After a day of crash, the Nifty50 on February 25 bounced back quite sharply with the recovery of around fifty percent of previous day's losses, the first day of March series, and formed a bullish candle on the daily charts. But experts advised to wait for more stability before taking aggressive bets given the index still below 200-day exponential moving average which could act as an immediate resistance for the Nifty50.
The bullish candle formation appears when the closing is higher than the opening levels.
The volatility index is still at elevated levels; however, it cooled down considerably from 32 levels hit in the previous session, suggesting the trend is still in favour of bears, experts say.
India VIX, the fear index which measures the expected volatility in the market, fell by 16.4 percent to 26.74 on Friday.
The rebound in the broader market was also on expected lines given the exaggerated reaction of the market to the conflict between NATO and Russia. The Nifty Midcap 100 and Smallcap 100 indices gained 4.2 percent and 4.8 percent, respectively on Friday, after around 6 percent correction each in the previous session.
The Nifty50 opened gap up at 16,516 and remained higher throughout the session ranging between 16,749-16,478. The index finally settled at 16,658, up 410 points or 2.5 percent.
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"Nifty50 smartly recouped around 50 percent of the losses witnessed in last Thursday's trading session. However, there seems to be multiple hurdles in the zone of 16,800 – 17,065 levels which not only includes bearish gap zone but also 200-day exponential moving average whose value is placed around 16,720 levels," says Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.
Hence, he feels for the next couple of sessions, Nifty needs to sustain above 16,478 levels to develop sideways to positive bias. "In that scenario initially it can head into the zone of 16,800 – 16,850."
Contrary to this if Nifty fails to sustain above 16,478 levels then eventually it may slip towards 16,200 levels, according to the expert. For the time being, Mazhar advises, that it looks prudent to wait for more signs of stability on the index before initiating a trade.
Also read - Gainers & Losers: Five stocks that moved the most on February 25
Analyst feel as per the option data, the Nifty could see a wider trading range of 16,000 to 17,000 levels before getting firm direction on either side.
Maximum Call open interest was seen at 17,000 then 17,500 strike while maximum Put open interest was seen at 16,500 then 16,000 strike. Marginal Call writing was seen at 16,500 then 16,700 strike while marginal Put writing was seen at 15,500 then 16,000 strike.
Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services says positive setup was seen in Apollo Hospitals, NALCO, Tata Power, Vedanta, Bank of Baroda, Tata Steel, SRF, PVR, Biocon, Cholamandalam Investment, Bajaj Finance, Hindalco, Voltas, United Spirits, Trent, Siemens and Kotak Mahindra Bank while weakness was seen in HUL, HPCL, SBI Life and BPCL.
Bank Nifty also opened higher at 35,902 and headed towards 36,700 levels but remained stuck in a range of 36,250 to 36,650 levels for the major part of the session. It failed to surpass previous day's high but managed to close with gains of 1,203 points at 36,431.
"The banking index has to hold above 36,250 levels for an up move towards 37,000 and 37,777 while on the downside there is support at 36,000 and 35,750 levels," says Chandan Taparia.
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