Trade Setup for December 12: Will the Nifty weekly expiry bring momentum to the market?

The broader markets have shown solid performance, with the Nifty Smallcap index reaching a record high in early trading on Wednesday. This index has surged 13% from the November lows, with more than 70 stocks seeing returns above 10% during this period.

Market Overview

The Nifty has been range-bound, trading within a 300-point range between its 50 and 100-Day Moving Averages. This consolidation phase comes after the Reserve Bank of India’s cautious stance, with only a 50-basis point CRR cut last Friday. The market’s reaction will likely depend on Thursday's CPI inflation print, which will be crucial for setting the market’s direction.

Price Action and Broader Trends

The Nifty has struggled to break the 24,700 mark, bouncing between 24,500 and 24,800. Thursday’s weekly options expiry of the Nifty 50 could provide the necessary momentum for a breakout in either direction. While most of the price action this week has been on low volume, it's expected that thin trading volumes could continue until the end of December, spilling into January 2025.

Sectoral Performance

Railway stocks have been in focus, with most showing a rebound of 20% to 30% since November. However, many remain below their peak levels from July and August. The Nifty Smallcap index, on the other hand, has shown remarkable resilience, and its performance has been one of the key highlights of the week.

Key Technical Levels

According to Nagaraj Shetti of HDFC Securities, the Nifty is testing its upper range at 24,700 to 24,800. If it fails to break above these levels, it might see a minor pullback before resuming upward momentum. Immediate support is at 24,500. Shrikant Chouhan from HDFC Securities suggests that a break above 24,700 could push the Nifty to levels around 24,825, while a dip below 24,500 might bring it down to 24,350.

Nifty Bank Outlook

The Nifty Bank index gave up some of its Tuesday gains, testing resistance around 53,650. Despite this, it remained within a narrow 350-point range, similar to the Nifty. Om Mehra of SAMCO Securities believes that the Nifty Bank index has shown resilience and that a decisive close above 53,650 could trigger further upside momentum. Support for the index lies at 53,300, with 52,500 acting as major support in case of a downturn.

F&O Cues

Fresh Long Positions: KEI Industries, JK Cement, CAMS, Max Healthcare, and Jio Financial Services saw fresh long positions, indicating a positive market sentiment for these stocks.

Fresh Short Positions: Avenue Supermarts, Delhivery, APL Apollo Tubes, HFCL, and Zomato saw fresh short positions, suggesting bearish sentiment for these stocks.

Short Covering: Stocks such as Syngene, Cyient, HPCL, Trent, and Cummins India saw short covering, which could signal a potential rebound.

Stocks to Watch

Vedanta: Board meeting scheduled for December 16 to consider a fourth interim dividend. Record date set for December 24.

Nuvama Wealth: Block deals by Edelweiss Finance and ECap Equities to sell a 7.1% stake at a 6.8% discount.

Gland Pharma: USFDA approval for Phytonadione injectable emulsion for coagulation disorders.

Grasim: Board approves raising up to ₹2,000 crore via NCDs.

Shriram Finance: Completes sale of 84.4% stake in Shriram Housing Finance to Warburg Pincus.

Godawari Power: Agreement with GAIL for RLNG gas supply.

Greaves Cotton: Approves OFS component for its subsidiary Greaves Electric Mobility Ltd. IPO.

Reliance Power: Arm wins a 930 MW solar energy contract with energy storage from Solar Energy Corporation of India.

As the market approaches Thursday’s weekly expiry, all eyes will be on the CPI print and the Nifty's ability to break its current range.