On Friday Nifty 50 Manage to close well above the 7500 mark though the most part of the week was in the high volatile days. Last week Nifty has formed Doji pattern in the candlestick. Dojo was one of the indecisive pattern, this week’s close with big candle body gives clear direction and confidence in the market. With this positive close, Nifty 50 creates Morning Doji Start pattern in the weekly candlestick chart. The Morning Doji Star in one the reliable pattern when it forms in the down trend.
On a weekly basis Nifty has closed with 15 points down. In the weekly candlestick chart, Nifty has formed long shadow with thin body doji. Typically doji means the indecisiveness in the direction. Doji in the bottom can be seen as trend reversal. It has high posibility that current down trend may reverse.
In the year 2015, it was Small & Midcap companies who outperformed the Blue chip companies from Nifty 50 shares. The same happened even with mutual fund companies, where the return from Small & Midcap based funds have outperformed Index based funds.
The Nifty 50 index has closed the year 2015 with negative return of -3.10%. However for the same period Nifty Next 50 and the Nifty Midcap 50 index have given positive return of 9.72% and 3.72% respectively.
Things have changed over the last two weeks trading in 2016. The Small and Midcap companies are going down more than blue chip companies. Year to date, Nifty has given the negative return of 7.69% where as the Small and Midcap index have given negative return of 10.50% & 14.96% respectively. There is a shift in sentiment where the sellers are trying to take money out from profitable trades.
Aurobindo Pharma Ltd (NSE:AUROPHARMA) is today’s top gainer from Nifty 50 stocks. The stock went on to close near 800 levels after getting approvals from the US health regulator for antihyperlipidemic (cholesterol) drug Rosuvastatin calcium tablets.
With free fall from PSU banks have triggered bearish signal with most of the PSU banks. The fall has dragged Nifty 50 by 55 points and Nifty Bank by 290 points. Both Nifty 50 & Nifty Bank indices are manage to stay in the bullish zone, but there is a possibility it will be dragged into bearish mode if the things continued.
Future & Option Analysis
Marico Limited has been continuously adding huge number of shares in the December series futures. Over the eight calendar days, the share has added 44,52,500 shares in the open interest. On December 10th, the stock was having 15,13,200 shares but as of yesterday it has 59,65,700 shares in the open interest. The stock price is also steadily moving up. During the same period, the stock has gained 30 rupees or over 7%.
When the market has closed near flat and the current series future premium goes up a bit, there are million shares added in the slightly out of money 7,900 & 8,000 December series call options. The calls have healthy time value premium of 77.50 and 43.50 respectively, because we still have 24 calendar days for call expiry.
Nifty has ended the day by going down by 7.45 points or 0.09%. It is typical flat trading session, there is nothing to talk about it. There are lot of stock specific actions happened. The indecisive doji pattern from Candlestick chart is raising concerns about ability to hold the upper range of resistance levels. Following set of shares have raised in Price and increased the future open interest in the current December series. The raise in the price & the open interest can be considered as Long Build Up.
On Friday, lot of shares witnessed Short Covering in the Open Interest, out of that Larsen & Toubro Limited, HDFC Bank Ltd, IDFC Ltd & Bank of India have made remarkable impact in the future’s open interest.
After Friday’s sharp rally, Axis Bank went on to create Long Build Up in the derivative segment. The Current month’s (December series) future has added 3,325 lots or 33,25,000 shares in the open interest which is 8.88% rise in the open interest. In the spot, Axis Bank has closed at 471.10, up by 5.8 or 1.25%.