Trade Setup for Jan 02: Nifty 50 begins the new year with two levels in sight – 17,800 and 19,000

The last instance of the index delivering positive returns for seven years in a row was 28 years ago.

The last week of 2022 also saw the Nifty 50 posting weekly gains after a three-week sell-off that saw the index correct over 1,000 points from its all-time high. Those 1,000 points have now become the range for the Nifty 50, going into the new year.

Nilesh Shah of Envision Capital says that when the Russia-Ukraine war broke out in February, it was presumed that the year would be a negative one in terms of returns. “What saved the day was earnings, and the resillience of the domestic investor,” he said in an interaction on CNBC-TV18’s Editors’ Roundtable. He expects both these variables to continue even in the new year as despite the headwinds, the market delivered single-digit returns. “So even if 2023 is a repeat of 2022, I think that should be great.

What do the charts suggest for Dalal Street?

Nagaraj Shetti of HDFC Securities expects further consolidation to take place in the market. The Nifty 50 formed a long negative candle on its daily chart, thereby forming a bearish dark cloud cover type candle pattern. “Formation of such a pattern after a reasonable upside bounce could indicate a reversal pattern at the highs,” he said.

The Nifty Bank index outperformed the Nifty 50 in 2022, ending with gains of over 20 percent. However, the index has failed to surpass levels of 43,500, indicating selling pressure at higher levels. Kunal Shah of LKP Securities believes that one should have a buy-on-dips approach on the Nifty Bank with immediate support seen at 42,500. “The momentum indicators are in the strong buy zone, which confirms the strength of the index,” he said.

Here are key things to know about the market ahead of the first trading day of 2023:SGX Nifty

On Monday, Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty 50 index — declined 78 points or 0.43 percent to 18,145, thereby pointing to a weak opening for the market.

Global Markets

Most global markets, including Wall Street, will remain shut on account of the new year holiday.

Benchmarks on Wall Street ended their worst year since 2008 with another negative session on Friday. The S&P 500 fell nearly 20 percent in 2022, while the tech-heavy Nasdaq fared worse, ending 33 percent lower.

What to expect on Dalal Street

Rupak De of LKP Securities observed that the Nifty 50 index closed above its 50-week exponential moving average. While the RSI on the weekly chart is in a bearish crossover, the 50-EMA and 200-DMA are in the bullish cross over. He expects the trend on the Nifty 50 to remain bullish as long as the index remains above the 17,800 mark on a closing basis. On the upside, resistance is seen at 18,350. While a decisive move above 18,350 may push the index towards levels of 18,600 or even 19,000, a close below 17,800 may weaken the trend.

HDFC Securities’ Shetti sees the Nifty 50 facing resistance at 18,250. He expects a decisive move on the upside only above the 18,250 mark. On the downside, he sees support at 17,960.

For the new year, the Fed policy, the consequences that it may have for global growth, and the newsflow from China will be of importance to the market, according to Joseph Thomas of Emkay Wealth Management. For the immediate term, he expects the market to remain volatile and trade with a downward bias.

Key levels to watch out for

For the Nifty 50 options expiry on January 5, the 18,200 strike call added 50.4 lakh shares in Open interest, followed by the 18,300 call which added 48.4 lakh shares.

On the downside, the 18,200 put added close to 24.2 lakh shares in Open Interest, while the 18,100 put added 14.5 lakh shares.

No stocks are currently in the F&O Ban.

FII/DII activity

On the final trading day of the year, FIIs selling figure came up to Rs 2,950 crore in cash while DIIs bought Rs 2,266 crore.

For 2022, net capital outflows from FPIs stood at Rs 1.21 lakh crore. The main triggers, according to VK Vijayakumar of Geojit Financial Services were the rising interest rates in the US and a weak rupee. However, he believes that the USD has now bottomed out and if this trend sustains, FPIs can turn buyers in India in the new year.

Long build-up (Increase in price and Open Interest)

Short build-up (Decrease in price and Increase in Open Interest)