By Sameet Chavan
On Tuesday, US markets extended their losses but yesterday morning (Thursday) we saw some recovery in Dow futures and Asian bourses also looked cheerful. Despite this, our markets started correcting after a flat start. Barring a small recovery in the first hour, we witnessed continuous selling pressure thereafter. In fact, post the mid-session the selling augmented to slide below 17700 as well. Fortunately, due to some modest tail end recovery, Nifty managed to minimize the damage to a per cent.
Yesterday’s extended correction was literally a surprise for traders; especially after seeing the greenery across the global peers. We may attribute this weakness to FIIs selling or weekly expiry factor, but it has certainly happened beyond the expectations. The only positive or rather we should say a takeaway is that we have tested the key support of 17650 and some recovery was visible precisely after nearing it. As we had alluded to in the previous commentary, 17650 is to be seen as crucial support and the real weakness would start only if we sustain below it. With some late recovery, Nifty is back to 17750 and looks extremely oversold. Now going ahead, since we have overreacted today as compared to other bourses, any sustainable rebound there could lead to a sharp bounce back in our markets as well. In this case, we may see retesting of 17900 – 18000 levels in a day or two. Let’s see how things pan out as we are likely to kick off the monthly expiry week. Traders are advised to focus on quality names that have corrected in last 3-4 sessions and have reached their important supports. These are the ones who would recover faster in case our market sees some relief move.
Despite sharp sell-off in last three sessions, we could hardly trace any relevant short formation in both the indices; this fall was mainly due to profit booking. However, stronger hands continued selling equities and added bearish bets in index and stock futures segment. Although the market experienced decent selling, the Nifty premium surged yesterday and the volatility index decreased marginally. Meanwhile, the PCR-OI remains in the oversold terrain. Considering the above observation, the possibility of some respite cannot be ruled out.
(Sameet Chavan is a Chief Analyst-Technical and Derivatives at Angel One. Views expressed are the author’s own. Please consult your financial advisor before investing.)
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