Weak Rupee reverses Nifty breakout

 

Weak Rupee reverses Nifty breakout The earlier breakout in Nifty from 11,350-11,700 zone (refer our report dated Sept 06, 2018) which had opened a smoothjourney towards 12,100 has turned void. Sudden change in open interest data suggests short-term pain for the market.his is after the open interest tally dipped below 2.67 crore mark with decline in Nifty Futures below 11,400 levels. This data suggests that long positions which was piled up at higher levels were forced to liquidate after major set-back in the rupee. In an ideal case, this long addition has scope to expand all the way to 3.75 crore similar to what we saw in Jan2015. The breach of 72 on closing basis in the rupee has created some panic in debt market and this could have resulted in risk-off trade.

Nifty where next from here?

One may find Nifty expensive at 11,500, but in dollar terms, Nifty has corrected towards levels prevailing in December 2017 which is around 10,200. The Nifty to USDINR ratio is currently trading near support of 159. With strong consolidation between March-July 2018, it may be poised for a sharp rally in the near term. The upside projection of this ratio falls around 183-184 i.e an upside of 14%.

Applying Elliot wave principle on Nifty to USDINR ratio, it suggest that Wave 5 of Cycle degree remains in progress and within same we have just completed Wave (2) of Minor degree which has landed in support zone i.e. line extended from Wave 2 and Wave 4 of Cycle degree.

With USDINR trading at 72 levels, currently implied Nifty is trading at around 10,200 and has scope for rally towards 12,800-12,900 in actual terms.

Read detailed report in the ‘Reports’ section