The options data indicates a shift in the wider trading range for the Nifty to around 9,500-10,500.
It was a historic day for the market as the Nifty, after hitting 10 percent lower circuit at around 8,500, rebounded in the afternoon trade to go past the 10,000-mark on positive global cues to close nearly 4 percent higher on March 13.
The index recovered on the back of strong buying from domestic institutional investors (DIIs), bargain-hunting by long-term portfolio investor, some hope of recovery in global bourses and short covering in many beaten down oversold stocks.
The index recovered 1,400 points from the day's low and formed a large bullish candle on daily charts, as the closing was much higher than the opening levels. However, for the week, it lost 9.4 percent to form a bearish candle on the weekly scale.
The Momentum oscillator Relative Strength Index (RSI) turned northward from a deep oversold territory and showed some sign of relief for the bulls. Experts expect the consolidation to continue in the coming sessions, given the coronavirus-led volatility in global markets.
Traders are advised to wait for some consolidation, at least for one trading session, before deciding on a positional bet.
The Nifty opened sharply lower at 9,107.60 and extended losses to hit a 10 percent lower circuit at 8,555.15.
After the trading was stopped for 45 minutes, the index reopened with losses of around 5 percent and gradually started recovery in late morning deals. It crossed the 10,000-mark in the afternoon and hit the day's high of 10,159.40 before closing 365.05 points, or 3.81 percent higher, at 9,955.20.
"Considering the global volatility, it will be too early to conclude that these gains will sustain going forward, as similar rallies failed to kick in sustainable moves in Dow Jones recently. Hence, in the best case, the market should remain rangebound between 9,500–10,150 levels," said Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in.
According to him, some strength can be expected if the Nifty closes above 10,160, with an initial target of 10,300. A close below 9,500 can induce some weakness, with a downside target of 9,100.
For the time, long-term investors can adopt SIP-kind of strategy in their favourite largecap stocks that have recently outperformed with new highs, Mohammad said.
The options data indicated a shift in a wider trading range for the Nifty to around 9,500-10,500 for the coming days.
Maximum Call open interest was seen at 12,000 then 10,000 strike while maximum Put open interest was at 9,000 then 9,500 strike.
Call writing was seen at 9,500 strike while Put writing was seen at 8,500 then 9,000 strike and even sliding lower day by day with the lower market range.
"Options open interest data is scattered and shifted at various strikes, as many Put writers got trapped in recent market fall and even unwinding pressure could keep the street under pressure," said Chandan Taparia
Vice President | Analyst-Derivatives, Motilal Oswal Financial Services.
India VIX closed with a rally of 25.05 percent to 51.47 levels. VIX beyond 50 zone suggests that volatile swings could continue in the market, said Taparia.
The volatility has to cool down from a multiple-year high, then only stability and a smooth ride could be back in the Indian market, he said.
The Bank Nifty opened gap down and then further drifted lower in the initial trades. But, the banking index recovered by more than 4,000 points from its intraday low of 21,351.70, which is the biggest intraday recovery for the rate-sensitive index.
The index closed 4.99 percent higher at 25,166.50 and formed a big bullish candle on the daily chart. And if we combine the price action of the last two days, then it formed a Bullish Engulfing pattern on the daily scale.
The strong buying interest was seen in both PSU and private banking indices from lower levels, which helped the Bank Nifty to outperform the benchmark index."It is rebounding from its oversold territory on both daily and weekly chart, indicating the possibility of a pull-back move in the coming days. However, traders are advised to remain cautious till the market doesn't settle this dust. Going forward, immediate resistance is placed at 26,250 and then 26,600 levels; while support can be seen around 24,250 and 23,500 levels," Taparia said.