India VIX fell by 2.22 percent to 16.61 levels. Volatility has to cool down to form a short term top then only Nifty can form a short term bottom process for a temporary bounce back process, experts said.
The Nifty50 after flat opening fell sharply but formed the bottom and managed to rebound in noon trade to close tad above psychological 11,000 levels. The solution to IL&FS issue by forming new board lifted sentiment in later part of the session.
The index formed bullish candle on the daily charts after weakness seen in previous three consecutive sessions. It was a good start to October month after getting butchered in September.
Experts expect the Nifty to move up further if it sustains above 10,900 and said the next target is seen at around 11,170 levels but the downside seems limited.
The Nifty50 started off October month on a flat note but immediately fell sharply to hit day's low of 10,821.55, but managed to recoup those losses gradually in later part of the session and hit an intraday high of 11,035.65. The index closed 77.80 points higher at 11,008.30.
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"It is interesting to note that Nifty50 appears to be attracting some sort of value buying (or low level attractive buying), the moment it trades below 10,900 levels on intraday basis, for last couple of trading sessions," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said even in Monday's session also it witnessed buying interest from intraday low of 10,810 before signing off the day with Hammer kind of formation with long lower shadow. "Hence, sustaining above 10,900 levels on closing basis a multi-day pull back rally can't be ruled going forward.
However, upsides for time being looks to be capped in the zone of 11,145–11,170 levels, he feels. "If the said hurdle is cleared then this pull back can get extended further upto 11,345 levels."
He said on the downsides weakness may re-emerge if this index close below 10,900 levels as throughout this consolidation phase it was managing a close above 10,900 levels.
Hence, Mazhar advised traders to go long in next session by making use of initial dip, if any, in the first 30 minutes of trade with a closing stop below 10,900 levels.
India VIX fell by 2.22 percent to 16.61 levels. Volatility has to cool down to form a short term top then only Nifty can form a short term bottom process for a temporary bounce back process, experts said.
On option front, maximum Put open interest (OI) is at 10,800 followed by 11,000 strike while maximum Call OI is at 11,500 followed by 11,200 strikes. Put writing is at 10,700 followed by 10,500 strikes while Call writing is at 11,000 followed by 10,900 strike. Option band signifies a trading range in between 10,850 to 11,171 zones.
"The index formed a bullish candle on a daily scale and managed to negate its Lower highs formation of last three sessions. It also witnessed a positive divergence on daily scale as mechanical indicators like RSI didn't make new lows while price," Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.
He further said mow the index has to hold above psychological 11,000 zones to witness a support based buying towards 11,080 then 11,171 while on the downside major support exist at 10,850 zones.
Bank Nifty managed to respect its recent swing low of 24,678 and recovered sharply towards 25,400 zones. It formed a Double bottom and a Bullish candle on daily scale followed by a Doji which indicates that short term bottom could be placed in the rate sensitive index.
"Now it has to continue to hold above 25,000 zones to extend its bounce towards 25,650 then 26,000 zones while on the downside major support is seen at 24,700-24,650 zones, Taparia said.