The Nifty gained more than 100 points on June 2 despite weakness in its Asian counterparts, with IT, metal, pharma stocks and index heavyweight Reliance Industries leading the rally.
The index opened lower at 16,482 but gained strength to extend gains to 16,646, the intraday high. The index settled at 16,628, up 105 points.
It formed the Bullish Engulfing pattern on the daily charts. The pattern has two candlesticks—the first red and the second green. The green body engulfs the body of the first red candlestick.
The broader market participated in the run as well, with the Nifty midcap 100 index rising 0.68 percent and Smallcap 100 index climbing 0.6 percent on positive breadth. About three shares advanced for every two declining shares on the NSE.
“The last three sessions of volatile moves between 16,700 and 16,400 levels is hinting that the index is in a consolidation mode,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
For a sustained up move, the index needs a close above 16,750 levels where the 200-day exponential moving average (EMA) is placed. In that scenario, a higher target of 17,100 can be expected, the market expert said.
A close below 16,400, however, can induce a fresh bout of weakness in the index.
In simple words, the Nifty may remain trendless in the near term unless it emerges out of the consolidation zone of 16,700 – 16,400 levels, Mohammad said.
Volatility remained above 20 levels, which indicates that volatile swings could continue. India VIX, which measures the expected volatility in the market, fell 2.51 percent to 20.32 levels.
On the options front, maximum Call open interest was seen at 17,500 strike followed by 17,000 strike, while maximum Put open interest was seen at 16,000 strike. Call writing was seen at 16,700 strike, while Put writing was seen at 16,500 strike followed by 16,400 strike.
The data indicates that the Nifty could see an immediate trading range of 16,400-16,800.
Positive setup was seen in Ashok Leyland, Canara Bank, Federal Bank, M&M Financial Services, Reliance Industries, L&T Finance Holdings, Bajaj Finserv, Adani Enterprises, Coal India, TCS and HDFC Life Insurance Company.
Apollo Hospitals, Bajaj Auto, Hero MotoCorp, Indraprastha Gas and RBL Bank saw weakness, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Banking index
The Bank Nifty opened negative at 35,471 but managed to hold 35,400 and moved in a 300-point range. It is holding above its 50-EMA and closed near its day’s high down seven points at 35,614 from the previous day.
The banking index formed a bullish candle on the daily scale. “The index has to hold above 35,500 levels to see an up move towards 36,000 and 36,100 levels, while on the downside, support is seen at 35,250 levels followed by 35,000 levels,” Taparia said.
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