoral front, the PSU Bank index is down 2 percent, while auto, FMCG, pharma and capital goods show gains of nearly 1 percent each. A fresh breakout is observed in the pharma stocks, particularly with Sunpharma, Dr Reddy’s and Auropharma, displaying a heavy long build-up.

At 11 am, the Sensex was up 6.46 points or 0.01 percent at 65,988.94, and the Nifty was up 29.50 points or 0.15 percent at 19,794.70. About 1,889 shares advanced, 1,160 shares declined and 104 shares unchanged.

Options data indicated a tussle between call and put writers at the 19,500 strike. Significant Put Writing was observed at 19,700 and 19,600 strikes, while on the call front, 19,900 and 20,000 witnessed considerable open interest additions. The overall range for the day could be 19,600-19,630 on the downside and 19,840-19,870 on the upside.

According to Sudeep Shah, Head of Technical and Derivative Research at SBI Securities, “On the expiry day yesterday, the index found support at the 19,630 zone and continued its positive momentum up to the 19,850-19,875 zone in the first half. However, selling pressure emerged at higher levels, exactly from the area where Nifty had formed a swing high in October, and a notable gap down was witnessed on 21 September, and the gap is yet unfilled. Hence, the 19,850-19,900 zone is a crucial resistance zone that must be surpassed for the extension of its rally towards its life high levels.”

Going forward, positionally, he believes the 19,580-19,610 zone should act as a strong support, and profit booking below 19,570 could be witnessed up to the 19,450-19,430 zone, where the 20-day EMA is placed.

Bank Nifty 

“Bank Nifty underperformed significantly as it could not sustain above its previous day’s high close to 44,400 ending the day flat to negative. The immediate support for Bank Nifty is likely to be the zone of 43,740-43,800 where the 20-day EMA is placed, while the resistance zone is at 44,440-44,500. Above 44.450, a bigger short-covering move is likely to be witnessed up to the 44,900-45,050 zone. On the other hand, if 43,750 is breached, the index could revisit levels of 43,400-43,300 on the downside,” Shah added.

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