F&O: Nifty outlook negative; needs to negate lower highs

Nifty started Thursday’s session with marginal loss and remained sideways throughout the session. It moved within the range of 100 points, which was the narrowest range since February 20, 2020. Eventually, the index concluded the session around the 9,200 mark and formed a small body candle on the daily scale.

It moved within Wednesday’s trading territory and thus formed an Inside Bar pattern on the daily chart, indicating indecisiveness among market participants. The index has been making lower highs from last four sessions and needs to negate it for a bounceback, else weakness could persist. Looking at the overall chart structure, we maintain our negative to rangebound stance and expect Nifty to fall towards 9,000 and then 8,800 levels in the coming days. On the upside, immediate resistance is placed at 9,350 and then 9,450-9,500 zone.

In monthly options, maximum Call open interest stood at 10,000 and then 9,500 levels while maximum Put OI was at 9,000 and then 8,000. Except writing in the Call option of strike 10,000, there was no noticeable activity in other strike prices. Options data indicated an immediate trading range between 9,000 and 9,500 levels.

India VIX moved down 3.20 per cent to 39.93 level. However, the volatility index negated its lower high – low sequence of last five weeks, and thus, we may see further pressure on any bounce with a roller-coaster ride in the market.

Bank Nifty opened on a negative note and remained lacklustre throughout the day. It was a perfect day for weekly option writers, as the banking index remained in a range of around 400 points, which was its narrowest trading range in seven sessions. As a result, we witnessed the formation of a Doji candle and Inside Bar patterns on the daily chart, indicating indecisiveness among the market participants. Currently, it is sustaining well below a Rising Trend line breakdown on the daily chart, but if Bank Nifty moves above 19,800 level, only then we may see a pullback move towards the 22,200-22,500 zone. Going forward, Nifty’s immediate support is placed at 19,000 and then 18,700 levels, while resistance is now placed at 20,200 and then 20,500 levels.

Nifty futures closed 0.76 per cent lower at 9,210 level. We witnessed long buildup in Escorts, RIL, IndusInd Bank, M&M and Bharti Infratel while shorts were seen in Just Dial, Pidilite, Britannia, Berger Paint and UBL.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)