The Nifty50 index formed an inside bar on the daily chart as it traded inside the trading range of last session. It again failed to cross the 9,350 mark and corrected towards the 9,300 level before finally closing with a marginal loss of two points.
The index has been witnessing sustained supply near the 9,350 level but buying interest on declines is supporting it to bounce and that is why it got stuck in a trading range in last five sessions. Now, if it sustains below 9,280, only then it can correct towards 9,230 and 9,191 levels, while on the upside multiple hurdles are seen at 9,350 and 9,380 levels to start the next leg of rally.
On the daily scale, the index hit three swing highs at 9,218, 9,273 and 9,367 levels in last 31 sessions, while every time the RSI indicator was making lower highs, it was forming a process of negative divergence on the daily chart. However, this process has a negative implication, but the index has to decline to confirm this pattern. If it holds above 9,380, it would nullify the impact of this formation and may even head towards the next hurdle at the 9,500 level.
On the options front, maximum Put open interest stood at 9,000 followed by 9,300 and 9,200 while maximum Call open interest was seen at strike price 9,500, followed by 9,400. We have seen fresh Put activities at strike price 9,300, which is supporting the index on declines while Call writing remained intact at 9,300, 9,400 and 9,500 levels, which are restricting the upside momentum.
India VIX moved up marginally by 0.68 per cent to 11.52, while lower volatility is keeping the market in a tight range and is supporting buying interest on declines.
The Bank Nifty negated its formation of higher highs of last seven sessions and closed in the negative zone for the second day. However, the pace of selling was missing and selective midcap PSU banks attracted buying interest. Now, if it holds below 22,250, then it may correct towards 22,000 then 21,750 levels, while on the upside, hurdles are seen at 22,550 and then 22,700 levels.
Long buildup was seen on select IT, textiles, capital goods counters, especially in HexawareBSE 3.24 %, NIIT Tech, Cummins, Union Bank, Bank India, Arvind, CEATBSE 3.85 %, Siemens and PNBBSE 2.05 %, while short buildup was seen on the counters of Exide IndustriesBSE -3.62 %, Biocon, HPCLBSE -3.66 %, Amar Raja Battery, DaburBSE -2.92 %, HindalcoBSE -1.60 % and Tata SteelBSE -1.03 %, among others.
(Taparia is Technical & Derivative Analyst at Motilal OswalBSE 3.22 % Securities. Investors are advised to consult financial advisers before taking an investment calls based on these observations)