The Nifty fell plunged more than 300 points, extending losses for the third consecutive session on February 7, and formed a big bearish candle on the daily chart as the closing was lower than the opening level.
Traders seem to have turned cautious ahead of Monetary Policy Committee’s three-day meeting that begins on February 8. Rising oil prices, and relentless FII selling also added to the selling pressure. All sectoral indices, barring Metal and PSU Bank, fell 1-2 percent.
The index decisively broke its 50-day simple moving average (SMA) placed at 17,440 and slipped to around 17,100, indicating that the fall could get extended to around 16,950 in the coming sessions, experts said.
Volatility also increased significantly to climb above the 20 mark, indicating choppy trade going ahead. India VIX, which measures the expected volatility in the market, rose 8.14 percent to 20.44 levels.
The Nifty started off lower at 17,456.30 and hit the day’s low of 17,119.40 before recouping some of the losses. It settled at 17,213.60, with a loss of 302.70 points or 1.73 percent.
“A long bear candle was formed on the daily chart with minor lower shadow. This pattern signals sharp downside momentum in the market after the lower top formation of around 17,795 levels (seen on February 2),” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
In the last few months, the market has shown sharp weakness from the higher or lower tops (indicative of long bear candles). “Monday’s steep weakness could be another evidence of the said market action,” he said.
Also read: Gainers & Losers: 5 stocks that moved the most on February 7
The short-term trend for the Nifty continues to be down and the downside momentum seemed to have picked up, Shetti said.
“There is a possibility of further weakness down to the lower support of around 16,950-16,850 levels in the next few sessions, before witnessing another round of minor upside bounce from the lows. Immediate resistance is placed at 17,300 levels,” Shetti said.
On the broader markets front, the Nifty midcap 100 and smallcap 100 indices corrected more than a percent each.
Also read: Investor wealth eroded by Rs 4 lakh crore as Sensex tanks more than 1,300 points
On the options front, there was a maximum Call open interest at 1,8000 strike then 17,500 strike, while maximum Put open interest was seen at 16,500 then 16000 strike. Marginal Call writing was seen at 17,500 then 18,000 strike, while Put writing was seen at 16,900 then 17,200 strike.
The data indicates that the Nifty can see a wider trading range of 16,800 to 17,700 in the coming sessions.
Bank Nifty
The Bank Nifty opened negative at 38,592 and breached its 50-day exponential moving average on daily frame, falling up to 37,802.70 intraday.
Private heavyweight counters including HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, ICICI Bank and RBL Bank dragged the index down, which closed 793.90 points, or 2.05 percent, down at 37,995.40.
Also read: Nifty turns negative for 2022; here’s what is ailing sentiment on D-Street
The index formed a bearish candle and has been forming lower tops, lower bottoms on the daily scale.
“Till it sustains below 38,250 levels, weakness could be seen towards 37,500 and 37,250, whereas hurdles are seen at 38,500 and 38,850,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, Taparia said a bullish setup was seen in InterGlobe Aviation, Bank of Baroda, Vedanta, Biocon, ONGC, Power Grid Corporation of India, Gujarat Gas, GAIL, Ambuja Cements, NALCO, SBI, NMDC, Tata Steel and SRF. Weakness was seen in Lupin, Apollo Hospitals, Tata Consumer Products, Strides Pharma Sciences, HDFC AMC, HDFC Life, HDFC Bank, Britannia, Bajaj Finserv, Hero MotoCorp, IEX, United Spirits, Kotak Mahindra Bank and HDFC.
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