India VIX fell by 8.12 percent from 13.06 to the 12 level in the last week
Chandan Taparia
The Nifty index failed to surpass its key hurdle of 11,650 level, and drifted sharply towards 11,550 level.
It has seen a bounce back of around 200 points from its weekly lows in the last four sessions, but resistance is also intact near to 11,650 level, which is restricting its recovery.
The index formed a bearish candle on the daily and weekly scale as supply pressure is intact at bounce back move. But at the same time, the index is also respecting its rising support trend line by connecting major swing lows of 10,585, 11,108 and 11,461 levels.
Now, it needs to continue to hold above the 11,550 zone to extend its bounce towards the next hurdle of 11,650 zone, while a hold below the same could take it towards 11,461 and 11,420 zone.
India VIX fell by 8.12 percent from the 13.06 to the 12 zone in the last week. Volatility remained lower even after profit booking declined post Budget, and now it is hovering below the 12 level, which is the lowest daily closing in last 15 months since April 24, 2018.
Lower volatility suggests that index could get stuck in a trading range with restricted upside as participants are not expecting much action till any other trigger doesn’t affect Indian market.
On the option front, Maximum Put open interest (OI) is at 11,300 followed by 11,500 strike while maximum Call OI is at 12,000, followed by 11,700 strike. We have seen Put writing at 11,400 strike while Call writing is at 11,700 followed by 11,750 strike. Option data suggests a trading range in between 11,400 to 11,700 levels.
The Bank Nifty is forming higher highs from the past three trading sessions, but it failed to hold above 30,850 level and hovering near to its 50 DEMA. It formed a bearish candle on the daily and weekly scale as supply pressure is seen at higher levels, while major support is seen at the previous swing low of 30,250 level. Now it needs to hold above 30,600 level to witness a bounce towards 31,000 level while a hold below 30,500 could continue its decline towards major support of 30,250 level.
The index has gone choppy as its bounce is not being held, and stock specific leadership is changing as many outperformance stocks have seen a sharp cut in the last week. We have seen a positive setup in UBL, McDowell, Infosys, ICICI Prudential, Federal Bank, SBI, BOB, Torrent Power, ACC, UltraTech Cement while weakness in Motherson Sumi, Jubilant Foodworks etc.
(The author is Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.)
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