The Nifty50 bounced back sharply and recouped all its previous day's losses to close above 17,200 levels on April 28, the expiry day of April futures & options contracts. The index formed a small-bodied bullish candle on the daily charts, but the market breadth was in favour of bears which raises doubts over the sustainability of today's rally.
Overall, the index has been moving in a range of 16,900-17,400 levels for a couple of weeks now. If the index surpasses and sustains above 17,400 for a few sessions, then the upside can be stretched to the 17,800 mark, experts feel.
The market breadth underperformed frontline indices with the Nifty Midcap 100 and Smallcap indices rising six-tenth of a percent and four-tenth of a percent, respectively.
The declining volatility also supported the market but needs to cool down further to around 15-18 levels for the comfort of bulls. The India VIX fell by 5.95 percent to 19.38 levels.
The Nifty50 opened lower at 17,189 and corrected up to 17,071, but gained strength in the afternoon to head above the 17,300 mark. Though there was a bit of profit booking in late trade, the index managed to close with 207 points gains at 17,245.
"Nifty50 continued its alternation between bearish and bullish moves, inside the trading range of 17,400 – 16,900 levels. Moreover, despite witnessing a robust move in Thursday's session, the advance-decline ratio remained negative. Hence, unless it manages to sustain above 17,400 levels, one should still remain cautious on long side trades," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
In the case of a sustainable close above 17,400 levels, the strength shall eventually extend towards 17,800 levels, the analyst added.
However, in the next session, if this counter slips below 17,070 levels, then the index can again resume weakness with targets close to 16,900 levels but for the major breakdown, the Nifty needs a close below 16,800 levels, said Mazhar Mohammad.
Option data indicated that the Nifty50 could see a wider trading range of 16,800 to 17,700 levels in the coming sessions.
On the option front, maximum Call open interest was seen at 18,000 strike, followed by 17,500 strike while maximum Put open interest was witnessed at 16,500 strike, then 16,000 strike.
Marginal Call writing was seen at 17,300 strike then 17,200 strike while Put writing was seen at 17,000 strike then 17,200 strike.
Bank Nifty opened positive at 36,190 and witnessed immense strength in the second half of the session. It headed towards 36,500 levels and closed with gains of 393 points at 36,422.
The index formed a bullish candle on the daily scale with a long shadow indicating buying was visible at declines. "It has to hold above 36,250 to move towards 36,666 and 37,000 levels whereas supports are placed at 36,000 and 35,750 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stocks' front, Taparia said Coromandel International, Indian Hotels, Hindustan Unilever, United Breweries, AU Small Finance Bank, UPL, Asian Paints, Dabur, NTPC, Power Grid, SBI, Berger Paints, Pidilite Industries, Container Corporation, Adani Enterprises, Marico, Voltas, IndusInd Bank, and Reliance Industries witnessed positive set up. However, weakness was seen in Indian Energy Exchange, Hindalco Industries, Piramal Enterprises, RBL Bank, Sun TV Network, and ONGC, Taparia added.
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