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After The Bell: What should investors do on Wednesday as Nifty zooms past 16,100?

The Nifty has to hold above 16,000 to witness an up move towards 16,250 then 16,400, while on the downside, support is at 16,000 then 15,900, say experts

August 03, 2021 / 05:29 PM IST

Indian markets created history as the Nifty not just scaled 16,000 for the first time on August 3 but also hit a record high of 16,146. The BSE Sensex also hit a fresh life high of 53,887 in intraday trade.

The Sensex closed 873 points higher at 53,823, while the Nifty closed with gains of 245 points to 16,130.

Sectorally, buying momentum was seen in telecom, FMCG, auto, banks, and IT stocks, while some selling was visible in metal names. The broader indices underperformed the benchmark and ended almost flat.

The Nifty ended its two-month long consolidation phase and tested a new milestone of 16,000 supported by positive domestic and global cues. Short-covering also gave a much-needed boost to break out of the range.

“What really provided support to the market was the 1QFY22 earnings report which begun on a very healthy note despite the Covid 2.0 impact. It helped the market to largely sail through the headwinds of a possible third COVID wave, commodity-led inflation and volatility around the US Fed taper talk,” Sneha Poddar, AVP–Research, Broking & Distribution, Motilal Oswal Financial Services Ltd, said.

Close

The damage from the second COVID wave and restrictions has been lesser than that from the national lockdown in 1QFY21. Management commentaries across the board suggest an improved demand environment post-June 2021, led by the easing of restrictions, lower active COVID-19 cases, and a pickup in vaccinations, she said.

India VIX moved up 7.40 percent from 12.80 to 13.74 levels after falling in the last three sessions. Volatility spiked as Call writers got trapped and huge Call unwinding pressure was seen as it gave a range breakout, experts said.

On the Options front, the maximum Put OI is placed at 15,800 followed by 15,500 strikes, while maximum Call OI is at 16,000 followed by 15,800 strikes.

IndexPricesChangeChange%
Sensex60,048.47163.11 +0.27%
Nifty 5017,853.2030.25 +0.17%
Nifty Bank37,830.3058.60 +0.16%
Nifty 50 17,853.20 30.25 (0.17%)
Fri, Sep 24, 2021
Biggest GainerPricesChangeChange%
Asian Paints3,448.60127.95 +3.85%
Biggest LoserPricesChangeChange%
Tata Steel1,272.10-46.60 -3.53%
Best SectorPricesChangeChange%
Nifty IT37103.25286.35 +0.78%
Worst SectorPricesChangeChange%
Nifty Metal5498.20-117.85 -2.10%

“Call writing is seen at 16,400 then 16,500 strike, while meaningful Put writing is seen at 16,000 then 15,900 strike. Options data suggests a broader trading range in between 15,800 and 16,400,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.

Here’s what experts suggest investors should do on August 4:

Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services

The Nifty formed a strong bullish candle on the daily scale as sustained buying interest was seen during the session. The index finally broke out of the range after 45 sessions and closed with decent gains of around 250 points.

The Nifty is forming higher highs, higher lows from the past four sessions and supports are gradually shifting higher.

Now, it has to hold above 16,000 to witness an up move towards 16,250 then 16,400, while on the downside, support is seen at 16,000 then 15,900.

Kkunal Parar, Senior Research Analyst, Choice Broking

Finally, the index hit 16,000 after a few weeks of consolidation on an upper level and it seems that based on the breakout of the consolidation phase, we can see a good spurt in the index for a probable up move up to 16,300 to 16,400 during an upcoming session.

Technically, the index has given a breakout of its Flag Formation on a daily chart, which is a continuation formation indicating a good upside movement.

We are expecting a good upside up to 16,300-16,400 on an initial level, while for the medium term, we can see 17,500.

On the downside, the index has strong support at 15,450. Any correction to the 15,750 will be a good buying opportunity with the support of 15,450.

Gaurav Ratnaparkhi, Head, Technical Research, Sharekhan by BNP Paribas

The Nifty has given a strong breakout on the upside after a prolonged consolidation. It has surpassed the hurdle zone of 15,900-16,000 and is marching north. The index is heading towards its weekly upper Bollinger Band ie 16400, which will be the short-term target.

The medium-term target continues to be 16,800. Along with the price breakout, the daily Bollinger Bands have entered an expansion phase, which favours the rally.

The daily momentum indicator has triggered a bullish crossover and has started a new cycle on the upside from the equilibrium line. So the Nifty is expected to witness sustained rally.

On the flip side, the zone of 15,900-16,000, which was earlier acting as a resistance, will now act as a crucial short-term support area as per the principle of role reversal.

Ajit Mishra, VP-Research, Religare Broking Ltd

Markets resumed trend after two months of the range-bound move, so it is unlikely to fade away soon. However, the participation of the banking index would be a critical factor in deciding the pace of gains. The Nifty has the potential to test 16,300+. Traders should align their positions accordingly.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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