SGX Nifty Cracks Over 100 Pts; Volatility Continues!

The broader markets have become volatile amid one after other jitters from the banking space, first with Silicon Valley Bank and Signature Bank (NASDAQ:), and then with Credit Suisse (SIX:). The recent rout threw to a low of 16,850.15, breaking below the crucial support of 17,000, strengthening the ongoing downtrend.

However, a rally from the lows on Friday might persuade traders in thinking the bottom has been made, but one should not come to a conclusion too quickly. Firstly looking at the charts alone and ignoring the global scenario, as long as the high of 17,800 is intact, the trend is clearly negative, as per the lower low and lower high formation. No doubt, a bounce back from the current levels could come, but the price action since December 2022 indicates that every bounce is getting sold off.

The SGX Nifty closed Friday’s session 117 points down at 17,045, indicating another gap-down opening on Monday. The mood of the US markets is clearly driving Indian equities; therefore, our reliance on and seems to have increased. Dow Jones was also down 1.19% to 31861.98 while S&P 500 took a hit of 1.1% to 3,916.64 on Friday which is from where the pressure on SGX Nifty primarily came.

The daily chart of Dow Jones is also showing a crystal-clear downtrend. However, it seems like some stability is coming from the lower end of the current 5-day consolidation. If we see some rebound then Nifty 50 could also jump to the nearest resistance of 17,250. Due to beaten-down levels, placing short bets could be risky, therefore waiting for a higher level to capitalize on the downtrend would probably be the right idea.

It is surprising to see that the options chain is showing the highest open interest (OI) at 17,800 CE for the current weekly expiry, at 1.59 lakh contracts. This is roughly 700 points from Friday’s spot closing, indicating bulls are expecting a maximum upside till 17,800 in the next week and want to play cautious. One reason for this is an already beaten-down level as Nifty has fallen around 950 points straight, from the peak of 17,800.

But the bigger reason is the US Fed’s rate hike decision in the next week which will be the most important event for this month. The world is eyeing Jerome Powell to see how he strikes a balance between collapsing US economy and sticky inflation. This event has the potential to determine the further trajectory of Nifty. So it’s advisable to trade with increased risk management this week.

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