Markets turn jittery on Fed minutes; maintain cautious stance
Market for the week remained highly volatile as participants closely monitored the potential geopolitical implications of the sudden collapse of the Afghanistan government. Federal Reserve’s July meeting minutes revealed an emerging consensus to begin scaling back the bank’s $120 bn in monthly purchases of Treasury and mortgage securities at any of the officials’ three remaining policy meetings this year. Nifty failed to carry on the previous week’s momentum beyond 16,500 to finally end with losses of 0.5% and formed small bearish shooting star on weekly candlestick. The low of shooting star will be critical in coming days which stands at 16,376 and below this Nifty is likely to test levels of 15,300.
For the entire week, breadth of the market was extremely negative with serious selling in midcap and small cap stocks. The S&P BSE Midcap Small cap 400 index has ended in the negative terrain for the second consecutive week while Nifty Midcap 100 index has settled below crucial support of 50 DMA.
The key trigger for the market may come from breakdown in Nifty Bank which has seen a decline of almost 3% for the week and is on a verge of activating triangle breakdown. We can expect follow-up selling in Nifty Bank below 34,926 and expect a downside potential ranging from 15-22%. So far, Nifty Bank has been unable to cross February 2021 highs, clearly indicating signs of a major distribution.
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On the open interest front, there is no significant change in positions compared to previous week except for Index Put options of the retail segment. Retail segment has increased writing in Index Put options by 250% and any move below 16000 in Nifty Index may trigger serious unwinding in derivatives market.
Author: Nisha Harchekar – M.M.S (Finance) – 16 yrs+ experience as Equity Research Analyst
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