After The Bell: A smart bounce back; what should investors do on Wednesday?

Market Outlook

The Indian stock market bounced back sharply after briefly turning red on August 10, supported by a rally in telecom, IT, and banking stocks. The Nifty50 closed above 16,250 while the S&P BSE Sensex saw a rally of more than 150 points.

The Nifty50 hit a record high of 16,359 while the S&P BSE Sensex recorded a high of 54,779 in trade today.

Let’s look at the final tally on D-Street – the S&P BSE Sensex rose 151 points to 54,554 while the Nifty50 rose 21 points to close at 16,280.

Sectorally, buying was seen in telecom, IT, as well as banks while selling pressure was seen in metals, public sector, realty, and utilities.

“What started as a sell-off in metal stocks dramatically triggered a sell-off in the small-cap Index after rallying for several months. The Midcap Index and the PSU banks too were also not spared as both investors and traders booked profits,” S Ranganathan, Head of Research at LKP Securities, said.

“The index at close quite honestly was not reflective of the market mood as the breadth was very weak,” he said.

On the broader markets front – the S&P BSE Midcap index fell 0.8 percent, and the S&P BSE Small-cap index fell by more than 2 percent – underperforming the benchmark indices.

India VIX moved up by 0.83 percent from 12.60 to 12.70 levels. Overall, lower volatility indicates that bulls are holding the command and declines are being bought.

On the options front, the maximum Put OI is placed at 15,000 followed by 16,000 strikes while maximum Call OI is seen at 16,500 followed by 16,300 strikes.

Options data suggests a broader trading range in between 16,000 and 16,500 zones while an immediate trading range is between 16,150 and 16,400 zones.

Here’s what experts suggest investors should do on August 10:

Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services

The second half of the session witnessed a sharp decline to 16,200 followed by a recovery of 80 points in the last hour. It formed a Doji sort of candle on the daily scale as it closed flat near to its opening levels.

Now, the index has to hold above 16,250 zones to witness an up move towards 16,400 then 16,500 zones while on the downside support is seen at 16,150 and 16,000 levels.

Palak Kothari, Research Associate at Choice Broking

Technically, the Nifty index has been trading in a range and hasn’t broken its previous day low and sustained above the same one, which indicates bullish strength in the counter.

Furthermore, the Index has taken support from 50-HMA, which supports upside movement in the counter. A momentum indicator RSI & MACD is showing positive strength and Stochastic is also with positive crossover on the daily chart, which indicates a further bullish move.

At present, the Nifty index has an immediate resistance at 16,360 levels while downside support shifted up to 16,150 levels.

Rohit Singre, Senior Technical Analyst at LKP Securities.

After a strong volatile session, the index managed to close the day on a positive note at 16,280 and formed a Doji candle pattern on the daily chart for the second consecutive day which signals indecision in the markets.

The Nifty again respected the support zone of 16,200 as expected, and we witnessed a good pull-back from the same level which hints until holding above 16200 zone.

The index may see some extension in the existing consolidation zone of 16,200-16,350 zone and either side breakout will decide the final direction move.

Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments

The markets climbed well above the 16,300 mark and seemed all poised to close above it too. However, there was a sharp and nervous sell-off mid-day which brought the index close to 16,200.

We recovered well but did not close above the 16,300 levels. Once we are successful in doing so, we will witness a rally to 16,600 as the next target for the Nifty.

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