The Nifty50 lost ground after a day of sharp rebound and fell half a percent on February 6, tracking weakness in global peers. Traders also turned cautious ahead of the outcome of the Monetary Policy Committee meeting. Selling pressure was seen in metal, technology, and select, banking & financial services, and auto stocks.
The index has formed small inside body bearish candlestick pattern on the daily charts, with taking support at 17,700. The volatility is likely to continue in coming sessions too with support at 17,700 followed by crucial support at 17,550 level, whereas the resistance is expected at 17,800-18,000 area, experts said.
Overall, the index has been trading within the broad trading range of 17,353-17,972 levels formed on Budget day, February 1, for a third consecutive session.
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The Nifty50 opened at 17,819 and remained under pressure throughout session to hit a day's low of 17,698. Finally it settled at 17,765, down 89 points.
"The Nifty has hovered between 17,700 to 17,800 price range. On daily charts the index has formed a small inside body bearish candle which is indicating the continuation of a non-directional activity in the near future," Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.
For Nifty, he feels 17,700 would be the key support level and below the same the index could slip till 17,600-17,520.
On the flip side, a fresh rally is possible only after the dismissal of 17,825 and above the same, the index could rally till 17,900-17,925, the market expert said.
On Option front, we have seen weekly maximum Call open interest at 18,000 strike followed by 18,500 strike, with Call writing at 17,800 strike then 18,000 strike. On the Put side, the maximum open interest was seen at 17,000 strike followed by 17,600 & 17,500 strikes, with writing at 17,000 strike then 17,100 & 17,800 strikes.
The above Option data indicated that the Nifty50 could see an immediate trading range of 17,600 to 18,000 levels in coming sessions.
India VIX moved up by 2.01 percent from 14.40 to 14.69 levels. Volatility has overall cooled down from higher levels from the last three sessions and now needs to hold below 14 zone for market stability, experts said.
Bank Nifty opened on a flattish note at 41,530 but failed to hold 41,500 level and drifted lower to hit an intraday low of 41,261 in the initial hour of the session. Later on, it remained choppy between 41,300 to 41,550 levels for most part of the day and ended with losses of 125 points at 41,375.
The banking index has formed a small bodied bearish candle on daily scale but forming higher highs - higher lows from past two sessions which indicates supports are gradually shifting higher.
"Index has been trading in wider range between 50 DEMA and 200 DEMA on daily scale from past six trading sessions and now it has to continue to hold above 41,250 level to make an up move towards 41,750 and 42,000 levels, whereas supports are expected at 41,250 then 41,000 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
The broader markets performed better than benchmarks, as the Nifty Midcap 100 and Smallcap 100 indices gained 1 percent and half a percent, respectively.
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