The Nifty carried its Budget rally into the second day, adding more than a percent on February 2. All sectors participated in the run, as volatility cooled down with the Budget out of the way.
The index, which ended in the green for the third consecutive session, formed a bullish candle on the daily charts as the closing was higher than opening levels, indicating strength in the market.
The index needs to sustain above the day’s low of 17,675 in the coming sessions, which could take the index above 18,000, experts said.
India VIX, which measures the expected volatility in the market, was down 6.64 percent to 18.65 levels, extending downtrend for second straight session.
“VIX needs to come down to 15 zones for stability in the market,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
After opening at 17,706.20, the Nifty remained in the 17,674.80-17,794.60 range, closing 203.20 points, or 1.16 percent, up at 17,780.
“Bulls continued their party even after the Budget as Nifty50 witnessed a gap-up opening. However, the intraday trading range remained narrower with 120 points, which can be a cause for concern,” said Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisors at Chartviewindia.
Also read: Taking Stock | Budget rally continues for second day; Nifty above 17,700; Sensex gains 695 points
The index seems to be facing dual resistance from its 20-day moving average as well as its critical retracement point of 62 percent levels at around 17,794, the day’s high.
Therefore, “in the next couple of sessions, it remains critical for the index to sustain above the bullish gap zone of 17,674 – 17,622 levels”.
In such a scenario, strength can expand towards 18,045 levels but if the Nifty closes below 17,622 then expect weakness in the near term.
On the option front, there was maximum Call open interest at 18000 then 17500 strikes while maximum Put open interest was at 16500 then 16000 strike. Marginal Call unwinding was seen at 18000 then 17800 strike while Put writing was seen at 17700 then 17600 strike.
Also read: Gainers & Losers: 5 stocks that moved the most on February 2
Option data indicated that the Nifty could see a wider trading range of 17,400 to 18,200 in the coming sessions.
The broader markets also stayed strong. The Nifty midcap 100 and smallcap 100 indices surged 1.18 percent and 1.44 percent, respectively.
Bank Nifty
The Bank Nifty outperformed the Nifty, rising 825 points, or 2.14 percent, to 39,330.50 and formed a bullish candle on the daily charts.
It opened gap up at 38,841.55 and hit an intraday high of 39,386.60 after surpassing its previous resistance levels.
“The Bank Nifty has been forming higher lows from the last six sessions. Now it has to hold above 39,200 for an up move towards 39,700 and 40,000 zones whereas support can be seen at 39,000 and 38,850 levels,” said Taparia.
On stocks front, a bullish setup was seen in IndusInd Bank, Can Fin Homes, Bajaj Finserv, HCL Technologies, Aditya Birla Fashion, Divis Labs, LIC Housing Finance, Trent, Kotak Mahindra Bank and HDFC Life. Weakness was seen in Asian Paints, Balrampur Chini Mills, Chambal Fertilisers, DLF, ACC, Tech Mahindra and Cummins India, he said.
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