The Nifty50 failed to hold on to morning gains amid consolidation and closed lower due to late sell-off on Wednesday. The fall was despite continued positive trend in global peers and cooling off January CPI inflation.
The index ended tad below 10,800 levels and formed bearish candle on the daily scale.
The index has breached its 50-DEMA and failed to surpass previous day's high which implies that bears are holding tight grip in the market, experts said, adding the next crucial support would be 10,720.
The Nifty50 index opened positive at 10,870.55 and touched an intraday high of 10,891.65, but follow up was missing on higher side as it erased all its gains in last hour of trade and hit a day's low of 10,772.10. The index fell 37.70 points to close at 10,793.70.
"Nifty50 registered a strong bearish candle as it slid down in the last 40 minutes after moving in extremely narrow range of around 50 points between 10,870–10,825 for larger part of the trading session," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said this last hour breakdown may put some more pressure in the next session which may drag down the said index toward its 100-day moving average whose value is placed around 10,700 levels.
But as the index is heading for oversold zone with a fall of almost 5 consecutive days some bounce back can't be ruled out in next one or two trading sessions, he added.
Ideally a close above 10,900 can be considered as an initial sign of strength which can set the tone for a pull back rally, according to Mazhar.
India VIX closed flattish at 15.73 levels. VIX needs to cool down further with a hold below 16 zones to get any recovery from support zones.
On option front, maximum Put open interest (OI) was at 10,400 followed by 10,700 strike while maximum Call OI was at 11,000 followed by 11,200 strike.
Put unwinding was seen at all the immediate strikes with minor Put writing at 10,600 strike while Call writing was seen at 10,900 followed by 10,800 strike.
Option band signifies a lower shift in the trading range in between 10,650 to 11,000 zones, experts said.
"Nifty index has been forming lower highs - lower lows from last four trading sessions which indicates weakness. Now till it holds below 10,850 zones it could extend its weakness towards 10,720 and then at 10,680 zones while on the upside hurdle is seen at 10,850 and then at 10,929 zones," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Bank Nifty continued its weakness and witnessed selling pressure towards 26,850. The index closed at 26,885.40, down 125.35 points and formed a bearish candle on daily scale.
It has been forming lower highs - lower lows from past four sessions which suggests selling pressure is intact at higher levels, Chandan said, adding now till it sustains below 27,150 zone then weakness could drag it towards 26,666 then 26,500 zones while on the upside hurdles at 27,150 then 27,350 zones.
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