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NEW DELHI: Short covering at Nifty Bank ahead of F&O expiry sent domestic stock indices soaring in an extended session on Wednesday after a technical glitch on NSE halted trading on that bourse for a few hours. Analysts said they won't be surprised if they see more short covering on Thursday.
Analysts said the Put-Call ratio hinted at oversold conditions. After falling almost 12-15 per cent in February expiry, Nifty Bank picked up momentum and negated the formation of lower highs and lows on the technical chart. This happened after finance ministry allowed private banks to conduct government-related banking transactions. The announcement triggered huge short covering in bank stocks, analysts said.
Banks hold a significant weightage in Nifty50, and hence the spike.
Chandan Taparia of Motilal Oswal Securities said Nifty Bank was already making lower top and bottom for a couple of sessions, and was signalling an oversold condition. The government's decision on banks triggered the short covering, he said.
"Since Nifty Bank made a high of 35,680 on Tuesday, it has picked up momentum. The Put-Call ratio was already oversold. If you look at Nifty50, it has been showing a similar trend quite often. It saw similar selling between January 21 and 28 followed by a sharp rebound. Today, in the last one hour of trade, market participants did not get time to wonder what happened. We won't be surprised if we see more short covering tomorrow, as the trend has changed. It seems Nifty50 will end the February series in the 14,850-15,150 range," Taparia said.
Aditya Agarwala, Senior Technical Analyst at YES Securities, said Wednesday's rally was led mainly by short coverings and fresh long buildup in the banking stocks following the FinMin tweet.
"If the bulls manage to take Nifty50 beyond the 15,000 level in Thursday's session, the rally can extend to 15,200 level. On the downside, the 14,850 level will act as a support zone, being the 20-DMA,” he said.
"Trade may stay on the long side unless Nifty closes below 14,600 level," said Mazhar Mohammad, Chief Strategist – Technical Research &Trading Advisory at Chartviewindia.in.
“So, who is complaining? It is the bears who should be running for cover because Asia was very weak and, lo and behold, before they could think of going for the kill, they have killed themselves, 15,000 is here,” Sanjiv Bhasin of IILF Securities told ETNOW.
“The heavy lifting was done by Bank Nifty. Other than the adjustment, the Finance Ministry announcement that even private banks now can participate in government business emerged one of the triggers to make Bank Nifty go up 1,200-1,300 points. Bank Nifty was the one which, I would not say badly bruised, saw the bulk of the correction in the last three-four days. It is too early to say that the bear case is over. We will have to see how what happens tomorrow, because Asian markets all closed in the red," Gurmeet Chadha of Complete Circle Consultants told ET NOW.
Analysts said the Put-Call ratio hinted at oversold conditions. After falling almost 12-15 per cent in February expiry, Nifty Bank picked up momentum and negated the formation of lower highs and lows on the technical chart. This happened after finance ministry allowed private banks to conduct government-related banking transactions. The announcement triggered huge short covering in bank stocks, analysts said.
Banks hold a significant weightage in Nifty50, and hence the spike.
Chandan Taparia of Motilal Oswal Securities said Nifty Bank was already making lower top and bottom for a couple of sessions, and was signalling an oversold condition. The government's decision on banks triggered the short covering, he said.
"Since Nifty Bank made a high of 35,680 on Tuesday, it has picked up momentum. The Put-Call ratio was already oversold. If you look at Nifty50, it has been showing a similar trend quite often. It saw similar selling between January 21 and 28 followed by a sharp rebound. Today, in the last one hour of trade, market participants did not get time to wonder what happened. We won't be surprised if we see more short covering tomorrow, as the trend has changed. It seems Nifty50 will end the February series in the 14,850-15,150 range," Taparia said.
Aditya Agarwala, Senior Technical Analyst at YES Securities, said Wednesday's rally was led mainly by short coverings and fresh long buildup in the banking stocks following the FinMin tweet.
"If the bulls manage to take Nifty50 beyond the 15,000 level in Thursday's session, the rally can extend to 15,200 level. On the downside, the 14,850 level will act as a support zone, being the 20-DMA,” he said.
"Trade may stay on the long side unless Nifty closes below 14,600 level," said Mazhar Mohammad, Chief Strategist – Technical Research &Trading Advisory at Chartviewindia.in.
“So, who is complaining? It is the bears who should be running for cover because Asia was very weak and, lo and behold, before they could think of going for the kill, they have killed themselves, 15,000 is here,” Sanjiv Bhasin of IILF Securities told ETNOW.
“The heavy lifting was done by Bank Nifty. Other than the adjustment, the Finance Ministry announcement that even private banks now can participate in government business emerged one of the triggers to make Bank Nifty go up 1,200-1,300 points. Bank Nifty was the one which, I would not say badly bruised, saw the bulk of the correction in the last three-four days. It is too early to say that the bear case is over. We will have to see how what happens tomorrow, because Asian markets all closed in the red," Gurmeet Chadha of Complete Circle Consultants told ET NOW.
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3 Comments on this Story
 | May 2 hours ago Don't follow FM. Market is heavily shorted. Hold for another week. |
 | Dp Beer4 hours ago Seems like the FM has now decided to ruin the public sector banks . Most of them show profits once because the govt puts their money in PSUs ... now with private banks allowed to do business with the govt would mean the the public sector banks would slowly lose all their govt clients ... the private banks will lure the govt business with nice presents and good service ... they will offer the govt companies lots of freebies for banking with them , something that the public sector banks canâ t offer . In 2 years the PSU banks will become a burden like Air India ! In one tweet the FM has wiped out the public sector banks |
| Ramesh Shah4 hours ago THIS SHOWS HOW SHALLOW AND INDIFINATE IS OUR MARKETS ARE WHEN A SMALL TWEET COULD MAKE SO MUCH OF DIFFERENCE.. |