The Nifty50 erased all its previous two-day gains and lost nearly 200 points on January 4 despite positive global cues, but has taken support at the crucial 18,000 mark, where we have seen the maximum Put open interest in the current series. Traders seem to be cautious ahead of the FOMC minutes release, which is expected tonight.
The index opened flat at 18,231, and after initial volatility, turned sharply lower as the day progressed to hit an intraday low of 18,021. Finally, it settled with 190 points or 1 percent loss at 18,043, and formed a long bearish candle on the daily charts.
If the index manages to hold on to 18,000 mark in the coming session then there is a possibility of a rebound. But breaking the mark can weaken the mood further, experts said.
The selling was seen across sectors, with banking and financial services, metal, IT, realty, and oil and gas falling 1-2 percent.
“This decline has engulfed the gains of the last four sessions in the Nifty, and selling pressure in the banking index, which was acting as a saviour so far, has further deteriorated the mood,” Ajit Mishra, VP – Technical Research at Religare Broking said.
Mishra feels the pressure may increase below the 18,000 level in the Nifty. Keeping in mind the scenario, it is prudent to limit leveraged positions and wait for clarity, the market expert advised.
Per Option data, the expected broader trading range for the Nifty50 would be 17,800-18,500 for coming sessions.
On Option front, there was maximum Call open interest at 19,000 strike, followed by 18,200 strike and 18,500 strike, with Call writing at 18,200 strike, then 18,100 and 18,000 strikes. On the Put side, we have maximum open interest at 18,000 strike, followed by 17,500 strike and 18,200 strike, with writing at 17,300 strike, then 18,100 and 18,200 strikes.
India VIX increased sharply by 5.64 percent from 14.39 to 15.20 level, making the way favourable for bears in the market.
The Bank Nifty opened flat to negative at 43,417 but remained under pressure in line with the broader market. It failed to hold above the 43,500 level and broke its previous day’s low to close with losses of around 466 points at 42,959.
The banking index has formed a bearish candle which resembles, to some extent, a Bearish Engulfing pattern on the daily scale. “It has to cross and hold above 43,034 level to make an up move towards 43,250 and 43,400 levels while on the downside support is expected at 42,750 and 42,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
The broader markets also traded in line with benchmark indices on weak breadth. The Nifty Midcap 100 and Smallcap 100 indices fell around 1 percent each as about three shares declined for every one share rising on the NSE.
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