The markets opened with a extremely positive bias, hoping for favourable election results and the Nifty spot made a high of 5382, but as the day progressed and the situation became more clear, the euphoria died down and there was selling across the board , with 420 advances to 1061 declines to sum up the entire market breadth. To make things worse, the FIIs turned net sellers to the tune of 241 crores, while the DIIs were net buyers to the tune of 180 crores. Nifty futures closed at 5250, 28 points premium to the spot, with huge volumes and considerable addition of open interest, indicating shorts building up in the system. It is to be noted that the Nifty futures premium, has reduced from 52 points to 28 points in the last four trading sessions, indicating the market participants are not willing to pay the high cost of carry and risk premium, while the PCR has increased from 0.95 to 1.09 indicating the bears are gaining the upper hand. On the options side there was considerable build up in open interest from the 5100 to 5600 calls with corresponding shedding of open interest from 5200 - 5600 puts except the 5500 Put. All the technical indicators have already confirmed the intermediate down trend for the past few sessions. With the political situation almost clear and the expected CRR cut in the quarterly monetary policy review, already priced in, and not so comforting news from the international markets like China's scaling down of GDP projection and the private bondholders not expecting Greece to meet the looming deadline of debt swap, the U.S. and European markets which have mainly rallied in the past few weeks on the back of good news may be looking for an excuse to correct. Keeping all these factors in mind, going forward the levels to watch out for Nifty will be 5299 and 5341 on the upside and 5164, 5149 and 5094 on the downside.
Stock Picks
LT - Short 1268, 1285 SL - 1300. TGT - 1208, 1181
Axis Bank - Buy on dips between 1071 - 1090
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