The Nifty50 on September 29 made an attempt to top the crucial psychological level of the 17,000 mark as well as the 200-day moving average (DMA) - 16,983 at the beginning of the session but failed to sustain due to gradual profit booking. Eventually, it wiped out all gains and settled with moderate losses on the monthly expiry day for futures & options contracts.
That apart, the market participants were cautious ahead of the interest rate decision by the Reserve Bank of India due on Friday (September 30).
The index has seen the formation of a bearish candlestick pattern on the daily charts as the closing was lower than the opening levels. In coming sessions, the 16,750-16,800 zone is expected to act as crucial support in the near term, while the 17,000-17,200 is going to be the resistance area and above the same, the index can march towards the 17,500 mark, experts said.
Information technology and select banking & financial services, and auto stocks pulled the market down. However, the outperformance in broader markets continued for yet another session with positive breadth. The Nifty Midcap 100 and Smallcap 100 indices gained 0.4 percent and 0.6 percent, respectively as about 1,084 shares advanced against 861 declining shares on the NSE.
The Nifty50 started off higher at 16,994 and climbed up to 17,026, but lost all gains in late morning deals to hit a day's low of 16,789. The index closed with 40 points loss at 16,818, the lowest closing level since July 27.
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"Technically, despite a solid start, the benchmark Nifty failed to sustain above the 200-day SMA (simple moving average) or 17,000 level. In the intraday time frame, the index has formed a double top formation and conversely it is consistently taking support at 16,800," Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.
As long as the index trades above 16,800, the chances of a sharp pullback rally are bright. Above the same, the index could retest 16,950-17,000 levels.
However, below 16,800, the index could slip to 16,700-16,650, the market expert said.
The volatility cooled down but remained at elevated levels, making the bulls uncomfortable. India VIX, which measures the expected volatility in the market, fell by 3.58 percent to 21.30 levels.
At the beginning of the October series, we have seen maximum Call open interest at 17,000 strike followed by 17,500 strike while maximum Put open interest was seen at 16,000 strike then 17,600 strike.
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The maximum Call writing was seen at 17,000 strike followed by 17,600 strike while marginal Put writing was seen at 16,800 strike then 16,500 strike.
The above Option data indicated that the Nifty may see a trading range of 16,500 to 17,200 levels in the immediate term due to higher volatility.
Bank Nifty opened the day higher by more than 300 points at 38,093 and moved closer to 38,300 levels, but drifted below in line with the broader markets and touched a day's low of 37,536 levels.
The banking index settled the session with 112 points loss at 37,648 and formed a bearish candle on the daily scale.
It has been making lower highs - lower lows in the last seven trading sessions. Now, till it remains below 37,750, the weakness could be seen towards 37,250 and 37,000 levels whereas hurdles on the upside are seen at 38,000 and 38,250 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
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