Trade setup for Monday: 15 things to know before opening bell

Milan Vaishnav is the CMT, MSTA, founder of Gemstone Equity Research & Advisory Services

With the formation of Shooting Star as well as Double Top kind of patterns formation on the daily charts in an uptrend after hitting record high on February 2, the benchmark Nifty 50 is expected to be volatile in coming sessions, experts said. Both are bearish reversal patterns.

Hence, according to experts, for further uptrend, the index has to give a strong closing above its new record high 22,134, otherwise till then, the volatility may sustain with support at 21,700, and 21,500 is expected to be key support.

On February 2, the BSE Sensex rallied 440 points to close at 72,086, while the Nifty 50 surged more than 400 points intraday and hit a new record high, but lost 280 points from that high to settle with 156 points gains at 21,854. It was up 2.35 percent for the budget week.

With Friday's run, the previous crucial opening downside gap (bearish breakaway gap) of January 7 has been filled completely and that has nullified the bearish effect as per the gap theory. "Friday's swing high could also be considered as a Double Top type formation after the confirmation," Nagaraj Shetti, senior technical research analyst, HDFC Securities said.

He feels the short-term uptrend status of Nifty remains intact, but the overall chart pattern suggests a possibility of high volatility at the new highs.

"Any attempt of upmove from here could encounter strong resistance around 22,100-22,200 levels and that could possibly result in short-term weakness from the highs. Immediate support is at 21,700 levels," Shetti said.

According to Ajit Mishra, SVP - technical research at Religare Broking, too, the Nifty needs a decisive close above 22,150 to mark the next leg of the upmove towards 22,500+ else rangebound bias would continue.

The broader markets also closed off day's high with the Nifty Midcap 100 and Smallcap 100 indices gaining 0.4 percent and nearly 1 percent respectively.

The pivot point calculator indicates that the Nifty is likely to take immediate support at 21,806 followed by 21,730 and 21,607 levels, while on the higher side, it may see immediate resistance at 21,883, followed by 22,127 and 22,250 levels.

Meanwhile, on February 2, the Bank Nifty also started off the day on a positive note but could not hold those gains and ended in red, down by 218 points at 45,971, while the loss from its day's high was little more than 900 points. The index has formed bearish candlestick pattern on the daily timeframe, but took support at the 10-day EMA (exponential moving average 45,895).

"The Bank Nifty bears regained control as the index failed to surpass the crucial level of 46,500 on a closing basis. The immediate support for the index is situated at 47,700, and a breach below this level is anticipated to intensify selling pressure, potentially pushing the index towards the 45,000 mark," Kunal Shah, senior technical & derivative analyst at LKP Securities said.

Given the heightened volatility in the near term, he advised traders to approach the market with caution and implement strict risk management measures to navigate potential fluctuations.

As per the pivot point calculator, the Bank Nifty is expected to take support at 45,876 followed by 45,642 and 45,264 levels, while on the higher side, the index may see resistance at 46,062 followed by 46,868 and 47,246 levels.

After the rally post budget, on the weekly options data front, the maximum Call open interest was seen at 23,000 strike, with 57.84 lakh contracts, which can act as a key resistance level for the Nifty in the short term. It was followed by the 22,700 strike, which had 49.11 lakh contracts, while the 22,200 strike had 45.41 lakh contracts.

Meaningful Call writing was seen at the 22,100 strike, which added 24.86 lakh contracts followed by 22,800 and 22,200 strikes adding 24.66 lakh and 24.24 lakh contracts, respectively.

The maximum Call unwinding was at the 21,700 strike, which shed 17.73 lakh contracts followed by 21,800 and 22,000 strikes which shed 15.97 lakh and 2.9 lakh contracts.

On the Put front, the 21,000 strike owned the maximum open interest, which can act as a key support level for Nifty, with 56.74 lakh contracts. It was followed by 21,600 strike comprising 46.76 lakh contracts and then 21,500 strike with 43.75 lakh contracts.

Meaningful Put writing was at 21,600 strike, which added 25.7 lakh contracts, followed by 21,000 strike and 21,900 strike, which added 24.81 lakh contracts, and 20.14 lakh contracts.

Put unwinding was seen at 20,600 strike, which shed 12.03 lakh contracts, followed by 20,500 strike, which shed 4.26 lakh contracts, and 20,200 strike, which shed 86,650 contracts.

A high delivery percentage suggests that investors are showing interest in the stock. Syngene International, Crompton Greaves Consumer Electricals, SBI Life Insurance Company, Pidilite Industries, and SRF saw the highest delivery among the F&O stocks.

A long build-up was seen in 69 stocks, which included Hindustan Copper, Alkem Laboratories, Cummins India, Torrent Pharmaceuticals, and Atul. An increase in open interest (OI) and price indicates a build-up of long positions.

Based on the OI percentage, 29 stocks saw long unwinding including JK Cement, Mphasis, India Cements, Indus Towers, and Sun TV Network. A decline in OI and price indicates long unwinding.

A short build-up was seen in 29 stocks including City Union Bank, Bata India, Tata Chemicals, MRF, and Larsen & Toubro. An increase in OI along with a fall in price points to a build-up of short positions.

Based on the OI percentage, 60 stocks were on the short-covering list. This included SAIL, Havells India, REC, GAIL India, and Maruti Suzuki India. A decrease in OI along with a price increase is an indication of short-covering.

The Nifty Put Call ratio (PCR), which indicates the mood of the equity market, remained flat at 1.02 on February 2, compared to previous session. The above 1 PCR indicates that the Put volumes are higher than the Call volumes, which generally indicates an increase in bearish sentiment.

State Bank of India: The public sector lender has recorded standalone profit at Rs 9,164 crore for quarter ended December FY24, falling sharply by 35.5% compared to year-ago period, due to exceptional loss of Rs 7,100 crore for the quarter. Net interest income grew by 4.6% YoY to Rs 39,816 crore during the quarter.

Tata Motors: The Tata Group company has recorded a 137.5 percent on-year growth in consolidated profit at Rs 7,025 crore for quarter ended December FY24, driven by strong operating numbers. Revenue from operations grew by 25 percent YoY to Rs 1,10,577 crore for the quarter.

InterGlobe Aviation: The low-cost airline company has registered a massive 110.7 percent on-year growth in profit at Rs 2,998.1 crore for October-December period of FY24, driven by healthy topline and operating performance. Revenue from operations for the quarter increased by 30 percent to Rs 19,452 crore compared to corresponding period of last fiscal.

UPL: The crop solutions company has posted consolidated net loss of Rs 1,217 crore for third quarter of FY24, against profit at Rs 1,087 crore in year-ago period, impacted by significant fall in topline and weak operating numbers. Consolidated revenue from operations dropped 27.7 percent to Rs 9,887 crore compared to corresponding period of last fiscal.

Aurobindo Pharma: The United States Food and Drug Administration (US FDA) inspected Unit-III, a formulation manufacturing facility of Eugia Pharma Specialities, a wholly owned subsidiary of the company in Telangana, during January 22 to February 2. The US FDA closed its inspection with 9 observations for the said unit.

Bank of India: The public sector lender has recorded 62.5 percent on-year increase in standalone profit at Rs 1,870 crore for the quarter ended December FY24, driven by fall in bad loans provisions. Net interest income for the quarter fell 2.4 percent year-on-year to Rs 5,463 crore with net interest margin declining 43 bps YoY at 2.85 percent.

Foreign institutional investors (FIIs) net bought shares worth Rs 70.69 crore, while domestic institutional investors (DIIs) purchased Rs 2,463.16 crore worth of stocks on February 2, provisional data from the NSE showed.

The NSE has added Hindustan Copper to the F&O ban list for February 5, while retaining India Cements, Indus Towers, SAIL, and Zee Entertainment Enterprises to the said list.

Securities banned under the F&O segment include companies where derivative contracts cross 95 percent of the market-wide position limit.