The Nifty 50 snapped its four-day winning streak and closed marginally lower in a volatile session on February 1, following the balanced budget presented by Finance Minister Nirmala Sitharaman. The index tested the 200-day EMA (23,620) in the morning, driven by hopes for a better-than-expected budget, but could not sustain that level as the budget turned out to be in line with expectations. According to experts, the 200-day EMA is likely to act as a key hurdle for any further upward movement of the index. If it moves above this level, the 24,000 mark will be a key level to watch; however, if it stays below the 200-day EMA, consolidation may continue with support around the 23,300 level (or 20-day EMA).
The Nifty 50 opened higher at 23,529 and climbed to 23,632 in the morning. Post-budget, the index corrected to 23,318 before showing some recovery in the afternoon. It finished at 23,482, down by 26 points, and formed a small bearish candlestick pattern with upper and lower shadows, resembling a High Wave-like candlestick pattern on the daily charts, indicating volatility in the market.
On the weekly chart, Nifty formed a long bullish candle, which completely engulfed the previous two weeks' candle formations. This bullish engulfing pattern on the weekly chart signals a possible formation of a near-term bottom reversal at the low of 22,786, according to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
He added that the underlying trend of Nifty remains positive, but the market is facing stiff resistance around the 23,500–23,600 levels. "A decisive move above this hurdle could open further upside towards 24,000 levels in the near term. Immediate support is placed at the 23,300 level," he said.
The weekly options data indicated that the Nifty 50 may trade within a broad range of 23,000–24,000 in the short term.
As per derivative data, the maximum Call open interest was seen at the 24,000 strike, followed by the 24,500 and 23,500 strikes, with maximum Call writing at the 24,000 strike, and then the 24,500 and 23,800 strikes. On the Put side, the 23,000 strike holds the maximum open interest, followed by the 23,200 and 23,300 strikes, with maximum Put writing at the 23,200 strike, and then the 23,000 and 23,300 strikes.
Bank Nifty
The Bank Nifty also recorded a High Wave-like candlestick pattern on the daily charts after trading within the range of 48,900–50,000 during the day. The banking index closed at 49,507, down 80 points after a four-day run-up. For the week, the index rallied 2.36 percent and formed a big bullish candle on the weekly timeframe, engulfing the previous two days' candles. The index faced resistance at the 50-week EMA (49,814) but could not sustain there on a closing basis.
"A bear trap and swing failure signal strong bullish momentum, with short covering likely to propel the index toward its swing high of 50,400 in the coming week," said Anshul Jain, Head of Research at Lakshmishree Investments.
As bears struggle, aggressive buying above 49,600 could trigger further upside, according to Jain.
Meanwhile, the India VIX, which measures expected market volatility, fell sharply by 13.25 percent to 14.1, continuing its downtrend for the third consecutive session after hitting a high of 19.01 during the day. This decline in VIX has made the bulls more comfortable.
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