The Nifty50 has tested its crucial support of 50 WEMA (weekly exponential moving average 17,400) as well as 200 DEMA (17,550) amid volatility and managed to hold both those levels by recouping all losses in the last hour of trade on January 30.
The index snapped a three-day losing streak and settled with 45 points gains at 17,649, forming a bullish candle on the daily charts, though lower highs and lower lows formation continued for the third consecutive session.
The volatility seen on Monday is likely to continue as we approach key events - Union Budget and FOMC meet scheduled for February 1, but as long as the index sustains these levels going ahead, the chances of a sharp rebound in the coming days are expected to be high with 18,000 first followed by 18,200-18,500 area, experts said.
Technology and select banking & financial services stocks supported the market.
"The Nifty found support near 17,400 and bounced back sharply. However, the short-term texture of the market is still on the downside," Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.
He feels a pullback rally could be seen if the index trades above 17,550. Above the same, the market could rally till 17,750-17,800, he says.
On the flip side, below 17,550, the market could slip to 17,400 - 17,350, the market expert said.
Per weekly Option data, the maximum Call open interest was seen at 18,000 strike, which is expected to remain a crucial resistance area for the market, followed by 19,000 & 18,200 strikes, with Call writing at 18,500 strike, then 17,800 strike.
On the Put side, we have seen maximum open interest at 17,000 strike, followed by 16,500 & 17,500 strikes, with writing at 17,500 strike, then 16,500 strike.
Volatility spiked above 19 levels during the day and has been rising from the last four sessions, giving discomfort in the overall market sentiment. India VIX, the fear index climbed further by 2.25 percent to 17.71 level, from 17.32 level.
The above Option data indicated an immediate trading range for the Nifty50 is expected to be 17,400 to 17,800 levels.
Bank Nifty opened negative at 39,856 and moved with weakness throughout the session to drift towards 39,420 intraday, with a hurdle near 40,800. It witnessed a decent recovery in the last couple of hours and closed with gains of around 42 points at 40,387.
The banking index formed a bullish candle on the daily scale with long shadows on either side which indicates wild swings ahead of the event. "Now till it holds below 40,750 zones, weakness could be seen towards 40,000 then 39,750 whereas hurdles are placed at 40,750 and 41,250," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
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