The Nifty gained strength amid volatility in the afternoon and extended gains to hit a fresh record high intraday on August 5, driven by FMCG, IT and metal stocks. Selling in select banks and auto stocks limited the upside.
The index formed a Doji pattern on the daily chart as the closing was near the opening tick. Given the sharp rally of the last three days, experts expect the market to consolidate in the coming sessions before resuming a fresh uptrend.
Considering the day’s indecisive formation on weak market participation, traders to remain neutral on the index, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The Nifty50 opened higher at 16,288.95 and hit the day's low of 16,210.30 amid volatility but gained strength later in the day. It extended gains to hit a record high of 16,349.45 in the afternoon ended at a record closing high of 16,294.60.
The Nifty appears to be seeing some selling pressure due to which it has given up almost all the gains before signing off the session with an indecisive Doji formation," Mohammad said.
Moreover, "the advance-decline ratio from the beginning of the session remained decisively skewed in favour of the bears for the second session in a row, hinting broader market participants are only considering this rally as an opportunity to pare existing holdings, he said.
It’s critical that the index sustains above 16,210 in the next session to retain positive bias. If the index slips, it will lead to selling pressure on an intraday basis, with initial targets placed at around 16,147, he said.
If the bulls manage to push the index beyond 16,349, on the upside at 16,400–16,450 levels can be expected, he said.
The Options data suggested that the Nifty could see a broad trading range of 16,000-16,500 for the coming few sessions.
On the options front, maximum Put open interest was seen at 15,000 followed by 15,800 strike, while maximum Call open interest was seen at 16,500 followed by 16,000 strike. Minor Call writing was seen at 16,700 then 16,550 strike, while Put writing was seen at 16,000 then 16,200 strike.
India VIX declined by 2.55 percent from 13.21 to 12.87.
The broader markets continued to underperform the benchmark indices given the negative advance-decline ratio. The Nifty midcap 100 index was up 0.01 percent and the smallcap 100 index fell 0.57 percent.
The Bank Nifty opened positive at 36,093.95 and moved in a volatile manner within a range for the most part of the day. Momentum was seen in selective banking stocks but profit booking-led decline pulled the index lower and it closed with losses of 193.25 points at 35,834.80.
The index formed a bearish candle on the daily scale and negated its higher highs of the last three sessions. "The Bank Nifty needs to hold above 35,800 levels to witness an upmove towards 36,250 then 36,500, while on the downside, support is seen at 35,500 and then 35,250 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, a bullish setup was seen in Cholamandalam Investment, Bharti Airtel, ITC, SAIL, NALCO, Eicher Motors, Tech Mahindra, JSW Steel, Tata Steel, Tata Power, HCL Technologies, Piramal Enterprises, Reliance Industries, Voltas, Kotak Mahindra Bank, Siemens, TCS and Cummins India.
Weakness was seen in IDFC First Bank, SBI, IndusInd Bank, HPCL, PVR, Sun TV Network, PNB, Indraprastha Gas, MRF and UPL, he added.
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