The Nifty gained around 4 percent probably on the back of short covering owing to expiry session for March contracts, as the bulls continued to surge for the third consecutive session on March 26.
The stability in global markets Senate passed a $2-trillion coronavirus economic stimulus package in the US and welfare measures worth Rs 1.7 lakh crore announced by the Indian government helped the market gain further.
The index managed to recover most of Manic Monday's losses in the following three sessions and formed a bullish candle on daily charts on March 26 as he closing was higher than the opening level despite intraday volatility.
Experts say as the market gradually turns in favour of the bulls, it can test 13-day exponential moving average (DEMA) in the coming sessions. Positional traders are advised to book profits around 8,900.
The Nifty50 opened higher at 8,451 and remained in a positive terrain throughout session amid volatility. The index touched an intraday high of 8,749.05 and low of 8,304.90, before end the session 323.60 points, or 3.89 percent, higher at 8,641.45.
"Near-term technical picture appears to be tilting in favour of the bulls and hence in the next trading session if the index manages to sustain above 8,749 levels, then it can head to test its 13-day EMA (8,978), which has a good track record of offering support in upward phases and hence by the principle of polarity this level can become next resistance for the index," Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
But a close below 8,304 can kick in some profit booking, as the Nifty has been almost up by around 15 percent in the last three sessions from the lows of 7,511, he said. In such a scenario, a dip between 8,000 and 7,800 would be a good opportunity to create fresh longs.
Positional traders who are sitting on long positions should consider booking profits around 8,900, whereas fresh buying should be initiated only on correction, he said.
The benchmark index concluded the March derivative series with a huge loss of 25.72 percent, the worst series since October 2008.
"Overall chart structure is still negative but pull-back move of the ongoing corrective phase cannot be ruled out after the sharp decline of the last five weeks," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.
Since it is the beginning of a new series, options data is scattered at various strike prices. Maximum Call open interest was at 9,000 then 10,000 strike while maximum Put open interest was at 7,500 then 8,000 strike. Call writing was seen at 9,000 followed by 10,000 strike while Put writing was seen at 8,000 followed by 8,500 strike.
India VIX fell by 8.40 percent to 71.10 levels.
VIX has corrected by almost 15 percent from its recent swing high 86.63 and also negated its higher lows formation after twelve trading sessions, which indicates some short term relief to bulls for a bounce back move, said Chandan Taparia.
Bank Nifty continued its outperformance against the benchmark index and rallied 6.13 percent to close at 19,613.90. Overall, the index has corrected 35 percent in March series, which is the biggest ever fall on expiry-to-expiry basis.
It made higher highs – higher lows for second session and formed a bullish candle on the daily chart.
"RSI oscillator is also rebounding from oversold territory and thus we may see more upside. However, higher degree chart structure is still under pressure and this bounce is just a pull-back move of broader correction," said Taparia.
"Now Bank Nifty has to hold above 18,500 levels to witness a bounce towards 20,500 then 21,000 while support can be seen at 18,300 and then 17,000 levels," he added.