It was another volatile session for the market on February 21 as the Nifty50 gyrated in a range of nearly 300 points before signing off the day with moderate losses. Metal, pharma, FMCG and auto stocks witnessed selling pressure, whereas select IT and private banks restricted losses.
The index corrected for the fourth day in a row and saw Doji kind of indecisive pattern formation on the daily charts. A Doji candle indicates that there is some indecisiveness among the bulls and the bears and bounces were being sold in the absence of follow-up buying interest.
The volatility remained high, largely indicating the volatile swings going ahead. India VIX, which measures the expected volatility in the market, jumped more than 3 percent to nearly 23 levels.
“Volatility is unable to hold above 24 zones from the last 18 sessions, which suggests a broader trading range in the market but at the same time higher levels of VIX suggests a roller-coaster ride in the market,” says Chandan Taparia of Motilal Oswal.
Experts feel the trend is expected to remain in favour of bears and if the index breaks 17,070, the day’s low, in the coming session then it can slide down to below 17,000 mark.
The Nifty50 opened gap down at 17,192 and traded in a range of 17,351-17,071 before ending the session at 17,207, down 70 points.
“Interestingly, at today’s intraday low of 17,070 levels, the Nifty retraced exactly 62 percent of its last leg of rally from the lows of 16,809 to a high of 17,490 levels. Hence, some stability above 17,070 in the next couple of sessions can pave the way for a much-needed breakout with a close above 17,350 levels,” says Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.
However, “currently as the trend is in favour of bears, if the slide continues below 17,070 levels then there will be a high chance of Nifty slipping into the zone of 16,900 and 16,800 levels,” he adds.
Therefore, for the time being, Mazhar Mohammad advised traders to avoid long side bets whereas intraday shorting can be considered below 17,070 levels for a target of 16,930 levels.
Option data indicated that the Nifty50 could see a trading range of 17,000 to 17,500 levels in coming sessions. Maximum Call open interest was seen at 18,000 and 17,500 strike while there was maximum Put open interest at 17,000 and 16,500 strike. Call writing was seen at 18,000 and 17,600 strike while Put writing was seen at 17,100 and 17,000 strike.
Bank Nifty opened negative at 37,400 and moved in a unilateral direction and crossed the 38,000 mark in the first half. The second half saw a slight rangebound move and it finally closed with gains of 86 points at 37,685.
The index formed a bullish candle on the daily scale. “Now it has to hold above 37,500 levels for an up move towards 38,000 and 38,250 zones whereas support can be seen at 37,250 and 37,000,” says Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
He further says a positive setup was seen in Federal Bank, Mphasis, Infosys, Wipro, Dabur, ICICI Bank, HDFC Bank, Maruti, Marico, Cummins India and Cholamandalam Investment.
Weakness was seen in Indiabulls Housing Finance, BHEL, Hindustan Aeronautics, DLF, UPL, Hindalco, GAIL, Glenmark, Sun TV Network, Aurobindo Pharma, Aarti Industries, Deepak Nitrite, Indraprastha Gas, L&T Finance Holdings, Apollo Tyres and Nippon Life, he added.
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