The Nifty50 corrected for the fifth consecutive session and formed a bearish candlestick pattern on the daily charts on March 15, tracking steep losses in European banking stocks after the fallout of Silicon Valley Bank, though Asian counterparts rebounded after the rally on Wall Street overnight.
The Nifty50 rebounded smartly and climbed above 17,200, which was on expected lines given the bullish divergence, but failed to sustain those gains in the last couple of hours of trade due to profit booking. Finally, the index settled below the psychological 17,000 mark, with 71 points loss at 16,972, the lowest closing level since October 3, 2022.
If the index takes support in the range of 16,900-17,000 area, then there can be the possibility of a rebound. But if it breaks the same then the correction can be up to 16,750, which coincides with the low of September last year. Further with today's fall, the index has also broken the lower threshold of the channel, which can trigger more downside. However, on the higher side, the rebound, if any, can be possible up to 17,200-17,300 area followed by 17,450 (200-day SMA), experts said.
The bullish divergence still exists with the Nifty making lower lows and momentum indicator RSI (relative strength index) making higher lows. If it comes true, then there could be a possibility of a rebound again in the coming session. Also, the RSI with 31 levels is looking oversold now.
All sectoral indices, barring metal and healthcare, closed in the red.
"The decisive breach of the 17,000 mark undoubtedly dented the sentiments. But as we allude to our previous commentary, the 16,900-17,000 odd zone is expected to cushion the fall. And we remain hopeful till the market withholds the range," Osho Krishan, Senior Analyst - Technical & Derivative Research at Angel One said.
On the higher end, he believes that 17,200-17,250 is expected to act as an immediate hurdle, followed by the sturdy wall of 200 SMA, placed around 17,400-17,450 in a comparable period.
Considering the price action, the market looks bleak but at the same time a bit oversold too, the expert said.
On the weekly Option front, we have seen the maximum Call open interest at 17,200 strike, followed by 17,500 strike, with Call writing at 17,200 strike, then 17,100 and 17,000 strike. However, the maximum Put open interest was seen at 16,800 strike, followed by 16,900 and 16,700 strikes, with Put writing at 16,900 strike, then 16,700 and 16,800 strikes.
The above Option data indicated that the Nifty50 may trade in the range of 16,800-17200 area in near term.
The Bank Nifty opened gap up by more than 350 points but failed to cross the key hurdle of 40,000 mark and gradually drifted lower towards 38,934 levels in the latter part of the session. It formed a bearish candle on the daily scale and corrected by 360 points to close at 39,051.
The index continued the formation of lower lows of the last four sessions. "Till it holds below 39,400 levels, the weakness could be seen towards 38,888 and then 38,500 zones while on the upside hurdle shifted lower at 39,500 and then 40,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
India VIX marginally rose by 0.47 percent from 16.22 to 16.30 levels. Volatility is quoting near the highest levels of the last 28 trading sessions thus giving an overall grip to the bears in the market, Taparia said.
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