VIX suggests that volatile swings could continue in the market ahead of the election outcome
A sharp selloff in the last hour dragged Nifty below the psychological 11,500 on May 7. The benchmark index continued to reel under selling pressure for fifth consecutive session and formed large bearish candle on daily charts.
The index finally broke its multiple support of 11,550 after the consolidation of last twenty four trading sessions, experts said, adding if it breaks next meaningful support of 11,430 then it could move towards 11,250.
Nifty opened higher at 11,651.50 and remained rangebound, but fell in the last hour of trade that pulled the index lower to hit an intraday low of 11,484.45. It closed at 11,497.90, down 100.35 points.
"Nifty50 encountered selling pressure as it entered into May 6 gap zone of 11,632-11,699 before signing off the day with a large bearish candle," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said, with this fall, Nifty also appears to have registered a consolidation breakdown of its 19-day range of 11,850-11,550.
"This range breakdown itself has opened up a new target of 11,250 on the downside. However, in between, a meaningful support is placed around 11,430 from where a bounce can be expected but a breach of the said support shall further drag the index towards 11,250," he added.
Mohammad said, for time being, upsides shall remain capped around 11,650 and strength in Nifty can be expected only on a close above 11,657.
Meanwhile, any rally towards 11,550 can be a good opportunity to create fresh short with a closing stop loss above 11,660, he added.
India VIX moved marginally up by 0.18 percent to 26.47. Higher VIX suggests that volatile swings could continue in the market ahead of the election outcome, experts said, adding option band signifies widening of trading range to 11,300-11,800.
For Nifty options, maximum Put open interest (OI) was at 11,000 followed by 11,500 while maximum Call OI was at 12,000 followed by 12,500. Minor Call writing was seen at 12,000 while Put writing was seen at 11,500.
"Nifty has given a consolidation breakdown below 11,550 and hold below the same could continue its decline towards next support of 11,420 then 11,333 while hurdles are seen at 11,666," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Bank Nifty opened positive but failed to hold its gains and finally drifted towards 29,250 as it broke its crucial support of 29,500.
The index closed at 29,288.20, down 330.25 points and formed a bearish candle on the daily scale as sustained selling pressure was seen for the most part of the session.
"Now till it holds below 29,500, it could drift towards 29,000 then 28,888 while hurdles are seen at 30,000," Chandan Taparia said.
