Technical View: Nifty may consolidate as long as it trades below 23,800, fall in India VIX brings comfort for bulls

Nifty Technical View

The Nifty 50 rebounded after a day of profit booking and clocked more than 100 points in gains on March 27, the expiry day for March Futures & Options contracts. The index defended the 23,400 level (which coincides with the 200-day EMA and the lower end of the bullish gap from March 24), which is going to be a crucial support level for the index. As long as the index holds this level, the rally toward 23,800, followed by 24,000, is possible in the upcoming sessions, according to experts.

The Nifty 50 opened lower at 23,434, but immediately recouped the opening losses and remained in positive territory for the remainder of the session. The index touched an intraday high of 23,646 before closing at 23,592, up 105 points, and formed a bullish candlestick pattern on the daily charts with above-average volumes. The index also defended the midline of the Bollinger Bands on the weekly charts, which is a positive sign.

Going ahead, "we can expect the Nifty to consolidate with a positive bias. On the upside, 23,750 – 23,780 will act as an immediate hurdle, while 23,420 – 23,400 will act as crucial support from a short-term perspective," said Jatin Gedia, Technical Research Analyst at Mirae Asset Sharekhan.

The weekly options data suggested that the index is likely to trade within the range of 23,500-24,000 in the short term.

On the Call side, the maximum open interest was seen at the 24,500 strike, followed by the 24,000 and 23,800 strikes, with the maximum Call writing at the 24,500 strike, followed by the 24,400 and 23,600 strikes. On the Put side, the 23,500 strike holds the maximum open interest, followed by the 23,000 and 23,600 strikes, with the maximum Put writing at the 23,600 strike, followed by the 23,000 and 22,800 strikes.

Overall, experts advised following a "buy on dips" strategy in the Nifty as long as it holds above the 200-day EMA.

Bank Nifty

The Bank Nifty also bounced back after a two-day correction, rising 367 points (0.72%) to 51,576, and forming a bullish candlestick pattern on the daily charts with above-average volumes on the monthly F&O expiry day. The index traded well above all key moving averages with an expansion in Bollinger Bands, which is a positive sign.

According to Chandan Taparia, Senior Vice President | Head – Technical Research and Derivatives at Motilal Oswal Financial Services, the overall bias is positive, and small follow-up buying could set the next leg of the rally.

Now, the banking index has to hold above the 51,250 zone for an up move toward 52,000, then 52,250 levels, while on the downside, support is seen at 51,250, then 51,000 levels, he said.

Meanwhile, the Volatility Index, India VIX, fell below short-term moving averages, correcting for the third consecutive session, which is positive for bulls. It was down by 1.26% to 13.3.