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By Chandan TapariaIt was a historic day for the Indian market, as Nifty hit the lower circuit limit after 12 years and then rallied sharply to top the 10,000 mark.
At opening, it was mayhem on Dalal Street, but sentiments revived when the market reopened for trading.
The index recovered on the back of strong buying by DIIs, bargain hunting from long-term portfolio investors as global bourses showed hope of recovery and short covering kicked in on many of the beaten-down oversold stocks.
As a result, Nifty rallied around 20 per cent from lower levels and formed a Bullish Candle on the daily scale with bigger real body and lower shadow.
Momentum Oscillator RSI turned northward from the deep oversold territory, thus, showing signs of relief for the bulls.
Now, Nifty has to hold above 9,400 level to witness a bounceback towards 10,333 and 10,650 levels, while key support exists at 9,400 and then 9,100 levels.
Traders are advised to remain light on positions as volatility is at multi-year peak across the globe.
On the options front, maximum Call OI was at 12,000 and then 10,000 levels while maximum Put OI was at 9,000 and then 9,500 levels.
Options OI data lay scattered at various strike prices as many Put writers got trapped in the recent market fall.
Even unwinding pressure kept the Street under pressure.
Call writing was seen at strike price 9,500 while there was Put writing at 8,500 and then 9,000 levels, sliding lower day by day with lower market range.
The options data indicated a shift in wider trading range between 9,500 and 10,500 levels.
India VIX closed at 51.47 level with 25.05% gain.
A higher VIX beyond 50 level suggested that volatile swings could continue in the market.
Volatility has to cool down from current multi-year-high levels and only then Indian market could see stability and have a smooth ride.
Bank Nifty opened with a gap down and drifted further lower in early trade.
But, the banking index recovered by more than 4,000 points from the intraday low, staging the biggest intraday recovery in the history of the rate-sensitive index.
It formed a Big Bullish candle on the daily chart.
If we combine the price action of last two days, then we are witnessing a Bullish Engulfing kind of pattern on the daily scale.
There was strong buying interest in both PSU and private banking indices from lower levels, which helped Bank Nifty outperform benchmark index.
It is rebounding from the oversold territory on both daily and weekly chart, indicating the possibility of a pullback move in the coming days.
However, traders are advised to remain cautious and let the dust to settle.
Going forward, immediate resistance is placed at 26,250 and then 26,600 levels, while supports are be seen at 24,250 and 23,500 levels.
Nifty futures closed positive at 9,983 level with a gain of 4.58 per cent.
There was long build-up in HDFC Life, SBI, SAIL, BPCL and Tata steel, while shorts were seen in UPL, PVR, Naukri, Asian Paints and Berger Paint.
(Chandan Taparia is Technical - Derivative Analyst at MOFSL.
Investors are advised to consult financial advisers before taking an investment calls based on these observations)
