The Nifty50 extended losses for the third day to close a percent down on June 7, as traders remained cautious ahead of the Reserve Bank of India’s monetary policy committee meeting outcome.
The index opened 100 points lower at 16,470 and remained under pressure throughout the session. It closed at 16,416, down 153 points as it defended the crucial 16,400-mark.
If the Nifty sustains that support on the policy day, then a rally towards 16,794, the high of June 3, can't be ruled out, experts said.
The index closed below the opening level, hence, it formed a bearish candle on the daily charts. About two shares declined for every advancing share on the NSE.
Also read: These 5 factors weigh down market: Sensex falls over 550 points
"Weakness appears to be getting more pronounced as Nifty50 breached its critical support of 16,400 levels on an intraday basis to bridge the bullish gap present in the zone of 16,506 and 16,370 levels registered on May 30. However, a recovery from the intraday low of 16,347, to register a close inside the erstwhile trading range of 16,400 and 16,700 can be read as slightly positive for the bulls," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
The market seems to be awaiting a rate decision for further cues. Therefore, technically speaking, if the Nifty sustains above 16,400 on a closing basis after the rate hike, the index can initially move towards 16,700, the market expert said.
A negative reaction to the policy decision may drag the index to 16,200, where the 20-days simple moving average is placed, Mohammad said.
India VIX, which measures the expected volatility in the market, rose by 1.1 percent to 20.43 levels. Volatility staying above the 20-mark is a hurdle in the way of recovery and stability in the market, experts said.
Options data suggests that the Nifty could remain in a broader trading range of 16,000-16,800 in coming sessions.
Maximum Call open interest was seen at 17,500 strike then 17,000 strike, while maximum Put open interest witnessed at 16,000 strike then 15,500 strike. Call writing was seen at 16,600 strike then 16,800 strike, while minor Put writing was seen at 16,500 strike then 16,400 strike.
On the stock front, a positive setup was seen in ONGC, Oil India, TVS Motor, GAIL, Maruti, Coal India and M&M. Gujarat Gas, Coforge, Titan Company, UPL, ICICI Lombard and LIC Housing Finance witnessed weakness, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Banking index
Bank stocks index the Bank Nifty opened more than 200 points down at 35,081 and sank to the day's low of 34,834 before showing some recovery. It ended 314 points down at 34,996.
It formed a small-bodied bearish candle on the daily scale with a longer lower shadow. If it remains below 35,250, weakness can extend to 34,750 and 34,500, whereas resistance is at 35,500 and 35,750, Taparia said.
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