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By Rahul SharmaTechnical analysts place support for the Nifty index at 11000-11020 in the coming week.
Following Friday’s volatile session, investors will keenly watch if 11000 is broken during the week.
The pharmaceutical sector and oil marketing companies are showing signs of bottoming out.
One can look to buy technically strong counters such as Pidilite, Sun Pharma and ITC.
Where we areWe are back to July 2018 levels but this time on the way down.
Volatility has been on the rise and we saw one of most aggressive selloffs in the Nifty in recent times.
Nifty tested the psychological mark of 11000 last Friday after opening the session in the green and swung around 500 points in a single day from high to low.
Almost most of the sectoral indices have taken a hit led by Bank Nifty which bore brunt of the selling pressure.
YES bank and DHFL corrected massively and saw record volumes in both cash and FO segments.
What is in storeNifty has decisively closed the week below the 50 DMA of 11350 which is a very weak sign.
Although there was some recovery seen on Friday's session after the panic lows, the Nifty has broken its key support level of 11200 which could be testing for the long traders.
The next support level is placed at 10850 and it will have to be seen if bounce backs are getting bought into.
Option concentration is seen in 11000 puts which also provided intraday support on Friday's session.
Call concentration is seen at 11500 and 11400 indicating resistance for the market around those levels.
India VIX has shot up by more than 10% and is expected to remain strong above its technical level of 15.25 in the coming days.
IT sector which has shown a lot of strength is showing early signs of weakness.
Metal stocks are still relatively better placed and can witness outperformance to the broader market.
What could you doNifty is expected to remain volatile and further weakness is expected if 11000 is broken in this week.
Supports are placed at 11000 and 10840 whereas 11200 and 11350 would act as resistance on the way up.
We strongly advise hedging long portfolios with Nifty December 2018 11000 Put Options and keeping leveraged positions light until volatility settles down.
On the upside, sustenance above 11200 would be comforting for the bulls and can attract fresh buying interest.
One can look to pick technically strong counters in the current fall like Reliance, Pidilite, Sun Pharma and ITC.
(The author is Head -Technical Derivatives Strategy, Centrum Broking)
