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Nifty edged higher in today's midday trade amid weak global
sentiment on fears of a likely aggressive rate hike by the US Federal Reserve.
Sensex is up about 50 pts to 53480. Nifty50 is idling around 15960. The broader
markets also posted modest gains. Mid-cap and small-cap indices rose 0.4% and
0.1%, respectively. The biggest drag on the market continues to be FII sales,
which have topped $30 billion so far this year. But this month FIIs were buyers
for 2 days including yesterday. This means that some FIIs have started buying
into segments where valuations have become attractive.
After not-so-impressive results from IT major TCS, the entire
IT package seems to take a hit. Yesterday, TCS broke below INR 3,000 and fell
to its lowest level in 16 months. Today, Wipro, another large-cap IT stock,
fell below its key support of INR 400 to a low of INR 391.05, its lowest level
in the last 18 months.Nifty IT itself has dipped to its lowest level
since May 2021, making it clear that weakness in IT isn't limited to a few counters.
Over the past month, Wipro shares are down 10.4%, TCS is down 6.88%, Infosys
and Tech Mahindra are down 0.79% and 5.89%, respectively. .
Options data also points to a bearish view. At 400 CE there
was a massive increase in open interest at over 1,000 contracts. This is the
exact level taken out today and option sellers do not expect Wipro shares to
rise above INR 400 by the close of July 28, 2022. A put resolution was also witnessed in today's
session as the stock fell to its lowest level in 18 months. The highest OI is
at the ITM 400 PE with over 1.7k contracts which has started to unwind in
today's session and as the stock would fall more short positions would be
liquidated at that strike price.
On the weekly chart, the next support appears
to be around INR 380. These are the levels last seen in 2020. Given the
weakness across the IT space, Wipro stock could continue falling, at least
until the next support.On the downside, however, the stock has also
started forming a bullish divergence at the 52-week low, which could lead to a
possible recovery in the near term, but there are no signs of a reversal at
this time. If one wants to profit from divergence, one needs to look out for
reversal signals like bullish candles, breaking previous candle highs, etc. and
wait for the momentum to reverse rather than trying to catch a falling knife.
