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Nifty: Sustainability above 18100 may lead to resumption of uptrend

* The Nifty remained volatile last week and saw selling pressure at higher levels during most of the week. Global markets have also seen some volatility after higher than expected US inflation numbers and rising bond yields. Broader markets have consolidated in a broad range as they recover from the lows while both midcap and small cap along with Nifty index gained more than 1% last week

* From an options perspective, significant Put addition was observed at 18000 Put strike for the coming weekly settlement. A move below these levels may trigger another round of downside in the coming week. However, if the Nifty sustains above 18100, it may continue its positive trend towards 18400 in the coming sessions

* The leverage positions in index futures remained on the lower side and despite high volatility, no major addition was observed last week and cumulative open interest in Nifty futures remained near 1.2 crore shares. Domestic institutions are significantly short in index futures while retail participants are having majorly long. Similarly, in the stock futures segment, retail participants are primarily having net long positions while both FIIs and DIIs are net shorts in stock futures

* While the banking segment has underperformed significantly, heavyweights from the technology space along with stocks like L&T and HDFC Ltd helped the Nifty to consolidate. Going ahead, we expect supportive actions from banking whereas pharma and technology space should attract some inflows

Bank Nifty: Likely to consolidate during week…

* Underperformance in the Bank Nifty continued vis-à-vis the Nifty post the whistleblower news in IndusInd Bank. On the weekly expiry day, the index violated its sizeable Put base of 39000 and ended well below this level. However, a few private banks are near their sizeable Put base, which should provide a cushion

* After making a low of 38200 on the last day of the week, a sharp reversal was seen in broader indices, which helped the Bank Nifty also to revert. However, underperformance continued as pharma and technology stocks attracted money inflows

* Major Call writing positions for the week are at 39000 and 39500 strikes. As broader set up for the market seems positive. We do not expect any major selling in the Bank Nifty. Going ahead, highest Put base of 38000 should act as a support. However, noticeable performance in the index is expected only above 39500 levels. We feel focus should be on midcap banks like IDFC First Bank, Canara Bank and Federal Bank that are likely to give more returns

* The current price ratio of Bank Nifty/Nifty slipped towards its previous support of 2.14 levels. We feel the ratio is likely to spend some time near 2.14 levels as no major outperformance is expected in the Bank Nifty

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