For the time being, upsides shall remain capped around 12,103 levels and, hence, aggressive traders are advised to create short positions either by making using of rally or on breach of 11,829 levels.
The Nifty50 fell sharply on June 6 and registered the biggest one-day fall in 2019, dragged by banks after the RBI had delivered a dovish policy by cutting repo rate by 25 bps and changed its stance from neutral to accommodative. The index closed well below 11,900 levels and formed a “Bearish Belt Hold” pattern on daily charts.
The market could be worried for two reasons. First, in the policy, there is no announcement related to liquidity stress facing by NBFCs. In addition, banks have loan exposure to DHFL which got a downgrade rating by rating agencies after it having defaulted on debt repayment due to cash crunch.
A “Bearish Belt Hold” pattern is formed when the opening price becomes the highest point of the trading day (intraday high), and the index declines throughout the trading day making up for the large body. The candle will have small or no upper shadow and a small lower shadow.
The Nifty50 extended losses after opening lower at 12,039.80, which was also the day's highest level, as the day progressed and hit the intraday low of 11,830.25 in late trade. The index closed 177.90 points lower at 11,843.80.
"Nifty50 registered a 'Bearish Belt Hold' formation as it continued to fall from the word go before signing off the session near to its critical short term support levels of 11,829. However, the pace of fall in today's session is slightly worrisome Nifty appears to have triggered short term trend reversal which will be confirmed on a close below 11,829 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said Nifty should initially head towards 11,600 kind of levels in such a scenario and can also eventually make an attempt to bridge the bullish gap present in the zone of 11,591–11,426 levels registered on May 20 in the current leg of downswing.
For the time being, upsides shall remain capped around 12,103 levels and, hence, aggressive traders are advised to create short positions either by making using of rally or on breach of 11,829 levels, he added.
India VIX fell by 0.67 percent to 15.25 levels.
On the option front, Maximum Put open interest (OI) is at 11,500 followed by 11,000 strike while maximum Call OI is at 12,500 followed by 12,000 strike.
Call writing is at 12,000 followed by 12,500 strike while Put unwinding is at all immediate strike price.
Option data suggests a wider trading range in between 11,750 to 12,250 zones, experts said.
"Now till the Nifty50 holds below 11,888 zone it could extend its weakness towards 11,761 then 11,660 zones while on the upside hurdle is seen at 11,950 then 12,041 zones," Chandan Taparia, Associate Vice President – Analyst-Derivatives at Motilal Oswal Financial Services, said.
Bank Nifty opened negative and extended its losses by more than 700 points to close at 30,857.40. It formed a Bearish Belt Hold on daily scale and witnessed one of the steepest fall in past four years.
"Now till it holds below 31,150 zone it could extend its weakness towards 30,500 then 30,250 zones while on the upside hurdle is seen at 31,150 then 31,313 levels," Chandan Taparia said.
