The Nifty50 remained under pressure for the third day running, closing half a percent lower after recovering more than 100 points from the day's low in the last hour of the trade on October 21.
IT, metals and FMCG stocks pulled the market down but buying in banking & financials and auto stocks limited the downside.
The index opened higher at 18,382.70 but slipped to hit the day's low of 18,048.00. It recovered more than 100 points in the dying hour to close at 18,178.10, narrowing loses to 88.50 points.
The Nifty formed a bearish candle as the closing was lower than the opening level. Experts feel if the index holds 18,050, there can be consolidation going ahead.
For the time, traders should adopt a neutral strategy for the day, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.
Intraday traders with a high-risk appetite should consider shorting below 18,040 and look for a target of 17,960, he said.
The Nifty registered Three Black Crows bearish formation but in a perfect pattern, the second and third day of bearish candles open around the midpoint of the preceding sessions and in this case, second-day pattern failed to meet that condition, said Mohammad.
The Nifty appears to have found some support around 18,050, as it entered into the bullish gap zone of 18,050 –18,008 registered on October 13.
"Moreover, it recovered 130 points from intraday low, validating the support present in the said gap area," he said.
If the index breaches 18,040, the chance of it heading lower towards its 20-day moving average, whose value is present around 17,950 levels, remains high.
"And breach of the said average on closing basis shall have the potential to alter the medium-term trend," he said.
But if the index sustains above 18,040, it will lead to sideways consolidation between 18,450 and 18,050 levels.
The volatility cooled down a bit but the recent spike suggests a choppy market, experts said. India VIX, which measures the expected volatility in the market, fell 1.50 percent from 18.31 to 18.03 levels.
On the options front, maximum Call open interest was seen at 18,200 followed by 18,500 strike, while maximum Put open interest was seen at 17,500 followed by 18,000 strike.
Call writing was seen at 18,200 then 18,400 strike, while minor Put writing was seen at 18,200 then 18,100 strike. The data indicates that the Nifty50 could see an immediate trading range of 18,000-18,500 in the coming sessions.
The bank index seems to have rescued the bulls for the day as it outperformed the Nifty and hit a new high of 40,200.45 in the last hour of the session, driven by select private and PSU banks.
The index formed a bullish candle on the daily chart, as it gained 512 points, or 1.3 percent, to close at 40,030.20, crossing the 40,000-mark for the first time.
"If the index sustains above 39,428 levels (day's low), one can remain positive and look for a channel breakout with a close above 40,220 levels in the next session. In that case, a higher target towards 42,000 can be expected," said Mohammad.
The index has to hold above 40,000 to witness an up move towards 40,500 and 40,800, while on the downside, major support is seen at 39,500 and 39,300, said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, a bullish setup was seen in Kotak Mahindra Bank, Tata Motors, M&M Financial, Bank of Baroda, Shriram Transport Finance, PNB, Cholamandalam Investment, Ashok Leyland, Grasim, Federal Bank, Canara Bank, Can Fin Homes, Manappuram Finance, HDFC, ICICI Bank and Axis Bank.
Weakness was seen in Havells, L&T Finance Holdings, Berger Paints, Asian Paints, Deepak Nitrite, Pidilite Industries, Voltas, L&T Technology Services, IEX, Hindalco, Polycab, Ambuja Cements, Infosys, Hindustan Aeronautics, Jubilant Foodworks and Tata Steel.
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