By Chandan Taparia
The Nifty50 index had a volatile session on Wednesday but managed to recover more than 300 points from its intraday low of 10,100 and headed towards 10,400 mark. It surpassed the immediate hurdle of 10,280 and closed with a decent gain of 188 points.
The index formed a bullish candle on the daily scale and recovered almost all the losses made in the previous week. Recently, it took support near to psychologically important 10,000 mark and saw multiple positive divergences with technical indicators, as it is turning from the deep oversold territory confirming a short-term bottom formation.
Now, Nifty has to hold above 10,280 to extend its upward move towards 10,440-10,480 zone and then 10,650 level, while on the downside, multiple supports were seen at 10,250 and then 10,180 levels.
On the options front, maximum Put open interest was at 10,000 followed by 10,200 while maximum Call OI was at 10,700 followed by 11,000. Put writing was seen at strike price 10,200 followed by 10,300 while minor Call unwinding was seen at all immediate strike prices.
The option band signified a shift in trading band with the immediate range between 10,200 and 10,600 levels.
India VIX fell 3.43 per cent to 19.79. During the day, VIX made a seven-month high of 22.82 and fell sharply, which could support the broader market. The overall comparatively higher volatility could continue to attract wider market swing. The VIX has to go down below 17-16 levels to confirm a short-term trend reversal and a decent bounceback after the sharp cut of last two months.
Bank Nifty managed to respect its crucial support at 24,500 level and extended its gains towards 25,200 level. It formed a bullish candle on the daily scale and managed to close above the 25,000 mark. Now, it has to hold above 25,000 to move up towards its crucial hurdle of 25,500 and 25,650 levels, while on the downside, major support is seen at 24,750 and then 24,500 levels.
Nifty futures closed in the positive at 10,380 with a decent gain of 1.48 per cent. Long buildup was seen in Cummins India, IGL, Indiabulls Housing Finance and TechM while shorts were seen in Coal India, CESC, Vedanta and Amara Raja Battery.
(Chandan Taparia is Technical & Derivative Analyst at Motilal Oswal Securities. Investors are advised to consult financial advisers before taking an investment calls based on these observations)