The Nifty recovered sharply on May 20 from the selloff in the previous session, ending near the day’s high. The index finished at 16,266.20, up 456.80 points, or 2.89 percent, helped by buying across the sectors, forming a bullish candle.
The Nifty has to hold above 16,161 to extend the bounce towards 16,400 and 16,666, while on the downside, support exists at 16,000 and 15,800 zones, experts said.
“With this recovery, the index also bridged the bearish gap registered in the last session, present between 15,984 and 16, 211,” said Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in, said.
“Friday’s strong move can also be interpreted to conclude that the fall of the last Thursday’s session was just a reaction to the negative global cues, provided the Nifty witnesses a follow-through buying in the next trading session. In that scenario, the initial hurdle shall be around 16,400 levels and beyond that test of 20-day SMA cannot be ruled out.”
It is critical that the index to sustain above 16,000, below which weakness can be expected with initial target of 15,775.
Considering the erratic moves of the last couple of trading, it would be prudent to remain neutral on the index trade, he said.
The options data suggests a trading range between 15,800 and 16,500.
On the options front, the maximum Call OI (Open Interest) was at 17000 then 16300 strike, while the maximum Put OI was at 16000 then 15800 strike.
Call writing was seen at 16300 strike, while meaningful Put writing was seen at 16000 then 16100 strike.
“Volatility has fallen from higher zones which supported some smart pullback and now needs to come down for market stability,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
India VIX fell 5.94 percent from 24.55 to 23.10 levels.
The Bank Nifty opened gap-up in line with the broader market and extended gains towards 34,350. It witnessed buying interest from 33,650 to 34,350 and closed at 34,276, up 960 points.
It formed a bullish candle on the daily and weekly scales. “It has to hold above 34,000 zones to extend this move towards 34,500 and 34,750 zones, while on the downside, support exists at 33,666 and 33,500,” Taparia added.
Among stocks, a positive setup was seen in Dr Reddy’s Laboratories, ITC, HAL, Ashok Leyland, Reliance Industries, LIC Housing Finance, Adani Enterprises, Hero MotoCorp, L&T, Axis Bank, PVR, Sun Pharma, Petronet LNG, BEL, Apollo Tyre, HUL and Siemens. Weakness seen in the Manappuram Finance, Godrej Consumer Properties, Concor and HDFC AMC.
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