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.
