NIFTY OUTLOOK & OPTION TRADING TIPS FOR 13 AUG 2024

Overview: Indian benchmark indices ended on a flat note in a highly volatile session on August 12. The Sensex closed down by 56 points, or 0.07%, at 79648, while the Nifty ended 20 points lower, at 24347. This session was marked by mixed signals and fluctuations in both directions, ultimately leaving the indices relatively unchanged.

Market Sentiment: The overall market sentiment remained sideways to weak, with Nifty closing below the critical 21-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) indicated weak momentum with a bearish crossover, suggesting that the market might continue to be a sell-on-rise scenario as long as it remains below the 24,500 level. On the downside, support is positioned at 24,150.

Sectoral Performance:

• Gainers: The Realty sector led the gains, rising over 1.35%, followed by the Metal sector. The broader indices, including mid and small caps, outperformed the benchmark indices, closing slightly in the green.
• Losers: The Media index was the major laggard, shedding nearly 2%. The FMCG, Power, PSU Bank, and Media sectors were down by 0.5-2%, while sectors like Bank, Telecom, IT, Oil & Gas, Metal, and Realty saw gains between 0.3-1%.

Technical Analysis:

• Nifty faced resistance at the short-term 20-day EMA at 24,400, struggling to sustain its position above this level. This resistance, coupled with pressure from select heavyweight stocks, indicates that the market may remain under pressure until there is a decisive movement in banking majors.
• The formation of a long-legged Doji candlestick pattern after testing the higher end of a consolidation range suggests indecision among traders. A firm close above the 24,450-24,470 zone is essential to resume the uptrend, while support seems firm at 24,200.
• For day traders, the market's current texture is non-directional, making level-based trading the ideal strategy. The immediate breakout zone for bulls is at 24,400/79,850. A move above this level could lead to further gains up to 24,500-24,550/80,100-80,400. On the flip side, a drop below 24,300/79,500 could change the sentiment, potentially leading the market to retest 24,200-24,170/79,200-79,000 levels.

Key Influencers:

• The ongoing Adani-Hindenburg-SEBI saga created an overhang on the market, with early trades reflecting the impact of these allegations. However, indices managed to recover during the day, only to lose ground again due to selective profit-taking.
• Global cues will play a crucial role in the market's direction, alongside domestic factors such as anticipated ease in CPI inflation supported by a good monsoon. However, upside risks remain due to firm oil prices and volatility in food inflation.

Conclusion: The Indian market closed the day largely flat after a session filled with volatility and mixed signals. While certain sectors like Realty and Metal provided some support, pressure from other sectors, combined with external factors like the Adani-Hindenburg-SEBI saga, kept the indices from gaining significant ground. Traders are advised to adopt a cautious approach, with a focus on hedging and level-based trading strategies in the near term.