Technical View: Nifty forms bearish candle, all eyes on budget


The Nifty 50 started off the February series on a weak note and fell for the sixth consecutive session on January 29, as traders remained cautious in the penultimate session ahead of the budget that will be presented on February 1. Auto, FMCG, IT, metal and pharma stocks pulled the market down.

After opening higher at 13,946.60, the Nifty hit an intraday high of 13,966.85 in the early trade but wiped out those gains and remained volatile for the rest of the day. The index settled at 13,634.60, down 182.90 points, or 1.32 percent, and slipped 7.6 percent from the record high levels in six straight sessions.

The index formed a long bearish candle on the daily and weekly charts as the closing was lower than the opening level. The index lost 5.1 percent during the week. Experts expect further correction towards 13,200 if it fails to hold on to 13,720.

Traders should remain neutral on the budget day and wait for more clarity, Mohammad said.

“The Nifty50 remained volatile and choppy in the penultimate session to the budget as it moved in a wide band of 370 points before signing off the session with a long bearish candle which resembles a Black Day. In this process it also appears to have decisively closed below its 50-day simple average,” he said.

Unless the index closes above the said average whose value is placed at around 13,720 in the next couple of trading sessions, the market may see a bigger correction with initial targets placed at around 13,200, Mohammad  said.

If the Nifty closes above 14,000 in the post-budget session then fresh buying can be considered as the probability of the near-term bottom shall be much higher, he feels.

India VIX climbed above the 25-mark, rising by 4.33 percent from 24.29 to 25.34 levels. “Surge in volatility due to selling pressure and ahead of the Budget 2021, could keep volatile swing with limited upside in the market,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

Since it is the beginning of a new series, the option data is scattered at different strikes. Maximum Put open interest was at 14,000 followed by 13,000 strike, while maximum Call open interest was at 15,000 followed by 14,500 strike. Options data indicated the Nifty could see a wider trading range of 13,200 to 14,000-14,200 for the coming sessions.

The Bank Nifty opened gap up at 30,700.65 and was highly volatile during the day. Wild swings were seen in the banking stocks and the index closed the day with gains of 207.20 points at 30,565.50.

The index formed a bearish candle on the daily scale as it closed lower than its opening but negated its formation of lower top-lower bottom of the last four sessions. The index shed 2 percent for the week and formed a bearish candle on the weekly scale.

“If the Bank Nifty manages to hold 30,500 then bounce could be seen towards 31,000 and 31,250 levels, while on the downside, support is seen at 30,000 and 29,700 levels,” Taparia said.

Positive setup was seen in Cummins India, TVS Motor, Sun Pharma, Colgate Palmolive, ICICI Bank, United Breweries and Marico. Weakness was seen in Maruti Suzuki, Dr Reddy’s Labs, Lupin, Amara Raja Batteries, Tata Steel, Indraprastha Gas, Sun TV, Dabur, TCS, Infosys and Reliance Industries, he added.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol.