The Nifty continued to trade high throughout the session amid volatility and the index closed above the 14,600- mark on May 5 after the Reserve Bank of India announced a string of liquidity measures to support businesses and the economy as the second coronavirus wave ravages India. Banking & financials, IT, metals, pharma and select auto stocks led the market higher.
The Nifty started off sharply higher at 14,604.15 and gradually extended gains to hit the day's high of 14,637.90. It ended the session 121.40 points higher at 14,617.90.
The index formed an Inside Bar pattern on the daily charts as the trading range was within the bearish candle of the previous session, indicating indecisiveness among market participants. The index needs to close above 14,723 for strength, experts said.
Considering the sideways nature of the current phase, traders should remain neutral on the index, whereas positional shorting opportunity can be considered on a close below 14,490 levels, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
"It seems to be the day of consolidation on the bourses as trading range remained inside the bearish candle of last Tuesday's trading session, which resulted in an Inside Bar kind of formation hinting at an impending consolidation move in a range of 14,461–14,723 levels," Mohammad said .
Trading moves in the near term can remain choppy and volatile inside the range unless the Nifty takes a decisive turn in either directions, he feels.
If the index closes above 14,723, then it can be considered as an initial sign of strength, which can expand the upmove towards 14,900 levels. A close below 14,461 can act as a harbinger of a bigger cut with initial targets placed at around 14,150.
India VIX fell by 4.55 percent from 23.01 to 21.69 levels, which was a supportive factor for the bulls. For a bullish stance, VIX has to drop below 20.
On the option front, maximum Put open interest witnessed at 14,000 followed by 13,500 strike, while maximum Call open interest was seen at 15,000 followed by 15,500 strike. Marginal Call writing was seen at 15,000 strike while, minor Put writing was seen at 14,600 then 14,000 strike. Option data indicates that the Nifty could see an immediate trading range of 14,400 to 14,800 levels.
The Bank Nifty opened gap-up at 32,577.10. While it remained muted in the first half, the second half saw some recovery. Despite lack of strength, the banking index outperformed the broader market and concluded the day with gains of 513.40 points or 1.59 percent at 32,783.70.
The index formed a Bullish Hammer candle on the daily scale with a long lower shadow. "The Bank Nifty has to hold above 32,500 to witness an upmove towards 33,333 and 33,500, while on the downside, support is seen at 32,250 and 32,000 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, bullish setup was seen in Lupin, BHEL, Aurobindo Pharma, NMDC, Sun Pharma, Cadila Healthcare, UPL, Apollo Hospitals, Bharat Electronics, Mcdowell, Vedanta, Mindtree, Axis Bank, SRF and HPCL. Weakness was seen in Adani Ports, Siemens, Apollo Tyes, Tata Chemicals and M&M Financial, he added.