Overall the market sentiment remained positive for the second consecutive session as the Nifty50 rallied more than one percent at close, though it had broken previous closing for a moment on the budget day.
The index has formed a small bullish candle which resembles hanging man pattern on daily charts, indicating exhaustion of ongoing short term rally. The index has to decisively trade above 17,600 for a few sessions, only then a sharp upside is possible, otherwise the trade may remain rangebound, experts feel.
A hanging man is a bearish reversal candlestick pattern that is usually formed at the end of an uptrend or at the top. In a perfect hanging man pattern, there will be a small upper shadow or no upper shadow at all, a small body and a long lower shadow.
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India VIX, which measures the expected volatility in the market, was down by 8.99 percent to 19.97 levels, but experts feel as it is still around 20 levels, further volatile swings can’t be ruled out until it falls way below that mark.
The Nifty50 opened sharply higher at 17,529.45 and went above 17,600 mark. However, for a moment, in afternoon trade, it wiped out all those gains, but immediately rebounded and finally settled at 17,576.80 with 237 points or 1.37 percent gains.
“Although Nifty50 strongly recoiled from the intraday low of 17,255 levels, by the end of the day, it formed a hanging man formation which is usually considered as a sign of exhaustion for the ongoing short term uptrend,” said Mazhar Mohammad, chief strategist, technical research, and trading advisor, ChartviewIndia.
Going forward, he added the Nifty50 needs to consistently trade above 17,622 levels to retain the positive bias. “In that scenario, eventually, a higher target of 18,045 levels can be expected,” Mohammad said.
However, on the downsides, “it remains critical to sustain above 17,244 levels as a breach of this on a closing basis can usher in a fresh leg of a short-term downswing,” added Mohammad. “In between a sideways consolidation in the zone of 17,600 – 17,250 can be expected,” he said.
For the time being any sharp dip towards 17,300 can be considered as an opportunity to create positional longs with a stop-loss below 17,240 levels, he advised.
Option data indicated that the Nifty50 could trade in an immediate range of 17200 to 17800 levels. Maximum Call open interest was seen at 18000 then 17500 strike while maximum Put open interest was seen at 16500 then 16000 strike. Marginal Call writing was seen at 17600 then 18000 strike while Put writing was seen at 17500 then 17600 strike.
Bank Nifty opened on a positive note at 38460.45 but failed to surpass 38800 levels in the first half of the day. The second half remained quite volatile, but quick recovery was seen from lower zones and Bank Nifty closed with gains of 530 points at 38505.50, forming a Doji candle on daily scale with longer lower shadow.
“The index has to hold above 38250 levels to move upwards towards 38850 and 39250 levels whereas support can be seen at 38000 and 37750 levels,” said Chandan Taparia, vice president, analyst, derivatives, Motilal Oswal Financial Services.
On the stocks front, Taparia added that a bullish setup was seen in Tata Steel, Sun Pharma, Jindal Steel & Power, NMDC, L&T, NALCO, Siemens, ABFRL, JSW Steel, ITC, Ambuja Cements, Hindalco, Cholamandalam Investment, M&M Financial, DLF, Indian Hotels, Grasim, AU Small Finance Bank, Canara Bank, ICICI Bank, GAIL, United Breweries, TCS and PVR. However, “weakness was seen in HPCL, BPCL, IOC, Bata India, M&M, BEL and Eicher Motors.”
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