VIX has to hold below 16 zones to get a bullish momentum else tough fight could be back in the market, Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Bears tightened grip on Dalal Street on Monday. The Nifty50 closed lower for third consecutive session, forming bearish candle on the daily scale. Weakness in global peers and selling pressure in banks, auto, FMCG and metals stocks dampened market sentiment.
The broader markets also ended in the red as the Nifty Midcap dropped 0.66 percent and Smallcap declined 1 percent.
The sharp fall for second straight session and correction by around 300 points from 10,950 to 10,650 levels strengthened the bearish sentiment, experts said, adding the Nifty could drop below 10,600 levels if it stays below the 200-DMA, which is placed around 10,767 levels.
The Nifty50 after opening higher at 10,780.90 immediately turned rangebound and traded in tight range of about 40 points, but suddenly extended losses in last hour of trade to hit day's low of 10,649.25. The index closed 90.50 points lower at 10,663.50.
"Nifty50 continued its downswing signalling a near term top at 10,985 levels as it registered a bearish candle before signing off the session," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said in this process the index has decisively breached its 200-day moving average (10,767) strengthening the bearish sentiments further and dissipating the hopes of a bigger pull back beyond 11,000 kind of levels.
On the downsides initial target appears to be around 10,460 and a failure to find support around these levels shall threaten the recent lows of 10,333, he added.
As upsides, post Monday's breakdown, shall get capped around 10,780 kind of levels, traders are advised to make use of pull back rally towards 10,750 to create fresh shorts with a stop above 10,782 on closing basis and look for a initial target of 10,460, Mazhar said.
The Indian markets will remain shut on Tuesday for Christmas.
India VIX fell by 3.56 percent to 15.41 levels.
VIX has to hold below 16 zones to get a bullish momentum else tough fight could be back in the market, Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the option front, maximum Put open interest (OI) was at 10,000 followed by 10,700 strikes while maximum Call OI was at 11,000 followed by 10,900 strikes.
Meaningful Call writing was seen at 10,700 followed by 10,800 strike which may restrict its upside move while Put unwinding at immediate strikes could put some pressure.
Option band signifies a lower trading range in between 10,550-10,600 to 10,800 zones for the Nifty.
"Nifty slipped below its 50 DEMA and also tested its 50 percent retracement of the entire up move from 10,333 to 10,985 levels. Now till it sustains below 10,777-10,750 zones, profit booking could continue towards next major support at 10,600-10,550 levels while on the upside hurdles are seen at 10,750-10,777 zones," Chandan Taparia said.
Bank Nifty failed to surpass 26,950 zones and corrected towards its major support of 26,666 levels. The index was down 154.90 points to close at 26,714.75.
It formed a bearish candle and started to form lower lows for third consecutive session.
"Now if it sustains below 26,666 zones weakness could be seen towards 26,500 and lower levels while on the upside hurdles are seen at 26,950-27,000 zones," Taparia said.
