The Nifty crumbled to a month’s low on December 21 as a spike in Covid cases in China and growing fears for the global economy weighed on Indian shares.
After opening higher at 18,435, the index climbed to the day’s high of 18,473 but erased all the gains in morning trade itself. It sank to the day’s low of 18,163 in the afternoon session and closed down 186 points, or a percent, at 18,199. All sectoral indices, barring IT and pharma, closed sharply lower.
The index formed a long bearish engulfing candlestick pattern on the daily charts as it engulfed the previous three candles, indicating more nervousness ahead.
The index also broke the previous day’s low and its 9 daily moving average (18,440) but still managed to hold on to the low of November 21-22 18,130 as well as 50- DMA (18,144).
These levels can hence act as a support, followed by 18,000. A breach of these can lead to a sharp correction, while 18,350-18,450 is expected to be the near-term resistance, experts said.
The Nifty corrected sharply and formed a long bearish candle on the daily charts, which is broadly negative, Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, said.
As long as the index trades below 18,350, weakness will continue. A breach of 18,350 can take the index to 18,100-18,050. A pullback rally is possible only after it goes past 18,350, which can take the index to 18,450-18,475, the market expert said.
On the options front, the maximum Call Open interest was at 18,500 strike, which is expected to be the crucial resistance for the Nifty50 in current series, followed by 19,000 and 18,600 strikes, with Call writing at 18,500 strike, then 18,600 strike.
On the Put side, the maximum open interest was at 18,000 strike, which is likely to be crucial support, a break of which can bring a sharp correction, followed by 18,300 strike, with writing at 18,000 strike then 17,800 strike.
The Option data indicates that the Nifty may trade in the 18,000-18,500 range in the coming sessions.
The India VIX, which gauges the expected volatility in the market, surged 13 percent to 15.56 from 13.78 level.
The broader markets also traded in the red, with the Nifty midcap 100 and smallcap 100 indices correcting 1.6 percent and 2.2 percent.
The banking index
The Bank Nifty opened higher at 43,526 and climbed to 43,615 but squandered the gains in late-morning deals amid volatility. It closed 742 points, or 1.7 percent, down at 42,618 and formed a big bearish engulfing candlestick on the daily chart, indicating more weakness ahead.
“Key resistance and support levels for banking index are 43,000 and 42,000 respectively,” Mohit Nigam, Head – PMS at Hem Securities, said.
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