The Nifty50 opened higher and then extended gains and recouped more than half of last two-day losses to close near day's high on January 19. Positive global cues and buying across sectors led the rally.
The index formed bullish candle on the daily charts as closing was higher than opening levels, after two back-to-back bearish candles in previous sessions.
Experts feel if the momentum continues in the coming session, then the Nifty50 can hit a fresh record high, hence the risk taking traders can consider going long in the index.
Mazhar Mohammad Chartviewindia.in advised traders to refrain from shorting the index unless it breaches 14,350 levels whereas intraday traders with high risk appetite can consider going long in the index by making use of the opening dip if any in the first 30 minutes of the session and look for a modest target of 14,620.
The Nifty50 opened higher at 14,371.65 and extended gains as the day progressed to hit an intraday high of 14,546.05. The index settled at 14,521.20, up 239.90 points or 1.68 percent.
"Bulls made a strong come back as the index witnessed sustained upmove throughout the trading session by recouping more than 50 percent of preceding two trading sessions of losses. Though it is too early to conclude that bottom is in place at recent low of 14,222 levels one can retain positive stance as long as the index sustains above 14,350 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
According to him, Nifty may go back all the way to test life time high present around 14,653 levels. But in case if bulls failed to defend Tuesday's intraday low of 14,350 levels then the current positive momentum shall fade away and Nifty may breach recent low of 14,222 as well, he feels.
The volatility also declined but still at higher levels. India VIX was down by 6.16 percent from 24.39 to 22.89 levels. "Volatility needs to cool down below 20 mark to commence the fresh leg of rally for the new life time high territory. However, volatility could be comparatively higher ahead of the Budget 2021," Chandand Taparia of Motilal Oswal said.
The option data indicated that the Nifty50 could trade in an immediate range of 14,300 to 14,700 levels in coming sessions.
On option front, maximum Put open interest was seen at 14,000 followed by 13,000 strike while maximum Call open interest was at 15,000 followed by 14,500 strike. Call writing was seen at 15,000 then 14,700 strike while Put writing was seen at 14,400 and unwinding at 13,500 strike.
Bank Nifty opened gap up at 32,082.90 and remained consolidative in the initial half of the day but moved northwards in line with the broader market sentiment. Banking stocks performed well during the day and the rate sensitive index hit an intraday high of 32,464.95.
It formed a bullish candle on daily scale with a long lower shadow which indicates declines were being quickly bought into. "Now it has to continue to hold above 32,200 to witness an upmove towards 32,750 and 33,000 while on the downside support is seen at 32,000 and 31,750 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Positive setup was seen in IDFC First Bank, Cholamandalam Investment, Federal Bank, DLF, Tata Motors, REC, Havells, Grasim, Siemens, Lupin, L&T, Bata India, Voltas, Berger Paints, Apollo Hospitals, Reliance Industries and Bajaj Auto while weakness was seen only in Tata Consumer Products, he added.Disclaimer: "Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol."