By Santosh Meena, Head of Research, Swastika Investmart Ltd.

It was the second week in a row that Indian markets witnessed a strong rally on the back of easing geopolitical tensions, a drop in crude oil prices, the inline outcome of the US Fed meeting and shortcovering.

FIIs that have been selling relentlessly for the past five months came back with some purchases last week and it will be interesting to see how the market will perform if they continue to buy.

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In the past 5 months, they have sold more than Rs 2.3 lakh crore in the Indian stock market, which is their all-time high. Previously, their highest selling price at the time of the global financial crisis was in 2008, which was about 1.3 lac crore.

The interesting point here is that in 2008 Nifty and Sensex had corrected 60-65% due to their sales of 1.3 lac crore, but this time Nifty and Sensex only corrected about 15% despite much higher sales by FIIs. Domestic money is showing strong resilience this time around and we are no longer completely dependent on the flows of FIIs.

Our markets are in much better shape compared to most emerging markets and we have witnessed a strong rally from lower levels, therefore FIIs may feel they are missing out and may come back aggressively to Indian markets which could lead to a further rally in our market.

The market has already anticipated that the Russia-Ukraine issue will end soon, but news flows related to this issue may continue to cause some volatility in the market.

Handy Outlook

Technically, Nifty provides a good follow up to the bullish engulfing candlestick formation on the weekly chart as it managed to close above 200-DMA and 50-DMA, but 100-DMA from 17380 is an immediate hurdle; above that, we can expect further strength towards 17600/17800 levels.

On the other hand, 17200 should act as an immediate support level while 200-DMA of 17000 will be a strong foundation in any downturn.

Nifty Bank Outlook

Bank Nifty also witnessed a strong pullback from lower levels but 36700-37300 is a critical area of ​​resistance and if it manages to clear this area we can expect a brief covering rally towards 38000/38500 levels. The downside is that 36000 is immediate support while 35500/35000 are next levels of support.

Looking at the derivative data, the long exposure of FIIs in the index future has moved to 57% and the put-call ratio has risen to 1.33, both indicating bullish positioning of the market. Looking at the OI distribution, put writers show strong confidence at the 17,000 level.

(Disclaimer: The opinions/suggestions/advice expressed here in this article are those of investment experts only. Zee Business encourages its readers to consult their investment advisors before making any financial decision.)

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