The Nifty50 continued its stellar rally for the second consecutive session on February 2 as the index gained over 2.5 percent following the pro-growth Budget announced by the government on February 1. The rally was seen across-the-board, barring FMCG.
The index formed a bullish candle on the daily charts as closing was higher than opening levels. Experts advise caution after a two-day strong rally of over 7.5 percent.
Considering the strong upmove of the last two sessions, Mazhar Mohammad of Chartviewindia advises traders to avoid fresh buying in the index and preference should be given to book profits on long positions.
The Nifty50 witnessed a gap-up opening at 14,481.10 and remained strong throughout the session to hit an intraday high of 14,731.70. The index gained 366.70 points or 2.57 percent at 14,647.90.
"Animal spirits appears to have unleashed among bulls as Nifty witnessed yet another session of sustained buying with a strong gap-up opening. However, the intraday top was made in the first hour itself at a high of 14,731, which was slightly below the lifetime high of 14,753 levels, from where it seems to have started a consolidation process on intraday charts," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
In the next trading session, unless it gets past 14,731 levels, strength should not be expected, he feels. In case, "if the said hurdle is cleared then Nifty may register new lifetime highs beyond 14,753 levels and in that scenario, the rally shall eventually get extended towards next target of 15,200 levels," he said.
Contrary to this, he feels if bulls fail to cross 14,731 levels then there will be a bright chance of Nifty slipping into a sideways consolidation. "And on a mild correction buying for the index shall emerge in today's bullish gap zone of 14,469 – 14,336 whereas a close below 14,330 can confirm short term weakness."
India VIX remained flattish and closed at 23.34 levels.
On the option front, the Nifty witnessed noticeable Put writing at 14,000 and 14,600 strikes. Some Call writing was visible at 15,000 and 14,700 strikes, followed by unwinding in 14,000 to 14,500 strikes. Maximum Put open interest was at 14,000 followed by 13,500 strike, while maximum Call open interest was at 15,000 followed by 14,500 strike. Option data indicated that Nifty could see a wider trading range of 14,300 to 15,000 levels.
Bank Nifty opened gap-up at 33,589.05 and continued its positive momentum throughout the day. It registered a new all-time of 34,652.50 and eventually concluded the session with gains of 1,178.80 points or 3.56 percent at 34,267.90, forming a bullish candle for the second consecutive session.
"It is forming higher top - higher bottom from the last three sessions along with positive placement of mechanical indicator (RSI). Now it has to hold 33,500 levels to witness an upmove towards 35,000 zones, while on the downside support is seen at 33,500 and then 33,000," said Chandan Taparia, Vice President, Analyst-Derivatives at Motilal Oswal Financial Services (MOFSL).
Bullish setup was seen in Tata Motors, SBI, Ashok Leyland, DLF, Zee Entertainment, UltraTech Cement, Grasim, Siemens, Bharti Airtel, TVS Motor, Voltas, Piramal Enterprises, and Escorts while weakness was seen in SAIL, ICICI Prudential Life, HDFC Life, Tata Consumer, Bajaj Finance and HUL, Taparia added.