Nifty opened positive above the 12,000 mark on Thursday, but failed to hold at higher levels on account of weak global cues. It corrected sharply by more than 350 points from its intraday high and drifted towards the 11,650 mark. The entire market sentiment got changed due to the sharp selloff in the second half of the session and the index wiped off all the gains of last five sessions.
The index formed a Bearish Belt Hold candle with a long bearish body along with same open and high levels, which indicated complete dominance by the bears. It formed a Bearish Engulfing pattern on the daily scale and RSI indicator signalled a negative crossover on the daily scale. The immediate market structure has changed. As long as it doesn’t cross and hold above the 11,750 mark, the market could see weakness and drag Nifty towards the next key support in the 11,550-11,500 zone, while on the upside hurdles were seen at 11,800 and 11,850 levels.
India VIX moved up 9.14 per cent from 20.21 to 22.02 levels. A spike in VIX indicated a roller-coaster ride ahead for Nifty.
On the options front, maximum Put open interest stood at 10,500 level followed by 11,000, while maximum Call OI stood at 12,500 followed by 12,000 levels. There was Call writing at strike prices 12,000 and then 11,800 while Put writing was seen at 11,400 and then 11,300 levels. Options data suggested a wider trading range between 11,400 and 12,000 levels, while the immediate trading range stood between 11,500 and 12,000 levels.
Bank Nifty opened positive, but failed to hold above the 24,000 mark and corrected sharply towards the 23,000 level. It continued to decline after breaking below the 23,500 mark and closed the day with around 800 points loss. The index has formed a Bearish Engulfing Pattern and made lower lows from last three sessions. Now it has to cross and hold above 23,200 level to witness a bounce towards the 23,500-23,750 zone, while a failure to bounce and weakness in global markets could trigger a further decline towards the next key support at 22,500 and 22,222 levels.
Nifty futures closed in the negative at 11,675 level with 2.56% loss. The trade setup looked positive in Asian Paints, JSW Steel, Hero MotoCorp and Coal India, but weak in Bajaj Finance, Bharti Infratel, TechM, ICICI Bank, IndusInd Bank, RIL, SBI, HDFC Bank, HCL Tech, Bajaj Finserv and Kotak Bank.
(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)