After being oversold, the Nifty50 showed decent recovery but failed to hold those gains amid volatility and settled flat with a negative bias on September 27. However, the index has defended not only the psychological 17,000 mark but also 16,950 (the low point of gap up area created on July 29) and the 200-day simple moving average (16,990), which can act as a support area in the near term, while the decisive closing above 17,200 can bring the bulls back on track, experts said.
The Nifty50 has seen the formation of a bearish candlestick pattern on the daily charts as the closing was lower than the opening levels. It has also seen lower low and lower high formation for the fifth consecutive session.
Banking & financial services, auto, and metal stocks pulled the market down.
The broader markets, however, bucked the trend with the Nifty Midcap 100 and Smallcap 100 indices rising around 0.2 percent each after a sharp correction in the previous two sessions.
The Nifty50 opened the gap up by around 100 points at 17,111 and climbed up to 17,176 but failed to hold on to those gains. The index has taken support at 16,950 levels and closed with 9 points loss at 17,007.
“Lower top formation intraday charts and bearish candle on daily charts indicating continuation of weakness in the near term. However, momentum indicators suggest a strong possibility of a pullback rally from the current levels,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.
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He is of the view that the bearish sentiment in the market is still intact and a fresh pullback rally possible if the index succeeds to trade above 200 days SMA (simple moving average) or 16,940. Above this, the index could retest the level of 17,150-17,200.
On the flip side, below 16,940, it could slip till 16,850-16,800.
The intraday texture of the market is non-directional, hence level based trading would be the ideal strategy for the day traders, the market expert advised.
India VIX was down by 1.48 percent to 21.57 levels, but it is still hovering at higher zones which is giving discomfort to the bears.
On the Options front, we have seen maximum Call open interest at 18,000 strikes followed by 17,500 strike while the maximum Put open interest was seen at 16,000 strike then 17,000 strike.
Call writing was seen 17,100 strike followed by 17,200 strikes while minor Put writing was seen at 16,900 strike then 16,600 strike.
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The Option data suggested that the trading range for the Nifty50 maybe 16,800-17,300 in an immediate term due to higher volatility.
Bank Nifty opened positive at 38,811, but failed to hold above 39,000 and remained under pressure for the entire session. It touched the 38,185 level during the day with a slight recovery in the last tick and closed with losses of 257 points at 38,359.
The banking index has formed a bearish candle on a daily scale and has been making lower highs – lower lows over the last five sessions. “Now till it remains below 38,888, weakness could be seen towards 38,000 and 37,777 levels whereas hurdles are placed at 38,888 and 39,250 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
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