The market fell sharply ahead of expiry of February derivative contracts, but the higher highs, higher lows formation is intact on the daily charts. Hence, present weakness could be in line with new higher bottom of the pattern, experts said, adding that the index may take support at 21,800-21,700 levels in the coming sessions, with hurdle on the higher side at 21,200-22,200 levels.
On February 28, the BSE Sensex dropped 790 points or 1.08 percent to 72,306, while the Nifty 50 was down 247 points or 1.1 percent at 21,951 and formed long bearish candlestick pattern on the daily charts, which has engulfed the last two sessions' bull and bear candles.
Technically, "this formation signals trend reversal on the downside and one may expect further weakness in the short term," Nagaraj Shetti, senior technical research analyst at HDFC Securities said.
He feels the next crucial lower levels to be watched are around 21,800 and 21,700 levels (ascending trendline and 10-week EMA - exponential moving average).
"Nifty has bounced up from near these levels in the past, but a slide below 21,700 could open sharp fall in the near term. Immediate resistance is placed around 22,150-22,200 levels," he said.
Om Mehra, technical analyst at Samco Securities, also feels with closing below the crucial psychological level of 22,000, the overall structure shows slight weakness in the Nifty 50. "Indicators such as RSI (relative strength index) and MACD (moving average convergence divergence) skewed on the negative side. The index may end its consolidation phase and witness a sell-off if the 22,200 level is not attained."
The volatility jumped over 16 mark, which increased the pressure on bulls. The India VIX jumped 3.83 percent to 16.33, from 15.73 levels.
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Key support and resistance levels on Nifty
The pivot point calculator indicates that the Nifty is likely to take immediate support at 21,912 followed by 21,838 and 21,719 levels, while on the higher side, it may see immediate resistance at 22,152 followed by 22,226 and 22,345 levels.
On February 28, the Bank Nifty was also under pressure, falling below 46,000 mark. The index was down 1.34 percent or 625 points at 45,963 and formed long bearish candlestick pattern on the daily charts, closing below 10, 21 and 50-day EMAs.
"Wednesday's selling pressure has pushed the index below the crucial short-term moving average as well. The sentiment appears negative, with the index potentially moving towards 45,700/45,300 in the near term," Rupak De, senior technical analyst at LKP Securities said.
Resistance is positioned at 46,100, he added.
As per the pivot point calculator, the Bank Nifty is expected to take support at 45,846 followed by 45,633 and 45,288 levels, while on the higher side, the index may see resistance at 46,535 followed by 46,748 and 47,092 levels.
As per the monthly options data, the 22,200 strike owned the maximum Call open interest with 1.56 crore contracts, which can act as a key resistance level for the Nifty in the short term. It was followed by the 23,000 strike, which had 1.41 crore contracts, while the 22,500 strike had 1.39 crore contracts.
Meaningful Call writing was seen at the 22,200 strike, which added 82.29 lakh contracts followed by 22,100 and 22,000 strikes adding 74.5 lakh and 64.36 lakh contracts, respectively.
The maximum Call unwinding was at the 22,800 strike, which shed 14.06 lakh contracts followed by the 23,200 and 21,000 strikes, which shed 72,450 contracts and 68,950 contracts.
On the Put side, the maximum open interest was visible at 21,500 strike, which can act as a key support level for Nifty, with 94.09 lakh contracts. It was followed by the 21,000 strike comprising 59.32 lakh contracts and then the 21,800 strike with 58.07 lakh contracts.
Meaningful Put writing was at 21,800 strike, which added 8.09 lakh contracts followed by the 21,600 strike and 21,300 strike, which added 5.82 lakh contracts and 3.5 lakh contracts, respectively.
Put unwinding was seen at the 22,100 strike, which shed 35.6 lakh contracts followed by the 22,000 strike shedding 33.34 lakh contracts, and then the 22,200 strike, which shed 27.47 lakh contracts.
Stocks with high delivery percentage
A high delivery percentage suggests that investors are showing interest in the stock. Crompton Greaves Consumer Electricals, Marico, ICICI Lombard General Insurance Company, Muthoot Finance and JK Cement saw the highest delivery among the F&O stocks.
A long build-up was seen in 8 stocks, which included Havells India, Samvardhana Motherson International, Bharat Electronics, Hindustan Unilever, and Bharti Airtel. An increase in open interest (OI) and price indicates a build-up of long positions.
Based on the OI percentage, 109 stocks saw long unwinding including Delta Corp, Canara Bank, Ipca Laboratories, Alkem Laboratories, and Bosch. A decline in OI and price indicates long unwinding.
59 stocks see a short build-up
A short build-up was seen in 59 stocks including Maruti Suzuki India, Bata India, Titan Company, LTIMindtree, and City Union Bank. An increase in OI along with a fall in price points to a build-up of short positions.
Based on the OI percentage, 11 stocks were on the short-covering list. This included Aditya Birla Fashion & Retail, Laurus Labs, Indus Towers, Coromandel International, and Berger Paints. 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, dropped sharply to 0.66 on February 28 against 1.00 levels in the previous session. The PCR below 1.00 indicates that the trading volume of Call options is more than Put options, which generally indicates the likely bullish trend in the market ahead.
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Stocks in the news
Reliance Industries: Billionaire Mukesh Ambani-owned company Viacom 18 Media, and The Walt Disney Company signed binding definitive agreements to form a joint venture (JV) that will combine the businesses of Viacom18 and Star India. Reliance has agreed to invest Rs 11,500 crore into the JV for its growth strategy.
KSB: The pumps and valves manufacturer has recorded consolidated net profit at Rs 54.9 crore for quarter ended December 2023, falling 1.8 percent compared to year-ago period, impacted by weak operating margin. Revenue from operations increased by nearly 15 percent YoY to Rs 602.6 crore for the quarter.
UPL: Shriram Finance is going to replace UPL in the Nifty 50 index with effect from March 28. Shriram has highest 6 month average free-float market capitalisation within eligible universe as a replacement to UPL, the exchange said.
Coal India: The state-owned coal mining company has signed a joint venture agreement (JVA) with BHEL, to undertake coal to chemicals business.
GPT Healthcare: The healthcare services provider is set to debut on the bourses on February 29. The final issue price has been fixed at Rs 186 per share.
ICICI Securities: The Securities and Exchange Board of India (SEBI) has issued an administrative warning to ICICI Securities. The warning has been issued in connection with the inspection of books and records for the merchant banking activities of the company.
PB Fintech: Insurance Regulatory and Development Authority of India (IRDAI) has granted Certificate of Registration to Policybazaar Insurance Brokers (Policybazaar), a wholly-owned subsidiary of PB Fintech, to act as composite insurance broker with effect from February 28.
Funds Flow (Rs crore)
Foreign institutional investors (FIIs) net sold shares worth Rs 1,879.23 crore, while domestic institutional investors (DIIs) bought Rs 1,827.45 crore worth of stocks on February 28, provisional data from the NSE showed.
Stocks under F&O ban on NSE
The NSE has retained Indus Towers, and SAIL to the F&O ban list for February 29. Aditya Birla Fashion & Retail, Canara Bank, and Zee Entertainment Enterprises were removed from the list.
Securities banned under the F&O segment include companies where derivative contracts cross 95 percent of the market-wide position limit.
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