The Nifty50 started off the week on a losing note as spiralling COVID-19 cases dented the mood. The index recovered some of the losses but still closed 1.77 percent lower and formed Hammer pattern on the daily charts.
All sectoral indices, barring pharma, closed in the red, while the Nifty midcap 100 and smallcap 100 indices fell more than 2 percent each.
The Nifty50 opened sharply lower at 14,306.60 and hit an intraday low of 14,191.40. The index saw some recovery from the day’s low and hit an intraday high of 14,382.30 but overall remained in the bear trend. It closed at 14,359.50, down 258.40 points or 1.77 percent.
The Hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies the stock bounced back after testing its support, where demand is located. Experts feel the 14,300 is expected to act as a crucial point for further steep fall.
Positional traders with a high-risk appetite should make use of any rally in the day’s bearish gap zone, placed between 14,382–14,559, to create fresh positional shorts by placing a stop above 14,620 levels on a closing basis and look for initial targets of 13,950, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
“COVID-19 2.0 worries appear to have spooked Dalal Street as the Nifty50 witnessed a huge gap down which washed out the laborious gains clocked in the preceding three trading sessions from the lows of 14,248 –14,697 levels. However, there seems to be some temporary solace to bulls as market witnessed smart pullback from the intraday lows of 14,191 levels which resulted in a Hammer kind of formation,” Mohammad said.
Moreover, “the Nifty seems to be holding on to its 100-day simple moving average on closing basis whose value is placed around 14,330 levels. Hence, a close below 14,300 can drag it down initially towards its logical target of 13,963 levels,” he said.
Nevertheless, considering the force with which markets are falling in recent times, a bigger target towards 13,600 can’t be ruled out going forward, he said.
On the options front, maximum Put open interest was seen at 14,000 followed by 13,500 strike, while maximum Call open interest was at 15,000 followed by 14,500 strike. Call writing was seen at 14,700 then 14,600 strike, while Put writing was seen at 14,200 and 13,900 strike.
The data indicates that the Nifty50 could see a wider trading range of 14,000 to 14,700. India VIX moved up by 10.22 percent from 20.40 to 22.48 levels.
The Bank Nifty opened gap down at 30,993.45 but managed to hold near to its major support of 30,500. While it moved in a range throughout the day, the last hour of the session saw quite a spike and it recovered from lower levels.
The index closed the session with losses of 769.10 points, or 2.41 percent, at 31,208.40 and formed a bullish candle on the daily scale with a long lower shadow.
“Now the Bank Nifty has to hold above 31,250 for an upmove towards 31,500 and 32,000, while on the downside, support can be seen at 31,000 and 30,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stock front, a bullish setup was seen in Apollo Hospitals, SRF, Aurobindo Pharma, Dr Reddy’s Labs, Lupin, Britannia Industries, Glenmark Pharma, Wipro and Cipla. Weakness was seen in RBL Bank, DLF, PNB, Bank of Baroda, Power of Grid, PVR, Hero MotoCorp, InterGlobe Aviation, Indraprastha Gas, L&T, Kotak Mahindra Bank and Bata India, he added.