The benchmark Nifty closed in the green on strength in late trade amid volatility, even as traders turned cautious due to increased restrictions in several states to control the coronavirus spread. Banking & financials, metals, pharma and select IT stocks helped the market close higher.
After opening higher at 14,522.40 the Nifty failed to hold on it and slipped to an intraday low of 14,353.20 amid volatility. It gained strength in late trade to hit the day's high of 14,597.55 and settled with gains of 77 points at 14,581.50.
The index formed a bullish candle, which resembled a hammer pattern on the daily charts. Experts say 14,300 is expected to be crucial for further downside, while the upside seems to be capped around 14,650-14,700.
The Hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies a bounce back after testing support, where demand is located.
Traders with long side exposure should book profits in the 14,650–14,700 levels in the next trading session, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
The NIfty's smart recovery hints that bulls are trying hard to chalk out a near-term bottom around 14,300 levels, he said. "Considering the fact that the Nifty has successfully defended its 100-day moving average, whose value is placed around 14,300 levels, a short-term bottom can be in place around these levels," Mohammad said.
A fall towards 14,350 can be a good opportunity to buy the dip and as long as 14,300 is not violated on the closing basis, upsides may get stretched into the bearish gap zone present between 14,652–14,785, he said.
But if the Nifty closes below 14,300, then weakness shall re-emerge and till such breakdown, the near-term trend can be expected to remain sideways with a positive bias, he said.
India VIX moved up by 2.10 percent from 20.46 to 20.89 levels. The options data indicated that the Nifty50 could trade in the range of 14,250-14,850 in coming sessions.
On the options front, maximum Put open interest was seen at 14,000 followed by 14,500 strike, while maximum Call open interest was seen at 15,000 followed by 15,500 strike. Call writing was seen at 15,200 then 14,900 strike, while minor Put writing was seen at 14,000 and 14,500 strike.
The Bank Nifty opened positive at 31,929.10 but got stuck in a range for the most part of the day and was facing hurdles at 32,100 levels. The last hour saw positive momentum and the index closed with gains of 341.20 points, or 1.07 percent, at 32,112.80.
The banking index continued to outperform the broader market. It formed a bullish candle on the daily scale with a long lower shadow. "It has to hold above 32,000 for an upmove towards 32,500 and 32,750, while on the downside, support can be seen at 31,500 and 31,250 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stock front, a bullish setup was seen in Glenmark Pharma, TCS, Cadila Healthcare, Wipro, Cipla, ONGC, Siemens, Dabur, ICICI Bank, Page Industries, Tata Steel, Gail, Godrej Consumer Products, Lupin and Marico. Weakness was seen in Indiabulls Housing Finance, Eicher Motors, DLF, Bharat Forge, Grasim, PVR, Maruti, Ambuja Cements, Manappuram Finance, Muthoot Finance and Voltas, he added.