F&O: Nifty negates higher lows formation; VIX sees a spike

By Chandan Taparia

Nifty on Tuesday opened at a new record high of 13,145, but failed to hold its gains and started correcting from the first hour of the session. It corrected more than 300 points from the day’s high and drifted towards 12,850 amid selling pressure later on. The index formed a Bearish Belt Hold or Bearish Engulfing Candle on the daily scale and negated higher lows formation after two trading sessions.

Nifty has to hold above 12,850- 12,900 levels now to witness a bounce towards 13,000 and 13,050 levels, while a hold below the same could see weakness towards 12,800 and 12,750 levels.

India VIX went up by 9.82 per cent from 21.06 to 23.12. Volatility has increased in the past few sessions, suggesting that the ongoing momentum could take a pause going ahead.

On the options front, Maximum Put open interest stood at 12,800 level followed by 12,500, while maximum Call OI was seen at 13,500 followed by 13,000. Call writing was seen at 13,000 and 12,900, while Put unwinding was seen at immediate strike prices. Options data suggested a wider trading range in between 12,750 and 13,050 levels.

Bank Nifty had a gap-up opening and extended its move towards 30,200 zone, but failed to hold gains at higher levels and started drifting lower. It corrected nearly 1,000 points from the day’s high as selling pressure was seen across banking counters. It formed a Bearish Engulfing candle on the daily scale and closed with losses of more than 500 points. Now it has to hold above 29,000 to witness a bounce towards 29,500 and 29,800 levels, while a hold below the same could see selling pressure towards 28,600-28,500 zones.

Nifty futures closed negative with losses of 1.58 per cent at 12,856 level. The trade setup looked positive in ONGC, Gail, Adani Port and SBI Life, but weak in Axis Bank, HDFC Bank, Eicher Motor, Maruti, Dr Reddy, Aurobindo Pharma, Bajaj Finance, Hero Motocorp and Kotak Bank.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)