The Nifty swung wildly from gains to losses to finally settle higher in a highly volatile session on February 8, as the traders awaited the outcome of RBI’s three-day monetary policy committee meeting that got underway during the day.
The index formed a small bearish candle, which resembled a Hammer formation, on the daily chart as the closing was lower than the opening levels.
The Hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies that the index bounced back after testing its support, where demand is located.
The bounce after a three-day decline could get extended in the coming sessions but could be short-lived, experts said.
The Nifty opened higher at 17,279.85 and hit the day’s high of 17,306.45 but wiped out the gains to sink to the day’s low of 17,043.65 in the morning trade itself. It then started recouping losses and closed 53.20 points higher at 17,266.80.
Volatility cooled more than 8 percent down after a spike in the previous session but is still around 20 levels, indicating further volatility in the market. India VIX was down by 3.69 percent from 20.43 to 19.68 levels.
Also read: Taking Stock | Market snaps 3-day losing streak; Sensex gains 187 points, Nifty above 17,200
“A small body of negative candle was formed on the daily chart with long lower shadow. Technically, this pattern indicates a formation of a bullish hammer or Doji-type candle pattern (not a classical one).
“Technically, a formation of such patterns after a reasonable weakness signal an upside bounce in the market post confirmation of reversal pattern,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
Buying seems to emerge from near the crucial lower support of ascending trend line at around 17,000 (up trend line connected through previous swing highs and lows as per the concept of change in polarity).
“The said trend line support has offered a reasonable upside bounce in the market around Union Budget-22,” he said.
The expected upside bounce could be short-lived and another lower-top formation below 17,800 levels, according to him.
Also read: Gainers & Losers: 5 stocks that moved the most on February 8
The options data indicates that the Nifty50 could see a wider trading range of 16,800 to 17,700 levels in coming sessions. Maximum Call open interest was seen at 18,000 then 17,500 strike, while maximum Put open interest was seen at 16,500 then 16,000 strike. Marginal Call writing was seen at 17,200 then 17,500 strike while Put writing was seen at 17,200 then 17,000 strike.
Bank Nifty
The banking index started off on a positive note at 38,176.10, and went up to 38,222 but failed to hold it and declined the day’s low of 37,319. However, there was a quick recovery of more than 700 points, which helped the Bank Nifty close 33 points higher at 38,028.40.
The index formed a small bearish candle on the daily charts. “It has to cross and hold above 38,250 levels, to witness a bounce towards 38,500 and 38,850, whereas support is seen at 37,500 and 37,250 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
Also read: Why is the mood swinging so much on markets? Here’s a look at the factors driving volatility
On the stock front, a bullish setup was seen in Bank of Baroda, Tata Steel, SRF, Petronet LNG, Cipla, TVS Motor, Reliance Industries, Titan, JSW Steel, Biocon, Cholamandalam Investment, Axis Bank and PVR. Weakness was seen in Indiabulls Housing Finance, BHEL, Coal India, Tata Chemicals, Coforge, Container Corporation, Zee Entertainment, Lupin, Bata India and Max Financial, Taparia said.
The broader markets, however, underperformed frontline indices. The Nifty Midcap 100 index fell 0.7 percent and Smallcap 100 index declined 1.72 percent.
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