Options data suggests that Nifty could trade in a wider trading range of 11,200 to 11,800 levels in the coming days.
The Nifty50 snapped its two-day winning streak and closed a volatile session on a negative note amid a contraction in the services sector for the sixth consecutive month.
The index formed a bearish candlestick pattern on the daily charts as closing was lower than opening levels.
Experts feel 11,500 is expected to be a crucial level and if the index decisively breaks the same then there could be a sell-off.
Considering the sideways nature of the current phase, Mazhar Mohammad of Chartviewindia.in advised traders to remain neutral and wait for a directional move to emerge.
The further fall in volatility continued to play a supportive role for the market as it removed the fear in the mind of participants. India VIX fell by 2.83 percent to 20.50 levels.
The Nifty50 after opening higher at 11,566.20 remained in a narrow range and hit an intraday high of 11,584.95 & low of 11,507.65. The index settled at 11,527.50, down 7.50 points.
"It was a day of consolidation on the bourses as Nifty50 remained in a narrow range of 77 points before signing off the session with a bearish candle. Nifty is looking sideways in a range of 11,700 – 11,387 levels. The index shall continue to remain under pressure even in the next trading session provided it trades below 11,500 levels.," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
In that scenario, weakness shall get extended into the zone of 11,454 – 113,90 levels, whereas a breach of 11,390 on a closing basis shall signal the resumption of the downtrend.
Contrary to this, strength in the next trading session can be expected if it remains above 11,585 for at least 30 minutes. In that scenario, the chances of intraday rally getting extended towards 11,700 can’t be ruled out, he said.
Options data suggests that Nifty could trade in a wider trading range of 11,200 to 11,800 levels in the coming days.
On option front, maximum Put open interest was at 11,000 followed by 11,500 strike, while maximum Call open interest was at 12,000 followed by 11,500 strike. Marginal Call writing was seen at 11,600 strike while Put writing was seen at 11,000 then 11,500 strike.
Bank Nifty started off trade higher at 23,986.15 but failed to hold above 24,000 levels and gradually drifted towards 23,500 levels to hit a day's low of 23,451.65 in the latter part of the session.
The index fell 343.75 points or 1.44 percent to 23,530.80 and formed a bearish candle on the daily scale, relatively underperforming the benchmark index.
"Bank Nifty negated the formation of higher lows after two trading sessions as supply pressure is visible at higher zones. Now it has to cross and hold above 23,800-24,000 levels for a move towards 24,250 and 24,500 while a hold below 23,400 could drift it towards 23,200 then 23,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.
Positive setup was seen in Tata Consumer, TCS, Tata Motors, Grasim, United Breweries, Titan Company and UPL, while weak structure was seen in Axis Bank, Kotak Mahindra Bank, Bharti Airtel, Hindalco and HDFC, he added.