Headline index Nifty had a modestly positive start to the day and formed its intraday high point in the morning session. However, after that, the index gradually pared all its morning gains and slipped into the negative. The downsides, too, stayed very limited and Nifty spent the last two hours of the session in a very limited range. The index finally ended with a minor loss of 19.05 points or 0.13 per cent.
Wednesday’s session will be the penultimate day of the weekly options expiry. As per the F&O data, though Nifty ended below 15,000 level, this point still holds the maximum Put OI and also saw the highest writing activity during the day. NIFTY PCR stood at 0.92 across all expiries and this makes a case of a strong technical pullback as Nifty is oversold on the very short-term time frame. The level of 15,000 is set to act as an inflection point; it would be crucial for the index to move past this level in order to avoid more weakness from creeping in.
Volatility continued to slide as India VIX came off by 4.89 per cent to 20.1900. Tuesday’s session is likely to see a modestly positive start to the day with the levels of 14,965 and 15,140 acting as potential resistance points, while support may come in at 14,850 and 14,800 levels.
The RSI on the daily chart stood neutral at 50.43 and did not show any divergence against price. The daily MACD was bearish and traded below its Signal Line. A black body emerged on the charts, apart from which no other formation was noticed.
The pattern analysis shows that over the past two weeks, Nifty has been consolidating within a broad range of 15,250 on the higher side and its 50-DMA at 14,717 on the lower side. The index appeared to be badly trapped inside this wide consolidation zone; staying afloat the 50-DMA on a closing basis would be crucial to avoid any major weakness creeping into the market.
Nifty is set to take a decisive directional move in the immediate near term. Presently, it is poised at a very crucial juncture. Though the coming sessions are likely to play a catch up to the domestic market’s relative underperformance, we recommend continuing to approach the market in a highly stock-specific way. It is also suggested to avoid any aggressive shorts and also to keep overall exposures light and curtailed until a directional bias is established in the market. A cautiously positive approach is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
