The Nifty extended losses for the second successive day on January 5, slipping below the psychologically vital 18,000 mark after the Federal Reserve meeting minutes indicated that the US central bank will continue its aggressive stance to control inflation.
After opening higher at 18,102, the index climbed to 18,120 but immediately erased the gains and sank to the day’s low of 17,893. It managed to recover some of the losses in the last hour to close 51 points lower at 17,992.
The index formed a bearish candle with long lower shadow, indicating support-based buying which helped it cut losses by taking strong support at the 17,900 mark. In case of further recovery, the index can jump to 18,100-18,200 but a breach of the support can drag the index to 17,770, the lowest level in December, experts said.
Banking & financial services, and technology stocks pulled the benchmark index down, while buying in auto, FMCG, metal and pharma supported the market.
“A reasonable negative candle was formed on the daily chart with long lower shadow. Technically, this pattern indicates downside continuation amidst volatility. The upside recovery of Thursday signal that buying is expected to emerge from near the lower support of around 17,750-17,800 levels,” Nagaraj Shetti, Technical Research Analyst at HDFC Securities, said.
Negative chart patterns like lower tops and bottoms continued on the daily chart and the Nifty is expected to revisit the recent swing lows of 17,775 in the short term, he said. Any upside bounce could encounter resistance around 18,100, he said.
The weekly options data indicated that the Nifty may see a broad trading range of 17,700-18,500 in the coming sessions. A decisive break on either side will give a clear direction to the market.
On the options front, the maximum Call open interest was seen at 18,000 strike followed by 18,500 and 18,200 strikes, with Call writing at 18,000 strike then 17,900 strike.
The maximum Put open interest was seen at 17,700 strike followed by 17,900-17,800 strikes, with Put writing at 17,700 strike then 17,600 and 17,900 strikes
India VIX was down 1.41 percent from 15.20 to 14.98 levels. Volatility needs to now cool down below 14 for stability to resume, experts said.
Banking index
The Bank Nifty opened positive at 43,073 but nosedived to 42,300 and remained under pressure for the most part of the session.
It formed a bearish candle on the daily scale with long lower shadow as it closed 350 points down at 42,609.
“The banking index has to cross and hold above the 42,750 level to make an up move towards 43,034 and 43,250 levels, while on the downside, support is expected at 42,250 and 42,000 levels,” Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services, said.
The broader markets outperformed the Nifty despite negative breadth. The Nifty midcap 100 index gained half a percent and the smallcap 100 index ended flat but with a positive bias.
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