The Nifty50 managed to recoup some losses in later part of session but overall remained in favour of bears on July 28, as banks, auto, and select pharma stocks witnessed selling pressure.
The index formed Hammer kind of pattern on the daily charts. Experts expect further selling pressure in the Nifty50 if it breaks 15,660 on a closing basis.
The Hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and a long lower shadow. The long lower shadow signifies the stock bounced back after testing its support, where demand is located.
Mazhar Mohammad of Chartviewindia.in advised traders to remain neutral whereas if the index closes below 15,600 then it can once again catapult the trend in favour of bears.
The Nifty50 opened flat at 15,761.55 and turned lower to hit an intraday low of 15,513.45 in morning trade. The index showed recovery from late morning deals but remained in the red throughout session to close 37.10 points at 15,709.40.
"It appears to be the day of roller coaster ride for the Indian bourses as the Nifty witnessed swift recovery, from the intraday low of 15,513, after the sharp fall from the intraday high of 15,767 in the early session of the day which resulted in Hammer kind of formation. Despite this recovery advance decline ratio decisively remained skewed in favour of bears," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
Moreover, he said the index has not significantly improved indicator/oscillator set up in favour of bulls. Hence, it can be safe to assume that Nifty is still stuck up in a trading range with upsides capped around 15,900 levels, he feels.
"Nevertheless it is essential for the index to sustain above its 50-day moving average, whose value is placed around 15,660 levels, as if the index breaches that level on closing basis then it can be sentimental negative for bulls," he said.
In next session if Nifty manages to sustain above 15,767 levels then some intraday strength can be expected but monthly expiry related factors may bring back volatility to the index, according to him.
India VIX moved up by 3.50 percent from 13.23 to 13.69 levels. Volatility has seen a sharp spike towards 16 levels during the day as index broken all immediate support and fear was seen among traders. "Now VIX has to cool down below 12 levels to again get a bullish stance for the market," said Chandan Taparia of Motilal Oswal.
On option front, maximum Put open interest was seen at 15500 followed by 15600 strike while maximum Call open interest was seen at 15800 followed by 15900 strike. Call writing was seen at 15700 then 15750 strike while minor Put writing was seen at 15550 then 15600 strike. Option data indicated that the Nifty50 could see a broader trading range of 15,600 to 15,850 levels.
Bank Nifty opened positive at 34,839.45 but selling pressure pulled the index towards its lowest levels of last 26 trading sessions at 34,115.20. It saw slight recovery but overall bears ruled the banking index and it closed with losses of 264.55 points at 34,532.90.
The index formed a bearish candle with long lower shadow and negated its higher highs of the last four sessions. "It has to hold above 34,500 levels to move up towards 34,750 and 35,000 while on the downside support is seen at 34,250 and 34,000 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.On stocks front, he further said bullish setup was seen in Bharti Airtel, Bharat Electronics, SAIL, Tata Steel, Divis Labs, JSW Steel, ACC, Bajaj Finserv, Bata India, ICICI Bank, Naukri, UltraTech Cement and Berger Paints while weakness was seen in Canara Bank, M&M Financial, Cadila Healthcare, Kotak Mahindra Bank, Dr Reddy's Labs, LIC Housing Finance, L&T Finance Holdings, Tata Motors, M&M, PNB, BHEL and RBL Bank.