On Monday, Indian stock markets are likely to start off on a very strong note, being supported by the positive global signals. The GIFT NIFTY futures indicated more than 150 points up in pre-market trading, notifying the domestic indices of a sharp gap-up opening.

By Friday, NIFTY50 practically wholly made up for its weekly losses and so it ended the week at just 0.3% loss. The tech stock concern over stretched valuations did not affect negatively the positive global sentiment that was driving the market upwards; US equities kept rising. Not only the macroeconomic data that was seen as favourable but also the 2.7% consumer price inflation reading – that was softer than expected – did support investor confidence; thus the market was hoping for further interest rate reductions.

Asian stocks were mostly higher, following the previous night’s gains at the US stock market. Although the Bank of Japan had lifted rates by 25bp last week, the yen still got weaker and Japanese stocks surpassed the 50,000 milestone. GIFT NIFTY futures, thus, rose over 153 points reinforcing the expectation of a good opening for the Indian markets, in line with these cues.

Technical Outlook

NIFTY50, from a technical point of view, had a rebound off its 50-day EMA and hit an obstruction close to the 26,000 mark, which coincides with the 20-day SMA. Analysts say that a continuous weekly close over 26,000 would be a signal of the rising optimism among investors and the lifting of the market out of the present consolidation phase.

Options Data and Strategy

Options data for the December 23 expiry indicates a narrow trading range. The highest call open interest is concentrated at the 26,000 strike, suggesting strong resistance at that level. Meanwhile, the 25,900 strike has seen significant put open interest, indicating a solid support zone for the index.

Market Snapshot

• Stocks advancing on NIFTY50: 47
• Stocks declining: 3
• Long build-up observed in: Shriram Finance
• Most traded futures: Shriram Finance, Infosys
• Most traded options: Infosys 1660 CE

The NIFTY50 will be watched very carefully by investors to see if it can maintain its position above the 26,000 level throughout the day, since that could influence short-term market direction.

Disclaimer: Trading in derivatives carries a high degree of risk and is appropriate only for investors who possess a thorough understanding of such risks. The information offered is strictly for educational purposes and is not to be considered as a suggestion for investment.