(Image: Reuters)
The Nifty50 had a gap down opening and plunged more than 300 points for a second consecutive session as bears held tight control over Dalal Street, tracking southward journey in global counterparts amid rising recession fears in the western world. Consistent FII selling and weakening currencies with the strengthening dollar also dampened equity market sentiment.
The index has seen the formation of a bearish candlestick pattern on the daily charts. The 50-share benchmark index has defended the 17,000 mark due to a bit of recovery in late trade, hence if the index manages to sustain the same crucial mark then there could be a temporary relief rally in the market after being looked oversold, but if the index fails to hold on to the said level then there could be a fair chance of index breaking 16,900-16,800 levels in coming days, experts feel.
All sectors, barring IT, traded in the negative territory. Auto, Metal, Realty and Oil & Gas were the biggest losers, falling between 3 percent and 4 percent. The severe selling pressure was also seen in the Nifty Midcap 100 and Smallcap 100 indices which corrected more than 3 percent each.
The Nifty50 started off trade lower by around 150 points and remained under pressure throughout the session to hit a day’s low of 16,978, though it attempted some recovery. The index finally settled with 311 points or a 1.8 percent loss at 17,016, continuing the downtrend for the fourth consecutive session.
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“Due to markets being in oversold territory, we could witness a quick pullback rally,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.
For traders, the 200-day simple moving average (SMA – 16,992) and 16,850 would be a key support level. On the flip side 17,150 and 17,200 could be the immediate hurdle for the bulls,” the market expert said.
The elevated volatility also caused a favourable trend for bears. The India VIX, which measures the expected volatility in the market, rose by 6.31 percent to 21.89 levels.
On the Option front, we have seen maximum Call open interest at 18,000 strike followed by 17,500 strike, with Call writing at 17,200 strike then 17,100 & 17,300 strike, while the maximum Put open interest was seen at 16,000 strike followed by 17,000 & 16,500 strikes, with Put writing at 16,500 strike then 16,000 strike.
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The above Option data indicated that the Nifty may remain in a range of 16,800 to 17,500 in the near term.
The Nifty Bank also corrected sharply, opening more than 500 points lower at 39,028 and corrected up to 38,492. The banking index defended the 38,500 level and closed with 930 points losses at 38,616 and formed a bearish candle on the daily charts, with lower high and lower low formation.
“The Nifty Bank index has breached its important support levels and pull-back rallies should be utilized to initiate fresh short positions,” Kunal Shah, Senior Technical Analyst at LKP Securities said.
The higher-end resistance is visible at the 39,500-40,000 zone and the next support is seen at the 38,000 level, he added.
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