The Nifty50, after consolidating during early hours, gained strong momentum in the last couple of hours of trade and snapped a four-day losing streak on June 9. It closed way above the crucial 16,400 mark, which is a positive sign; hence, if it surpasses 16,514 and closes above the same level, then a further strength can be seen on the street, experts said.
The index closed above the opening levels and hence formed a bullish candle which also resembles a Bullish Engulfing kind of pattern formation on the daily charts.
The rally was led by private banks, technology, pharma stocks, and index heavyweight Reliance Industries, while the broader markets also participated in the run with the Nifty Midcap 100 index gaining half a percent and Smallcap 100 index up 0.2 percent but the breadth was not very strong as about 993 shares advanced against 920 declining shares on the NSE.
The further fall in volatility was a supportive factor for bulls. India VIX, the fear index fell by 3.51 percent to 19.14 levels. Experts feel if it declines below the 18 mark then there could be further stability in the market.
The Nifty50 opened lower at 16,264 and rebounded in morning trade itself with volatile movement. The index gained strength in the last couple of hours of trade and closed 122 points higher at 16,478.
"Nifty50 staged a smart recovery after testing its 20 days SMA (around 16,250) that almost erased the losses of the preceding session. Momentum may further strengthen on the upside if the Nifty closes above 16,514 levels, but in between, it needs to sustain above 16,243 levels," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
He further said eventually, it should head to test its 200-day moving average (DMA) placed around 16,750 levels, but if the index breaches 16,240 on a closing basis then the weakness shall resume.
For the time, positional traders can make use of the dips to create long positions for a target of 16,700 with a stop-loss below 16,240, the market expert advised.
On the option front, there was a maximum Call open interest at 17,500 strike then 17,000 strike while maximum Put open interest was seen at 16,000 then 15,500 strike.
Call writing was seen at 16,500 then 16,800 strike while minor Put writing was seen at 16,300 and 16,400 strike. As per this option data, the immediate range for the Nifty50 could be between 16,250 to 16,650 levels.
Bank Nifty started off trade at 34,802 and drifted lower to hit a day's low of 34,659 in the early part of the day. However, it witnessed consolidation followed by a sharp recovery to head towards 35,150 levels in the second half.
It took support at its 50 EMA (exponential moving average - 34,750), and the momentum picked up in the last couple of hours which helped Bank Nifty close with gains of 139 points at 35,085.
Bank Nifty formed a bullish candle on the daily scale but has been forming lower lows in the last five sessions. Now it has to hold above the 35,000 mark to make an up move towards 35,500 and 35,750 levels, whereas support can be seen at 34,750 and 34,500 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stocks' front, the market expert said positive setup was seen in Container Corporation of India, ICICI Prudential Life Insurance, Dr Reddy's Laboratories, BPCL, SBI Life Insurance, Torrent Pharma, Reliance Industries, Bajaj Auto, Eicher Motor, Hindustan Aeronautics, TVS Motor, Kotak Mahindra Bank, HDFC AMC, HDFC Life, HDFC Bank, Bandhan Bank, and TCS.
However, weakness was seen in Tata Steel, Vedanta, Apollo Tyres, LIC Housing Finance, and Britannia Industries, he added.
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